ROGER  W.  PffltJH, 


r 

B  4/531 


THE  LIBRARY 

OF 

THE  UNIVERSITY 
OF  CALIFORNIA 

LOS  ANGELES 

SCHOOL  OF  LAW 
GIFT  OF 


BUSINESS  LAW 

FOR 

BUSINESS  MEN 
STATE    OF    CALIFORNIA 

A  Reference  Book  Showing  the  Laws  of  California  for 
Daily  Use  in  Business  Affairs 


TENTH  EDITION 


Revised  and  Enlarged 


By  A.  J.  BLEDSOE 

Member  of  Legislature  of  California,  Sessions  1891, 1893,  1895 


PUBLISHED   BT 

A.  J.  BLEDSOE 

ATTORNEY-AT-LAW 

Herman  W.  Hellman  Building 

Northeast  Corner  Spring  and  Fourth  Streets 

Los  ANGELES,  CALIFORNIA 

PRICE  $7.50 

PRESS  OF 

KINGSLEY,  MASON  &  COLLINS  Co. 
Los  ANGELES 


COPYRIGHT,  1912 
BY 

A.  J.  BLEDSOE 
TENTH  EDITION,  1920 

T 


PREFACE  TO  TENTH  EDITION,  1920. 

The  Tenth  Edition  of  my  business  law  book  is  now 
offered  to  the  public.  The  work  is  enlarged  and  revised 
to  date,  including  the  latest  amendments.  The  ninth  edi- 
tion had  1021  pages;  the  tenth  edition  has  1136  pages. 
In  revising  the  book  it  was  found  necessary  to  omit  some 
subjects,  and  to  add  others,  with  the  purpose  of  making 
the  new  edition  still  more  popular  and  useful. 

The  success  of  the  preceding  nine  editions  of  this  work 
has  been  such  that  I  may  justly  claim  my  "Business  Law 
for  Business  Men"  is  now  a  standard  work,  and  worthy 
of  a  prominent  place  in  any  library.  The  work  of  keeping 
the  bo^)kMjjLlcij|aJ^j3^ 
the  future,  forjHie_ye.arly 


There  is  every  reason  to  believe  that  the  new  edition 
will  meet  with  equal  favor  with  those  of  the  past,  for 
which  favorable  reception  by  the  public  I  wish  to  express, 
in  advance,  my  continued  and  sincere  appreciation. 

My  experience  and  observation  during  a  busy  life  in 
the  practice  of  law  have  served  to  demonstrate  to  me  that 
much  vexatious  and  expensive  controversy,  arising  from 
a  lack  of  knowledge  of  the  laws  of  the  State  on  matters  of 
every-day  business,  may  be  avoided,  if  business  men  have 
the  means  of  ascertaining  at  the  moment  what  their  rights 
and  liabilities  will  be. 

Men  usually  go  to  a  lawyer  after  a  controversy  has 
occurred,  and  seek  a  lawyer's  advice,  not  to  keep  out  of 
trouble,  but  to  be  extricated  from  it.  The  plan  of  this 
work  is,  to  so  arrange  and  illustrate  the  laws  of  California 
pertaining  to  ordinary  business  affairs,  and  rights  and 
obligations  in  many  relations  of  life,  that  a  busy  man  can 
turn  immediately  to  the  page  and  section  and  find  the 
information  he  needs,  before  assuming  a  liability  himself 
or  attempting  to  enforce  a  right  against  others. 

A.  J.  BLEDSOE. 


7483G4 


A.  J.  BLEDSOE 

ATTORNEY  AT  LAW 

HERMAN  W.  HELLMAN  BUILDING 

Northeast  Corner  Spring  and  Fourth  Streets 

LOS  ANGELES,  CALIFORNIA 


General  Practice  in  State  and  Federal  Courts. 

Special  Attention  to 
Organization  of  Common  Law  Companies  in  California. 


Legal  Advice  at  Office.     Written  Opinions  by  Mail. 

Yearly  Contracts  for  Legal  Service. 
Minimum  Fee  for  Written  Opinion,  $10.00 


REFERENCE:  Judge  F.  M.  Angellotti,  Chief  Justice  of  the 
Surpreme  Court  of  California,  in  a  letter  written  by  him  in 
1919,  made  the  following  statement:  "I  have  known  Mr. 
Bledsoe  personally  for  many  years,  and  I  can  say  that,  as  a 
lawyer  and  legislator,  he  has  always  had  a  good  reputation 
in  California,  and  in  the  trial  of  cases  before  this  Court  he 
has  always  conducted  himself  in  a  legitimate  and  honorable 


WHAT  SUPREME  COURT  JUDGES  HAVE 
SAID. 


JUDGE  F.  M.  ANGELLOTTI. 
(Now  Chief  Justice) 

STATE  OF  CALIFORNIA, 

JUDICIAL  DEPARTMENT,  SUPREME  COURT, 
CHAMBERS  OF  ASSOCIATE  JUSTICE  FRANK  M.  ANGELLOTTI. 

San  Francisco. 
A.  J.  BLEDSOE,  ESQ. 

Dear  Sir : 

I  appreciate  your  courtesy  in  sending  me  a  copy  of 
your  book,  "Business  Law  for  Business  Men,"  and  the 
limited  examination  I  have  been  able  to  give  it  satisfies 
me  that  it  is  a  very  creditable  work,  containing  much 
useful  information. 

Yours  very  truly, 

F.  M.  ANGELLOTTI. 


JUDGE  LUCIEN  SHAW 
STATE  OF  CALIFORNIA, 

JUDICIAL  DEPARTMENT,  SUPREME  COURT, 
CHAMBERS  OF  ASSOCIATE  JUSTICE  LUCIEN  SHAW. 

San  Francisco. 
MR.  A.  J.  BLEDSOE. 

Dear  Sir : 

I  have  examined  your  "Business  Law  for  Business 
Men"  with  some  care,  and  am  very  much  pleased  with  it. 
It  is  concise,  the  style  is  clear,  and  the  matter  generally 
accurate  and  complete.  It  is  the  best  work  of  the  kind 
that  I  have  seen. 

Yours  very  truly, 

LUCIEN  SHAW. 


6  WHAT  SUPREME  COURT  JUDGES  HAVE  SAID. 

JUDGE  WALTER  VAN  DYKE 

About  a  year  before  his  death,  Walter  Van  Dyke  wrote 
the  following  letter  concerning  one  of  the  earlier  editions 
of  the  book: 

JUDICIAL  DEPARTMENT,  SUPREME  COURT, 
CHAMBERS  OF  ASSOCIATE  JUSTICE  WALTER  VAN  DYKE 

San  Francisco. 
A.  J.  BLEDSOE,  ESQ.,  Attorney  at  Law. 

Dear  Sir : 

I  have  received  a  copy  of  your  book  entitled  "  Business 
Law  for  Business  Men,"  and  you  will  please  accept  my 
thanks  for  the  same.  The  book  contains  the  code  law  of 
the  State,  conveniently  arranged,  bearing  upon  the  most 
important  subjects  pertaining  to  business  affairs,  and 
cannot  fail  to  be  of  great  service  to  business  men,  for 
whose  benefit  it  appears  to  have  been  specially  intended, 
but  will  also  prove  to  be  very  convenient  and  useful  to  the 
practicing  lawyer. 

Very  truly  yours, 

WALTER  VAN  DYKE. 


CHIEF  JUSTICE  BEATTY. 

(Several  years  before  his  death,  Judge  Beatty  wrote 
the  following  recommendation.) 

STATE  OF  CALIFORNIA, 

JUDICIAL  DEPARTMENT,  SUPREME  COURT, 

CHAMBERS  OF  THE  CHIEF  JUSTICE. 

San  Francisco. 
A.  J.  BLEDSOE,  ESQ. 

Dear  Sir: 

At  the  time  I  received  your  book,  ''Business  Law  for 
Business  Men,"  and  for  some  time  after,  I  was  too  busy 
to  examine  it  with  any  care,  and  only  lately  have  done  so. 
As  the  result  of  such  examination,  I  am  happy  to  say  that 
I  find  it  very  accurate  and  trustworthy,  and  should  think 
it  would  be  very  useful  to  non-professional  men  in  or- 
dinary matters  of  business.  Yours  truly, 

W.  F.  BEATTY. 


INDEX  TO  SUBJECTS 

PAGE 

Accident  Insurance   345-350 

Agreements  for  Sale 74-78 

Architects   481-488 

Assignment  for  Benefit  of  Creditors 580-586 

Assignment  of  Contracts 1026-1031 

Auction  Sales    145- 147 

Automobile  Law  of  California 968-1013 

Attachments   660-669 

Bank  Checks  572-578 

Bank  Laws  of  California 783-863 

Bills  of  Exchange 561-572 

Bills   of  Lading 537-555 

Building   Contracts 362-444 

Collection  of  Bills  and  Accounts 587-597 

Commission  Merchants    261-267 

Common  Law  Companies   1066-1069 

Corporations  in  California 684-782 

Deeds    199-220 

Employer  and  Employee — Labor  Laws 225-244 

Estates  of  Deceased  Persons 923-967 

Fire  Insurance   305-334 

Guaranty    of   Accounts 1032-1035 

Homesteads — (See  Mortgages  in  Index  to  Sections) 

Hotel  Keepers  and  Lodging  House  Keepers 171-182 

Installment   Sales  of   Personal   Property-. 126-134 

Installment  Sales  of  Real  Estate 221-224 

Judgments  and   Executions 669-672 

Leases  182-199 

Letters  of  Credit 559-561 

Life  Insurance   334-344 

Making  of  Contracts 57-73 

Manufacturer's  Agents    259-261 

Marine  Insurance    350-362 

Mechanic's  Liens   444-481 

Mines  and  Mining 864-921 

Mortgages    633-658 

Notary   Public    529-536 

Partnership    482-520 

Powers  of  Attorney 1036-1042 

Principal   and   Agent 244-253 

Notes 598-633 

Real  Estate  Agents 267-305 

Sale  of  Personal  Property 79-126 

Searchers  of  Records 524-529 

Spaulding's  Table  for  Measurement  of  Logs 520-524 

Stoppage  in  Transit 134-136 

Taxes  and  Tax  Titles 1070-1136 

Trust  Deeds    1014-1025 

Trade  Acceptances    556-559 

Warehouse  Law  136-145 

Warranty  of  Personal  Property 136-145 

Wholesaler's  Agents 253-258 

Wills    673-683 

Workmen's  Compensation   Law    1043-1065 


INDEX  TO  FORMS. 


Agreement  to  Sell  Real  Estate 75 

Agreement  to  Sell  Personal  Property 78 

Assignment  of  Account 596 

Assignment  of  Contracts — 

Assignment   of  Contract 1029 

Assignment — Endorsed    1030 

Assignment  of  Debt  Due .  . 1030 

Assignment   of   Account 1031 

Assignment  of  Contract  for  Sale  of  Real  Estate 1031 

Automobile  Law  of  California- 
Notice  of  Sale  for  Storage  Charges  or  Repairs 1012 

Bill  of  Sale 82 

Builder's   Contract    363 

Bulk  Law- 
Notice  of  Sale  of  Stock  of  Goods 82 

Creditor's  Claim  Against  an  Estate 949 

Corporations  in  California — 

Articles  of  Incorporation 685 

Notice  of  Assessment 733 

Notice  of  Sale 734 

Deeds — 

Deed   of   Gift - 201 

Bargain  and  Sale  Deed 203 

Quitclaim  Deed   204 

Warranty  Deed   206 

Corporation  Deed   and  Acknowledgement 208 

Trust   Deed    1021 

Joint  Tenancy  Deed    218 

Guaranty  of  Account  1035 

Installment  Agreement  for  Sale  of  Real  Estate 223 

Installment  Sales  of  Personal  Property — 

Conditional  Agreement   128 

Conditional  Agreement  Where  Personal  Property  Is  Attached 

or  to  Be  Attached  to  a  Building 130 

Conditional  Agreement  for  Sale  of  Machinery 131 

Assignment   of   Installment   Contract ' 134 

Landlord  and  Tenant — 

Lease    of    Land 183 

Lease  of  Agricultural  Lands 185 

Assignment  of  Lease 187 

Notice  of  Intention  to  Renew  Lease 190 

Notice  to  Quit  193 

Notice  to  Pay  Rent  or  Surrender  Possession 194 

Lease  of  Personal  Property 194 

Farming  Lease  on  Shares 190 

Mortgages — 

Assignment   of  Mortgage : .  657 

Chattel  Mortgage   .  644 

Real  Estate  Mortgage 641 

Release  of  Mortgage   608 


INDEX  TO  FORMS.  9 

PAGE 
Mines  and  Mining — 

Notice  of  Location  of  Lode  Claim 869 

Notice  of  Location  of  Placer  Claim 870 

Prool  of  Assessment  Work   878 

Mining  Lease  885 

Oil  Lease  890 

Mining  Deed 894 

Mechanics'  Liens — 

Assignment  of  Lien  478 

Contractor's    Bond    46(i 

Notice  of  Agreement  to  Furnish  Materials  to  Contractor. . . .  468 
Notice  to  Owner  of  Materials  Furnished  to   Contractor. . . .  468 

Notice  to  Owner  of  Labor  Performed 469 

Notice  by  Owner  That  He  Will  Not  Be  Responsible  for  Im- 
provements on  His  Premises   477 

Notice  of  Mechanic's  Lien  for  Labor 470 

Mechanic's  Lien  by  Contractor  or  Sub-Contractor 472 

Notice  of  Claim  Against  Public  Improvement  Fund 474 

Owner's  Notice  of  Completion 476 

Notes — 

Note 605,  606 

Note   Signed  with  an  X 608 

Note  Payable  on  or  Before  a  Certain  Date 609 

Joint  Note    611 

Joint  and  Sveral  Note 612 

Notice  of  Dishonor 626 

Installment  Note    628 

Real  Estate  Agent's  Authority  to  Sell 280 

Option  to  Buy  Real  Estate 76 

Partnership — 

Certificate  of  Partnership   Transacting   Business  Under   Fic- 
titious Name   500 

Certificate  of  Special  Partnership 503 

Partnership  Agreement  518 

Affidavit  of  Special  Partners 503 

Powers  of  Attorney — 

General  Powers  of  Attorney   1037 

Special  Power  of  Attorney 1038 

Commercial  Power  of  Attorney  with  Authority  to  Sell  Real 

Estate 1039 

Homesteads — 

Declaration  of  Homestead  by  Husband  and  Wife 637 

Declaration  of  Homestead  by  Husband 638 

Declaration  of  Homestead  by  Wife 639 

Trade  Acceptance    55S 

Will    .  .   67S 


INDEX  TO  SECTIONS 

PART  I. 

BUSINESS   CONTEACTS  AND  LEGAL  OBLIGATIONS. 
ACCIDENT  INSUEANCE. 

PAGE 

Section    387.— Being  Killed  by  Bobbers 346 

Section    400. — Condition  Against  Change  of  Occupation 349 

Section  384. — Definition  of  Accident 345 

Section  385. — Death  by  Accidental  Means 346 

Section  388. — Death  by  Drowning 346 

Section  3S9. — Death  from  Fright 346 

Section  390. — Death  by  Falling 346 

Section  392. — Death  by  Murder 347 

Section  393. — Death  by  Inhaling  Gas 347 

Section  398. — Disease  and  Bodily  Infirmity 348 

Section  399. — Disease  Produced  by  Known  Cause 349 

Section    386. — Hanging  One's  Self  While  Insane 346 

Section    394.— Loss  of  Hand 347 

Section    395. — Loss  of  Feet 348 

Section    390. — Loss  of   Business 348 

Section    402.— Proof  of  Injury  or  Death 350 

Section    391. — Taking  Poison  by  Mistake 347 

Section    383.— The  Policy " 345 

Section    397.— Total  Disability 348 

Section    401. — Voluntary  Exposure  to  Danger 349 

AGEEEMENTS  FOE  SALE. 

Section      29. — Agreement  to  Sell  Real  Property 74 

Section      33. — Agreement  to  Sell  Personal  Property 77 

Section      30. — Form  of  Agreement  to  Sell  Eeal  Property 74 

Section      32. — Form  of  Option 70 

Section      34. — Form  of  Agreement  to  Sell  Personal  Property 78 

Section      28. — Kinds  of  Agreements  for  Sale 71 

Section      31. — Option  to  Buy  Eeal  Property 7fi 

AECHITECTS. 

Section    498. — Architect's  Certificate  as  to  Liens 484 

Section    500. — Architect 's  Plan  Part  of  Contract 484 

Section    494. — Architect 's  Lien 481 

Section    495. — Architect  Cannot  File  Lien  Against  Public  Building . .  482 
Section    496. — Architect  Has  No  Lien  Against  Monument  in  Public 

Park 483 

10 


INDEX  TO  SECTIONS. 


11 


PAGE 

Section    506. — Certificate  and  License  of  Architect 487 

Section    499. — Condition  as  to  Certificate  May  Be  Waived  by  Owner.  484 
Section    493. — Compensation  of  Architect 481 

Section    502. — Liability  of  Architect  for  Negligence 485 

Section    504. — Liability  for  Disclosing  Intention  of  Owner 486 

Section    497. — Payments  Made  on  Architect's  Certificate 483 

Section    501. — Services  of  Architect 484 

Section    505. — Time  Spent  on  Plans  and  Specifications 486 

AUCTION   SALES. 

Section      84. — Authority  of  Auctioneer 145 

Section      87. — Auction  Sale  Under  Written  conditions 146 

Section      88. — Auction  Sale  Without  Eeserve 140 

Section  90. — Auctioneer's  Memorandum  of  Sale  Binds  Both  Parties  147 

•Section      89. — Frauds  Upon  the  Buyer 147 

Section      85. — When  Auction  Sale  Is  Complete 146 

Section      86. — Withdrawal  of  Bids 146 

BUILDING  CONTRACTS. 

Section    425. — Acceptance  by  Agent 370 

Section    427. — Agreement  as  to  Extra  Work 370 

Section    426.— Breach  of  Contract  by  Owner 370 

Section    422. — Contract  of  Minor 369 

Section    429. — Contract  Providing  for  Arbitration 371 

Section    437.— Dwelling  House  Act 432 

(a)  Unlawful  to  Construct  Dwelling  Contrary  to  Act.  433 

(b)  Alterations 433 

(c)  Building  Converted  to  Use  as  Dwelling 434 

(d)  Penalty   for   Violation 434 

(e)  Definitions    434 

(f)  Rooms  in  Basement 436 

(g)  Ventilation  Beneath  Floor 437 

(h)  Width  and  Height 437 

(i)  Windows   437 

(j)  Water   Closets 438 

(k)   Plumbing  Fixtures 438 

(1)    Earthenware  Bowls  and  Seats 440 

(m)  Cooking  in  Bath  Compartment 440 

(n)  Repapering 441 

(o)   Repairs    441 

(p)  Metal  Mosquito   Screening 441 

(q)   Garbage  Cans 441 

(r)   Sanitary  Regulations 442 

(s)   Fine  a  Lien 442 

(t)   Minimum   Requirements 443 

Section    439. — Embezzlement  by  Contractor 444 

Section    433. — Excavations    374 

Section    421 — Failure  to  File  Contract 369 


1  H  IXDKX  TO  SECTIONS. 

I'AUK 

Section    419. — Form  of  Builder  ?s  Contract 363 

Section    438. — Hotel  and  Lodging  House  Act 444 

Section    428. — Loss  by  Fire  Before  Completion 370 

Section    418. — Materials  Furnished  Contractor  Exempt  from 

Execution  • 363 

Section    432. — Material  Departure   from   Specifications 374 

Section    424. — Owner  Preventing   Work 369 

Section    423. — Price  Where  Contractor  Abandons  the  Work 369 

Section    417. — Recording   of   Contract 363 

Section    420. — Eeference  to  Plans  and  Specifications  in  Contract....  368 

Section    431. — Right  of  Contractor  to  Abandon  Work 37.'5 

Section    430. — Substantial  Performance 372 

Section    435. — Temporary  Flooring  for  Protection  of  Workmen 376 

Section    416. — The   Contract 362 

Section    436. — Tenement  House  Act 37o 

(a)  Duty  of  Building  Departments 377 

(b)  Unlawful  to  Construct  Tenement  House  Contrary 

to  Act   '.378 

(c)  Alterations  378 

(d)  Building  Converted  to  Use  as  Tenement  House..  379 

(e)  Penalty  for  Violation 379 

(f)  Permit  to  Erect  Tenement  House 379 

(g)  "Certificate  of  Final  Completion"  and  "Permit 

of  Occupancy  " 382 

(h)  Power  to  Enter  Tenement  House 383 

(i)    Definitions   384 

(J)    Front  Yard  389 

(k)   Height 381) 

(1)    Per  Cent,  of  Lot  Left  Unoccupied 391 

(m)  Rear  Yard 391 

(n)    Yard  Serving  Two  Tenement  Houses 391 

(o)   Depth  of  Rear  Yard 392 

(p)   Minimum  Depth  of  Rear  Yard  on  Entire  Lot 392 

(q)   Minimum  Depth  of  Rear  Yard  on  Corner  Lot 393 

(r)  Passageway   on   Street 393 

(s)  Excavated   Front    Yard 394 

(t)    Width  of  Side  Yard 394 

(u)   Minimum  Size  of  Outer  Court 394 

(v)   Minimum  Size  of  Inner  Court 395 

(w)  Recess   395 

(x)  Intakes  for  Inner  Court 396 

(y)  Cellars 397 

(z)  Basements 397 

(aa)   Ventilation  Beneath  Floor 397 

(bb)  Floor  Area  of  Rooms 399 

(ce)  Windows  , 400 

(dd)   Window  Areas 400 

(ee)   Windows  in  Public  Hallway 402 

(ff)    Ventilation  Skylight ' 403 

fgg)  Water  Closets 40-i 

(hh)   Water  Closet  for  Each  Compartment 404 


INDEX  TO  SECTIONS. 


13 


PAGE 

(ii)    Bathtub  or  Shower 40d 

(jj)    Kunning  Water 407 

(kk)  Plumbing  Fixtures  Made  Sanitary 409 

(11)     Two  Means  of  Egress ". 410 

(mm)  Stairways 410 

(nn)   Hallways,  Etc.,  From  Stairways 414 

(oo),  Fire  Escapes 414 

(pp)  Standpipes  419 

(qq)  Elevator  Shafts 420 

(rr)    Vent  Shafts 421 

(ss)    Walls  of  Inner  Court 422 

(tt)    Boiler    Boom 42'! 

(uu)   Garages 42i 

(vv)   Windows  in  Tenement  Already  Erected 424 

(ww)  Cooking  in  Bath  Unlawful 425 

(xx)   Lighting  of   Hallways 426 

(zz)    Repapering    427 

Caaa)  Repairs   427 

(bbb)   Metal  Mosquito  Screening 427 

(ccc)    Garbage  Cans 428 

(ddd)  Rooms,  Etc.,  to  Be  Kept  Clean 428 

Dangerous  Articles  Not  to  Be  Kept 429 

H  ousekeeper  in  Charge 430 

(ggg)    Fine  a  Lien 430 

(hhh)  Name  of  Owner  to  Be  Filed 430 

(iii)     Name  of  Agent  Filed 431 

(j.ij)     Notices    431 

(kkk)  Minimum    Requirements 43J 

Section    434. — Unsafe  Scaffolding  and  Ladders 395 

COMMISSION  MERCHANTS. 

Section    228. — Authority  to  Sell  on  Credit 262 

Section    230. — Authority  of  Partner  or  Servant 262 

Section    242. — Authority  as  General  Agent 266 

Section    232. — Cannot   Extend   Credit 263 

Section    243. — Care  to  Be  Taken  of  Goods  Consigned 26'3 

Section    245. — Duty  to  Render  Accounts 266 

Section    233. — Guaranty  of  Certain  Price 263 

Section    227. — Insurance  of  Consigned  Property 262 

Section    231. — Instructions  from  Consignor 26:5 

Section    234.— Instructions  to  ' '  Sell  on  Arrival " 263 

Section    236. — In  Whose  Name  Insurance  May  Be  Put 264 

Section    241. — Lien  of  Commission  Merchant.  .            265 


Section 
Section 


23P, 
244 


.-—  May  Sell  in  His  Own  Name 265 

, — Must  Not  Mix  Goods  with  Another's 266 


Section  229. — Pledge  of  Consigned  Property 262 

Section  237. — Responsibility  of  Purchaser 264 

Section  238. — Right  to  Commissions 265 

Section  226. — Selling  Property   on  Commission 261 

Section  235. — Special  Property  in  Consignments 264 


14  INDEX  TO  SECTIONS. 

i'AOE 

Section    240. — Taking  Promissory  Note  in  Payment 265 

EMPLOYEE  AND  EMPLOYEE. 

Section    182. — Age  and   Schooling  Certificates 237 

Section    184. — Age  and  Schooling  Certificate  for  Minors  Over  Fifteen  239 

Section    173. — Contract  of  Employment 225 

Section    178.-— Contract  for  Personal  Services 228 

Section    181. — Child  Labor  Law 231 

(a)  Children   Under    Sixteen 232 

(b)  Work  Defined 232 

(c)  Messenger  Service 232 

(d)  Street   Trades 232 

(e)  Prohibited  Occupations 233 

(f)  Bureau  of  Labor  Statistics  to  Determine  Whether 

Business  Is  Prohibited 234 

(g)  Agricultural   Labor 234 

(h)  Employer  to  Keep  Eegister 236 

(i)    Eeport  by  Authority  Issuing  Permits 236 

(j)    Penalty     237 

Section    186. — Forcing  Employees  to  Patronize  Employer 241 

Section    185. — Hours  of  Labor  of  Women 241 

Section    188. — Municipal    Employees 242 

Section    190. — Master   and   Servant 243 

Section    180. — Minors — Hours  of  Labor 231 

Section    174. — Obligations  of  the  Employer 225 

Section    175. — Obligations  of  the  Employee 226 

Section    179. — Payment   of  Wages 228 

(a)  Wages   Due    Semi-Monthly 229 

(b)  What  Wages  Shall  Include 229 

(e)  Notice  of  Time  and  Place  of  Payment 230 

(d)  Failure  of  Employer  to  Pay ! . .  230 

(e)  Eefusal  of  Employer  to  Pay 231 

Section    187. — Eegistration    of   Factories 242 

Section    177. — Sanitary  Condition  of  Workshops 228 

Section    191. — Term  of  Hiring  of  Servant 243 

Section    176. — Termination  of  Employment 227 

Section    183. — Vacation    Permits  for    Minors   Between    Twelve   and 

Fifteen    239 

Section    192.— When  Servant  May  Be  Discharged 244 

Section    189. — Workmen 's  Compensation  Law 243 

FIEE  INSUEANCE. 

Section  313. — Acknowledgment  in  Policy  of  Eeceipt  of  Premium...  311 

Section  314. — Agreement  Not  to  Transfer 311 

Section  358. — Agent's  Knowledge  of  Former  Insurance 332 

Section  356.— Authority  of  Spt-eial  Agent 332 

Section  352. — Application   Made  Out  by   Agent 330 


INDEX  TO  SECTIONS.  15 

PAGE 

Section  347. — Agent  Waiving  Forfeiture 328 

Section  348. — Authority  of  Local  Agent 329 

Section  345. — Authority  of  Agents 327 

Section  321. — Alteration  Increasing  Eisk 313 

Section  322. — Alteration  Which  Does  Not  Increase  Eisk 314 

Section  346. — Brokers  or  Agents 327 

Section  315. — Certain    Warranties 312 

Section  324. — Certificate   of   Notary 314 

Section  302. — Contract  Between  the  Parties 305 

Section  335. — Condition  as  to  Change  Occurring  in  Building 319 

Section  338.— Contract  of  Reinsurance — Effect  of  Prior  Loss 322 

Section  30?,..—  Designation   of  Parties 306 

Section  390. — Double   Insurance 313 

Section  309.— Duty  of  Parties  in  Making  the  Contract 309 

Section  317. — Exoneration    of   Insurer 312 

Section  3*25. — "Falsity  of  Material  Eepresentations  by  Insured 314 

Section  353. — Fraud'  of  Agent * 353 

Section  304. — Tnsurable  Interest 306 

Section  307. — Insurance  Without  Interest  Illegal 308 

Section  328. — Insurance  by  Commission  Merchant — Incorrect  State- 
ment as  to  Ownership 316 

Section  333. — Insurance  of  Unoccupied  Building 31S 

Section  343. — Insurance  on  Harvester  While  in  Use 326 

Section  350. — Knowledge  of  Agent 330 

Section  334. — Liability  of  Insurance  Company  for  Fires  Caused  by 

Earthquakes ' 319 

Section  342. — Liability  of  Heir  for  Premium 325 

Section  344. — Liability    of    Company    on    Policy    Written    But    Not 

Delivered  Until  After  Fire 326 

Section  305. — Measure  of  Interest  in  Property 307 

Section  318. — Notice   of  Loss ". 312 

Section  351. — Oral  Waiver  of  Endorsement 330 

Section  31 1. — Onen  and  Valued  Policies 311 

Section  349. — Ostensible  General  Power  of  Local  Agent 329 

Section  357. — Oral  Promise  of  Policy 332 

Section  359.— Offer  to  Eenew  Policy 33:5 

Section  319. — Preliminary   Proofs   of   Loss 313 

Section  340. — Provision  as  to  Bringing  Suit 325 

Section  341. — Proofs  of  Loss  to  "Reinsuring  Company 325 

Section  332. — Remedy  for  Unauthorized  Term  of  Credit 318 

Section  327. — Eights"  of    Mortgagee — Effect    of    Sale    Under    Fore- 
closure      310 

Section  329. — Eight    of    Arbitration 316 

Section  336. — Eules  for  Interpreting  Contract  of  Insurance 320 

Section  312. — Running  Policy 31 1 

Section  326.-— Statements  as  to  Valuations 315 

Section  310. — The  Policy  of  Insurance 310 

Section  337. — Time  When  Poliev  Takes  Effect 32:.' 


16 


INDEX  TO  SECTIONS. 


PAGE 

Section    360. — Unauthorized  Contract  of  Local  Agent 333 

Section    323. — Verbal  Contract  to  Issue  Policy 31-i 

Section  308. — Wager  Policies  Void 309 

Section  330. — Waiver  of  Proof  of  Loss  by  Arbitration 317 

Section  331. — Waiver  of  Condition  as  to  Prepayment  of  Premium..  317 

Section  339.  -Warranties    ." 323 

Section  306. — When  Insurable  Interest  Must  Exist 308 

Section  316. — What  Acts  Avoid  Policy 312 

Section  354. — Waiver  of  Petroleum  Clause  by  Agent 331 

Section  355. — Waiver  Continues  During  Renewal  of  Policy 331 

Section  361. — Waiver  from  Knowledge  of  Agent 333 

HOTEL  KEEPERS  AND  LODGING-HOUSE  KEEPERS. 

Section    113. — Apartment     House     Lien     on     Baggage     and     Other 

Property   177 

Section    116. — Construction  of  Hotels 182 

Section    114. — Defrauding   Hotel   Keepers 180 

Section    106. — Exemption  from  Liability  in  Certain  Cases 173 

Section    105. — Liability     of     Hotel     Keepers     and     Lodging-House 

Keepers 171 

Section    108. — Liability  of  Hotel,  Boarding-House  and  Lodging-House 

Keepers  for  Loss  by  Fire 174 

Section    109. — -Liability  of  Hotel,  Boarding-House  and  Lodging-House 

Keepers  for  Loss  bv  Theft 175 

Keepers  for  Loss  of  Baggage 176 

Section    110. — Liability  of  Hotel,  Boarding-House  and  Lodging-House 

Section    112. — Lien  on  Baggage  and  Other  Property  of  Guests 177 

Section     111. — Statement    of   Charges,    Etc.,   to   Be    Posted   by   Hotel, 

Boarding-House    and   Lodging-House    Keepers 176 

Section     115. — Sanitary  Regulations    180 

(a)  Hotel  Defined  180 

(b)  Clean  Bedding,   Etc 181 

(c)  Infested  Rooms  Fumigated   181 

(d)  Clean   Rooms    181 

(e)  Ventilation  Devices    181 

(f)  Size  of  Sheets 181 

(g)  Individual   Towels 181 

(h)     Penalty  for  Violation 182 

Section     107. — What  Property  Must  Be  Deposited  in  the  Safe 174 

INSTALLMENT  SALES  OF  PERSONAL  PROPERTY. 

Section      70. — Absolute  Sale  on  Installments 128 

Section      64. — Conditional  Sales  of  Personal  Property 126 

Section      66.— Default  in  Payment 127 

Section      71. — Form  of  Conditional  Agreement 128 

(a)  Form  of  Conditional  Agreement  Where*  Personal 
Property  Is  Attached  or  to  Be  Attached  to  a 
Building  130 


INDEX  TO  SECTIONS. 


17 


PAGE 

(b)  Form  of  Conditional  Agreement  for  Sale  of  Mach- 

inery      131 

(c)  Assignment    of    Contract v 134 

(d)  Form   of  Assignment   of  Installment   Contracts...   134 

Section       65. — Language  of  the   Contract 126 

Section      69. — Money  Already   Paid 128 

Section       68. — Remedy  of  Seller  in  Case  of  Purchaser's  Default 127 

Section      67. — Sale  by  Vendee  to  Another  Person 127 

INSTALLMENT  SALES  OF  REAL  ESTAATE 

Section  172. — Form  of  Installment  Agreement  for  Sale  of  Real  Estate  223 

Section     169. — Payment   of   Installments 229 

Section  171. — Purchaser's  Remedy  if  Vendor  Fails  to  Fulfill  Contract.  223 

Section     168. — Sales  on  the  Installment  Plan 221 

Section     170. — Vendor's  Remedy  if  Installments  Are  Not  Paid 221 

LEASES. 

Section     123. — Assignment  of  Lease    187 

Section     142. — Destruction  of  Premises  by  Fire 198 

Section     141. — Fixtures   on   Leased   Premises 198 

Section  74. — For  What  Term  Leases  May  Be  Made  in  California.  .  . .  1/58 

Section     121.— Form   of  Lease 183 

Section     122. — Form  of  Lease  of  Agricultural  Lands 185 

Section     124. — Form  of  Assignment  of  Lease 187 

Section     129. — Form  of  Notice  of  Intention  to  Renew  Lease 190 

Section     135.— Form  of  Notice  to  Quit 193 

Section  136. — Form  of  Notice  to  Pay  Rent  or  Surrender  Possession.  .  .  194 

Section     138. — Form  of  Lease  of  Personal  Property 194 

Section     140. — Form  of  Farming  Lease  on  Shares 196 

Section     117.— Leases  of  Real  Estate 182 

Section     134.— Notice  to  Quit,  How  Notice  Must  Be  Served 193 

Section     132.— Notice  to  Quit 191 

Section     137. — Option  to  Purchase  in  Lease 194 

Section     143. — Repudiation  of  Lease,  Landlord's  Remedy 199 

Section     133.— Raising  the  Rent 192 

Section     128.— Renewal  of  Lease 190 

Section  118.— Term  of  Lease    182 

Section  127. — Termination  of  Lease 189 

Section  130.— Term  of  Hiring  When  No  Limit  Is  Fixed 191 

Section  139. — Tenant  Must  Deliver  Notice  Served  on  Him 196 

Section     119.— When  Verbal  Lease  May  Be  Made 182 

Section     120. — When  Lease  Must  Be  in  Writing 183 

Section     125. — What  Repairs  Lessor  Must  Make 188 

Section     126. — When  Lessee  May  Make  Repairs 188 

Section     131.— When  Rent  Is  Payable 191 


18 


INDEX  TO  SECTIONS. 


LIFE  INSURANCE 


PAGE 


Section    379. — Assignment   of   Policy 341 

Section    380. — Beneficiaries  of  Life  Insurance 342 

Section     367. — Conditions   in   Policy 337 

Section     363.— Creditor's  Interest   335 

Section    339.— Credit  for  Premiums 339 

Section    381. — Deduction  of  Unpaid  Premiums 342 

Section    364.— Delivery  of  Policy 335 

Section    370. — Effect  of  Disease  of  Applicant  on  Policy 338 

Section    375. — Forfeiture  for  Non-payment  of  Premium 340 

Section    362. — Insurable  Interest    334 

Section    372. — Malt  and  Spirituous  Beverages 339 

Section    371.— Meaning  of  Good  Health 339 

Section    382.— Paid  Up  Life  Insurance 342 

Section    373. — Payment   of   Premiums 339 

Section    365.— Place  of  Contract 336 

Section    377.— Proof   of   Death 340 

Section    369. — Representations  by  Insured 338 

Section     376.— Revival   of   Forfeited    Policy 340 

Section    378.— Suicide  341 

Section    368. — Waiver    of   Conditions 337 

MAKING  OF  CONTRACTS. 

Section       14.— Alteration    of    Verbal    Contract 655 

Section      13. — Alteration  of  Written  Contract 65 

Section      25. — Anti-Trust  Law    69 

(a)     Fixing  Prices  Under  the  Cartwright  Law 72 

Section        1. — Business  Contracts    57 

Section        3. — Consent  of  Parties  to  Contract 59 

Section        7. — Consideration   of  a  Contract 62 

Section       10. — Contracts  Against  Public  Policy 63 

Section       11. — Contracts  in  Restraint  of  Trade 64 

Section       24. — Contracts  by  Letter  or  Telegraph 67 

Section      26. — Contracts  Coming  Due  on  a  Holiday 73 

Section      27. — Holidays  in  California 73 

Section       15. — Express  Contracts    66 

Section      19. — Extinction  of  Written  Contract  by  Cancellation 67 

Section      16. — Implied  Contracts   66 

Section      20. — Interpretation  of  Contracts 67 

Section        6. — Objects  of  Contract 61 

Section        2. — Parties  to  Contracts 57 

(a)  Contracts  of  Married  Women 58 

(b)  Liability  of  Separate  Property  of  Wife  for  Debts. .  59 
Section      23. — Place    of    Performance . .             68 


INDEX  TO  SECTIONS. 


19 


PAGE 

Section        5. — Proposal  of  Contract,  Acceptance,  and  Revocation 68 

Section      21. — Printed  and  Written  Parts  of  Contract 68 

Section  18. — Rescission    of    Contract , 68 

Section  12.— Sale  of  Good  Will  of  a  Business 65 

Section  17. — Termination  of  Contracts 66 

Section  22. — Time  of  Performance  of  Contract 68 

Section        4. — When  Consent  Is  Not  Mutual 60 

Section        8.— What  Contracts  May  Be  Verbal 62 

Section        9. — What  Contracts  Must  Be  in  Writing 62 

MANUFACTURER'S  AGENTS. 

Section    221. — Agent's  Authority  to  Borrow  Money 259 

Section    222.— Agent  Selling  Goods  Out  of  Manufacture 260 

Section    224. — Limitation    of    Authority 261 

Section    220. — Manufacturer's  Agents  to  Buy  or  Sell 259 

Section    225.— Sale  of  Property  When  Manufactured 261 

Section    223. — Selling  Goods  for  One  Year  Made  in  Another 261 

MARINE  INSURANCE. 

Section    415. — Acts  of  Master  and  Crew 362 

Section     411. — Abandonment   356 

(a)  Refusal  to   Accept 358 

(b)  Waiver  of  Formal  Abandonment 358 

(c)  Omission  to  Abandon 358 

(d)  Notice    of   Abandonment 358 

Section    404. — Definition   of  Marine  Insurance 350 

Section     409. — Deviation  from  Voyage 354 

(a)  What  Constitutes  Deviation 354 

(b)  Deviation  Exonerates  the  Insured 355 

Section     407.— Duty  of  Parties 352 

(a)  Presumption  of  Knowledge  of  Loss 352 

(b)  Concealments  Which  Only  Affect  the  Risk  in  Ques- 

tion     352 

(c)  Effect  of  Intentional  False  Representations 352 

Section     143. — General  Average  360 

Section    405. — Insurable  Interest    350 

Section     412. — Measure  of  Indemnity 358 

(a)  Partial  Loss   359 

(b)  Profits    359 

(c)  Valuation  Apportioned    359 

(d)  Valuation  Applied  to  Profits 359 

(e)  Estimating  Loss  Under  an  Open  Policy 359 

(f )  Arrival  of  Cargo  Damaged 360 

(g)  Labor  and   Expenses 360 

(h)     One-third  New  for  Old 360 

Section     406.— Perils  of  the  Sea 351 

Section     414. — Perishable  Goods    362 


20  INDEX  TO  SECTIONS. 

PAGE 

Section    403.— The  Policy   350 

Section    410.— Total  and  Partial  Loss 355 

(a)  Actual  Total  Loss 355 

(b)  Constructive  Total  Loss 356 

(c)  Insurance  Against  Total  Loss 356 

(d)  Liability  of  Insurer  When  Voyage  Is  Broken  Up..  356 

Section     408. — Warranty  of  Sea-worthiness 353 

(a)  Seaworthiness   Defined    353 

(b)  Different   Degrees    of    Seaworthiness    at    Different 

Stages  of  the  Voyage 353 

(c)  Delay  in  Making  Eepairs 353 

(d)  Seaworthiness  for  Cargo 353 

(e)  Neutral  Papers    354 

(f)  At  What  Time  Seaworthiness  Must  Exist 354 

MECHANIC'S  LIENS. 

Section    467. — Abandonment  and  New  Contract 460 

Section     474. — Assignment  of  Mechanic's   Lien 462 

Section    462.— Attorney's  Fees    458 

Section     461. — -Building  Constructed  Under  Distinct  Contracts — Who  Is 

Original  Contractor    457 

Section  448.— Claim  of  Lien 450 

Section  455. — Claimants  May  Join  in  Suit 454 

Section  449. — Completion   450 

Section  453. — Contractor  May  Recover  Only  Amount  Due  Him 453 

Section    454. — Deficiency  of  Proceeds  Under  Decree  of  Foreclosure .  . .  454 

Section    471. — Dwelling-House — Land    Subject    to    Lien 461 

Section    472.— Elevator  Part  of  Building 461 

Section    457. — False  Notice  of  Claim 455 

Section    443. — Filing  of  Contract  and  Bond 446 

Section     480. — Form  of  Contractor's  Bond 466 

Section    481. — Form  of  Notice  to  Owner  of  Agreement  to  Furnish  Mate- 
rials  to   Contractor 468 

Section     482. — Form   of  Notice   to   Owner   of   Materials   Furnished   to 

Contractor  468 

Section     483.— Form  of  Notice  to  Owner  of  Labor  Performed 469 

Section    484. — Form  of  Notice  of  Mechanic's  Lien  for  Labor 470 

Section     485. — Form   of   Mechanic's   Lien   by   Contractor   or    Sub-Con- 
tractor      472 

Section     486. — Form  of  Notice  of  Claim  Against  Public  Improvement 

Fund    474 

Section     487. — Form  of  Owner's  Notice  of  Completion 476 

Section    489.— Form  of  Assignment  of  Lien 478 

Section     451.— How  Long  Lien  Continues 451 

Section     475. — If  Building  Is  Destroyed  by  Fire,  No  Lien  Can  After- 
wards Be  Filed 462 

Section  446. — Land  Subject  to  Lien 449 

Section  442.— Limit  of  Liens 44G 

Section  444.- — Limit  to  Owner's  Liability 447 

Section  459. — Lien  Law  to  Be  Liberally  Construed , 455 


INDKX  TO  SECTIONS.  21 

PAGE 

Section    464. — Lien  for  Moving  a  House 459 

Section    465. — Lien  on  Homestead 459 

Section    466. — Lien  Against  Railroad 459 

Section    476.— Lien  for  Work  Done  by  Order  of  Health  Officer 463 

Section     473. — Liens  on   Lots   for   Improvements 481 

Section     473. — Materials   Must  Be   Expressly  Furnished   for   Structure 

Charged  with  Lien 462 

Section    441. — Mining  Claim  Liens 445 

Section    458. — Mistakes  in  Statement  Not  to  Invalidate  Lien 455 

Section    477. — Miner's  Lien  Must  Be  Upon  the  Whole  Claim 463 

Section     465. — Mjning  Ground — Patented  Land. 405 

Section     445. — Notice    to   Owner    of   Labor    Performed    and    Materials 

Furnished    447 

(a)  Time  of  Commencing  Action 448 

(b)  Pro  Rata  Distribution  When  Moneys  Insufficient..  449 

(c)  Right  to  Recover  Deficit 449 

Section     488.— Notice  By  Owner  that  He  Will  Not  Be  Responsible  for 

Improvements  on  His  Premises 477 

Section     450. — Owner's  Notice  of  Completion 451 

Section     456. — Personal  Action  to  Recover  Debt 454 

Section     479. — Personal  Property  Liens 465 

Section     470. — Priority  of  Material  Man's  Claim   Over  Mortgage 401 

Section     469. — Real  or  Reputed  Owner 460 

Section     490. — Return   of    Plans   by   Recorder 479 

Section     460. — Security  for  Payment  by  Contractors  on  Public  Work.  456 

(a)     Claims  of  Material  Men,  Etc 457 

Section    491.— Street  Work  Liens 475 

Section    446. — The  Persons  Entitled  to  Liens 445 

Section    447.— When  Lien  Must  Be  Filed 450 

Section     452. — When  Building  Will  Be  Held  to  Have  Been  Constructed 

at   Owner's   Instance 452 

Section     463. — When  Lien  for  Materials  Begins 459 

Section     468.— What  Is  Meant  by  "Owner" 460 

NOTARY  PUBLIC. 

Section     565. — Bond    of    Notary 530 

Section     562.— Duties   of  Notary 529 

Section     570. — False  Certificate  to  Acknowledgement 532 

Section     576.— Fees    of    Notary 536 

Section     566. — Liability    of   Notary 530 

Section     568.— Liability  of  Sureties  on  Official  Bond 531 

Section     574. — Misappropriation   of   Moneys 535 

Section    571. — Notary  Cannot  Amend  Certificate 533 

Section     572. — Notary's   Knowledge   of   Party   Acknowledging   Instru- 
ment      533 

Section     564. — Number    of    Notaries 529 

Section     563. — Notary's  Record   529 


22  INDEX  TO  SECTIONS. 

PAGE 

Section     573. — Party  Introduced  to  Notary 534 

Section     ;769. — Premature  Protest  of  Promissory  Note 531 

Section     575. — Taking  Oath  Over  Telephone 535 

Section     567.— What  Acts  Covered  by  Official  Bond 530 

PARTNERSHIP. 

Section  532. — Affidavit  That  Special  Partner  Has  Paid  in  His  Share.  504 

Section  513. — Application    of    Partnership    Property    to    Payment    of 

Debts    513 

Section     520. — Authority  of  Individual  Partner 497 

Section     528. — Certified  Statement  of  Special  Partnership 501 

Section    517.— Compensation  for  Services  to  Firm 495 

Section     525. — Business  Under  Fictitious  Name 499 

Section     £40.— Duration   of  Partnership 510 

Section     508. — Formation  of  Partnership 489 

Section  526. — Form  of  Certificate  of  Partnership  Transacting  Business 

Under  Fictitious  Name 500 

Section     531. — Form  of  Certificate  of  Special  Partnership. 503 

Section     547. — Form  of  Partnership  Agreement 518 

Section     523. — General  Liability  of  Partner . . '. 499 

Section     533. — Interest  and  Profits  of  Special  Partner 506 

Section     516. — Liability  of  Partners  to  Account 495 

Section     536. — Liability   of  Mining  Partners 507 

Section  524.— Liability  of  One  Who  Permits  Himself  to  Be  Held  Out 

as  a  Partner 499 

Section     534. — Mining  Partnerships    506 

Section     537. — Mining  Ground   Partnership   Property 507 

Section    515. — Mutual  Obligations  of  Partners 493 

Section     538. — New  Member  of  Mining  Partnership 508 

Section     544.— Notice   of  Dissolution   of   Partnership 516 

Section  539. — Owners  of  Majority  of  Shares  Govern  Conduct  of  Mine  509 

Section     509. — Partnership  Property    490 

Section     510. — Partner's  Interest  in  Partnership  Property 490 

Section     512. — Partner's  Share  in  Profits  and  Losses 491 

Section     522. — Partner  Engaging  in  Other  Business 499 

Section     542. — Partial  Dissolution  of  Partnership 518 

Section     511. — Possession  of  Partnership  Property 491 

Section    519. — Power  of  Majority  of  Partners 496 

Section     535. — Profits  and  Losses  in  Mining  Partnership 507 

Section     518. — Renunciation   of  Partnership 495 

Section    530.— Rights  of  Special   Partners 502 

Section     546. — Rights  of  Partners  After  Dissolution 517 

Section     527. — Special  Partnerships   501 

Section     529.— Special  Partnership — Liability  of  the   Partners 502 

Section     541. — Total  Dissolution  of  Partnership 510 

Section     507. — What  Constitutes  a  Partnership 489 


INDEX  TO  SECTIONS. 


23 


PAGE 

Section  514. — What   Is   Partnership   Property 492 

Section  521.— What  Partner  Cannot  Do 498 

Section  543. — When  Partner  Entitled  to  Dissolution 510 

Section  545. — Winding  Up  the  Partnership  Affairs 517 

PRINCIPAL  AND  AGENT. 

Section  199. — Agent's  Power  to  Disobey  Instructions 246 

Section  200. — Agent  Cannot  Have  Authority  to  Defraud  Principal .  . .  247 

Section  201. — Agent's  Actual  Authority 247 

Section  202. — Agent's  Ostensible  Authority 248 

Section  207. — Agent's  Delegation  of  His  Power 252 

Section  195. — Authority  of  Agent 245 

Section  198. — Authority  of  Agent  to  Receive  Price  of  Property 246 

Section  193. — Definition   of  Agency 244 

Section  204. — How  Agency  Is  Created 250 

Section  194. — Kinds  of  Agency 244 

Section  205. — Mutual  Obligations  of  Principal  and  Third  Persons 250 

Section  206. — Obligations  of  Agents  to  Third  Persons 252 

Section  203. — Ratification   of  Agents   Acts 249 

Section  208. — Termination  of  Agency '. 253 

Section  196. — What  Included  in  Authority  to  Sell  Personal  Property  245 

Section  197.— What  Included  in  Authority  to  Sell-Real  Estate 245 

REAL  ESTATE  AGENTS. 

Section  271. — Agent's  Mistake  as  to  Title 291 

Section  281. — Agreement  Between  Agents  to  Co-operate  in  Selling.  .  .  297 

Section  286.— Agent's  Knowledge  of  Title 299 

Section  294. — Agent  Buying  in  His  Own  Name 301 

Section  277. — Amount  of  Commissions » 293 

Section  282.— Authority  to  Sell  on  Credit 297 

Section  251. — Authority  of  Agent  Making  Lease 279 

Section  298. — Authority  of  Agent  Making  Lease  for  Term  Longer 

Than  One  Year 302 

Section  264. — Commissions  Upon  Sale  or  Exchange  by  Owner 288 

Section  289. — Costs  in  Suit  for  Commissions 299 

Section  290. — Commissions  Out  of  Purchase  Money 299 

Section  300. — Commissions  on  Sales  of  Real  Property  Under  Order  of 

Court    303 

Section  299. — Death  of  Principal  Revokes  Authority  of  Agent 303 

Section  246. — Employment  Must  Be  in  Writing 267 

Section  260.— Evasion  of  Contract  by  Owner 286 

Section  250.— False  Advertisements   279 

Section  258.— Failure  of  Sale  by  Defective  Title 285 

Section  259. — Failure  of  Owner  to  Remove  Defects 

Section  252.— Form  of  Written  Authority  to  Agent .  .  .280 

Section  288.— How  Authority  of  Agent  Can  Be  Extended 299 

Section  274.— Husband  Giving  Agent  Property  of  Wife  to  Sell 292 


24 


INDEX  TO  SECTIONS. 


PAGE 

Section    287. — Interest  Allowed  by  Law  on  Agent's  Commissions 299 

Section    268. — Liability  of  Agent  Under  Contract  to  Sell  for  Specified 

Amount   290 

Section     269. — Liability  of  Owner  to  Auctioneer 290 

Section    285. — Liability  of  Auctioneer  for  Deposit  at  Auction  Sale ....  298 
Section    249. — License  of  Real  Estate  Brokers  and  Salesmen 269 

(a)  Real  Estate  Broker 269 

(b)  Real   Estate   Salesman 269 

(c)  Application    of    Act 269 

(d)  Act  Constituting  Person  a  Broker 270 

(e)  State  Real  Estate  Department 270 

(f)  Limitations   on   License 271 

(g)  Applications   for   License 271 

(h)     Licenses  for  Salesmen 272 

(i)      License   Fees    273 

(j)      Display  of  Licenses  in  Offices 273 

(k)     Revocation  of  Licenses 274 

(1)      Appeal  from  Revocation  of  License 274 

(m)    Powers    of    Commissioner 275 

(n)     Powers  of  Superior  Court 276 

(o)     Taking  of  Depositions 277 

(p)     Right  to  Attendance  of  Witnesses 277 

(q)     When  Salesman  is  Discharged _, 277 

(r)     Employer's    License    not    Affected    by    Employee's 

Violation   277 

(s)      Prosecution   of    Violations 278 

(t)      Penalty  for  Acting  Without  License 278 

(u)     No  Commission  to  Unlicensed   Persons 278 

(v)     Party  to  Action  Must  Be  Licensed 278 

Section    266. — Misrepresentation  by  Owner 288 

Section  257. — Option  to  Agent  to  Sell  for  Commission  Above  a  Fixed 

Price  283 

Section  276. — Owner  and  Purchaser  Need  Not  Be  Brought  Face  to 

Fjice  293 

Section  278.— Prevention  of  Sale  by  Owner 294 

Section  301. — Personal  Property   Brokers 304 

Section  283. — Power  of  Attorney  to  Agent  to  Make  Deed 298 

Section  292. — Purchase  by  Agent  from  Himself 300 

Section  293. — Purchase  by  Agent  from  Principal 301 

Section     256. — Ratification  of  Lnauthorized  Employment  by   Corpora- 
tion      283 

Section     261. — Ratifying  Authority  of  Brokers 287 

Section     272. — Repudiation  of  Contract  by  Vendor 291 

Section     284. — Risk  by  Purchaser  Who  Takes  Lawyer's  Advice  as  to 

Title    298 

Section    253. — Right  of  Agent  to  Commissions  When  Property  With- 
drawn from  Sale 280 

Section    263.— Sale  by  Owner 287 

Section    265.— Sale  by  Owner  Through  Another  Agent 288 

Section    291.— Selling  Land  on  Shares.' 300 

Section     273. — Terms  of  Payment  and  Refusal  to  Accept  Tender 292 


INDEX  TO  SECTIONS. 


25 


PAGE 

Section    247.— Verbal  Contract  Invalid 268 

Section  248.— When  Letter  Not  Sufficient 268 

Section  254. — When  Contract  Fulfilled  and  Commission  Earned 281 

Section  255. — What  Is  Sufficient  Authority  from  Corporation 281 

Section  262.— What  Is  Good  Title 287 

Section  267.— What  Constitutes  a  Sale  by  Owner 289 

Section  270.— What  Agent  Must  Prove  in  Suit  to  Recover  Commis- 
sions     290 

Section  275. — What  Constitutes  Finding  a  Purchaser 292 

Section  279. — When  Purchaser  Must  Sign  a  Written  Contract 294 

Section  280. — When  Owner  Must  Return  Money  Paid  on  Contract ....  296 

Section  295. — When   Authority   of  Agent  Revocable 302 

Section  296.— When  Option  Can  Be  Revoked 302 

Section  297. — Which  One  of  Two  Brokers  Is  Entitled  to  Commissions  302 

SALE  OF  PERSONAL  PROPERTY. 

Section       45. — Adulterated,     Mislabeled     or     Misbranded     Foods     and 

Liquors    S3 

Section       63. — Apples — Standard  Grades  and  Boxes 122 

(a)  "California   Fancy"    122 

(b)  "B   Grade"    123 

(c)  "C  Grade"    123 

(d)  Standard  Container   123 

(e)  Use  After  July  1,  1920 124 

(f )  Labelling  Container    124 

(g)  Definitions    124 

(h)     Powers  and  Duties  of  Inspectors 125 

(i)      Refusal  to  Receive  or  Ship 125 

(j)      Constitutionality    126 

Section       43.— Bill  of  Sale 82 

Section       40. — Buyer's  Directions  as  to  Manner  of  Sending  Things  Sold     80 
Section       41.— Bulk  Law 80 

Section       58. — Cheese  and  Cheese  Brands 105 

Section       46. — Cold   Storage   Eggs   and   Butter 85 

Section       47. — Eggs  in  Transit  More  Than  Thirty-one  Days 86 

Section       39. — Expense  of  Transportation 80 

Section       61. — Explosives    108 

Section       59. — False  Advertisements   lOti 

Section       44.— Form  of  Bill  of  Sale 82 

Section       42. — Form  of  Notice  of  Sale  of  Stock  of»  Goods 82 

Section       62. — Fruits  and  Vegetables — Standards  and  Standard  Pack- 
ages      113 

(a)  Enforcement  by  Commissioner  of  Horticulture....  113 

(b)  Exemptions    114 

(c)  Definitions    114 

(d)  Specifications  for  Standard  Containers 115 

(e)  Labels  for  Fruit  Containers 117 

(f)  Standard  Containers  117 

(g)  Standard  for  Grapes  and  Oranges 118 

(h)     Inspectors  of  Fresh  Fruit  and  Vegetables 118 

(i)      Appointment    and    Compensation 119 

(j)      Powers  and  Duties  of  Inspector 120 

(k)     Refusal   to   Ship 121 


26  INDEX  TO  SECTIONS. 

PAGE 

(1)      Penalty  for  Violation 121 

(m)    Constitutionality 122 

Section      50.— Imitation  Milk   92 

(a)  Manufacture  and  Sale  of  Imitation  Milk 92 

(b)  Imitation  Milk  to  Be  Labeled 93 

(c)  Adulteration    94 

(d)  Display  of  Sign  by  Restaurants "...  94 

(e)  License    94 

(f )  Penalty   96 

Section      55, — License  to  Receive  Milk  on  Basis  of  Butter  Fat  Con- 
tained    100 

Section       60. — Materials   in    Mattresses 107 

Section       52. — Oleomargarine  and  Imitation  Cheese 98 

Section      57. — Pasteurized  Milk    • 104 

Section      49. — Poisonous  Confectionery    91 

Section      38. — Right  to  Inspect  Goods  Before  Acceptance 80 

Section       51. — Rules  for  Marketing  Dairy  Products 96 

(a)  Standards  for  Carriers 96 

(b)  Rules  for  Assembled  Dairy  Products 97 

(c)  Penalties  98 

Section       48. — Sanitary  Regulations  of  Food-Producing  Establishments  87 

Section       56. — Specifications  for  Standard  Babcock  Testing  Glassware.  101 

Section       50. — Weighing   and    Sampling   Milk 99 

Section       35.— When  Goods  Sold  Must  Be  Delivered 79 

Section      37.— When  Price  of  Goods  Bought  Must  Be  Paid 79 

Section      36. — Where  Delivery  Must  Be  Made .' . .  79 

STOPPAGE  IN  TRANSIT. 

Section      72. — When  Seller  or  Consignor  May  Stop  Goods  in  Transit.  . .  134 

(a)     What  Will  Defeat  Vendor's  Right  to  Stop  Goods.  136 


Section     150. 
Section     156. 


Section 
Section 
Section 
Section 
Section 
Section 


DEEDS— SALE  OF  REAL  ESTATE. 

-Bargain    and    Sale    Deed 

-Corporation    Deed    


203 
208 


146. 
147, 
148, 
158, 
160, 
162. 


-Deed  to  Community  Property 200 

-Deed  to  "Separate  Property 201 

-Deed  of  Gift 201 

-Deed   in   Escrow 210 

-Deed  Cannot  Be  Canceled 211 

-Deed  to  Community  Property  Where  Husband  or  Wife 

Is  Insane  212 

-Defectively  Acknowledged  Deed 213 


Section     163, 

Section     157.— Effect  of  Deed  in  Escrow..  .  210 


Section     166.— Form  of  Joint  Tenancy  Deed 218 

Section     149.— Form  of  Deed  of  Gift 201 

Section     151.— Form  of  Bargain  and  Sale  Deed 203 


INDEX  TO  SECTIONS.  27 

PAGE 

Section     153. — Form  of  Quitclaim  Deed ."'. '."'.  204 

Section     155. — Form  of  Warranty  Deed 206 

Section     157. — Form  of  Corporation  Deed  and  Acknowledgement 208 

Section    165.— Joint  Tenancy  Deed 218 

Section     161. — Power  of  Attorney  to  Make  Deed.  .-..'. 211 

Section     164. — Maps  of  Subdivisions 214 

Section     159.— Quitclaim    Deed    204 

Section     167. — Record  Title  of  Survivor  in  Joint  Tenancy '.....  215 

Section     144.— Transfer  by  Deed 199 

Section     145. — Who  May  Take  Acknowledgements  of  Deeds 199 

Section     154. — Warranty   Deed    \ 206 

SEARCHERS  OF  RECORD. 

Section     550.— Abstracts  of  Title 524 

Section     558. — Incorrect  Report  of  Quantity  of  Land  Conveyed 528 

Section     552. — Liability  of  Searchers  of  Record 525 

Section     554. — Liability  for  Mistake 527 

Section     555. — Liability   for  Omitting  Encumbrance 527 

Section     556. — Marginal  Reference  in  Record  Book 527 

Section     559. — Measure   of  Damages 328 

Section     557. — Omitting  Judgment  and  Sale 528 

Section    561. — Sale  of  Good  Will  of  Abstracting  Business 528 

Section    551. — Searchers  of  Record 52.5 

Section    553.— To  Whom  Liable 520 

Section     560. — When  Suit  for  Damages  Must  Be  Commenced 528 

SPAULDING'S  TABLE  FOR  MEASUREMENT  OF  LOGS. 

Section    549.— Explanation  of  Table 523 

Section    548. — Legal  Standard  of  Log  Measurement 520 

WAREHOUSE  LAW. 

Section      94. — Delivery  of  Property  by  Warehouseman 150 

Section     100. — Fraud  by  Warehouseman 161 

Section     101. — Insurance  on  Stored  Property 163 

Section      95. — Liability  of  Warehouseman 153 

Section     102. — Liability  for  Loss  by  Reason  of  Defective  Building 163 

Section      92. — Negotiability  of  Warehouse  Receipt .  149 

Section      99. — Negotiation  of  Warehouse  Receipt 158 

Section       93. — Removal  of  Property  by  Warehouseman 137 


28 


INDEX  TO  SECTIONS. 


PAGE 
Section      98. — Sale  of  Property  for  Storage  Charges 155 

Section       91. — Warehouse  Receipts    147 

Section      96. — Warehouseman's   Liability    for   Delivering   Property   to 

Wrong   Person    154 

Section      97. — Warehouseman's  Liability  for  Loss  by  Fire 154 

Section     103. — Food  Warehouses    163 

(a)  Definitions     164 

(b)  Food  Warehouses  Declared  Public  Utilities 164 

(c)  Discrimination  by  Warehousemen   Unlawful 164 

(d)  Schedule  of  Rates  to  Be  Filed 166 

(e)  Contracts  in  Violation  Void 167 

(f)  Procedure  as  Specified  in  Public  Utility  Act 167 

(g)  Action  by  Attorney  General  to  Collect  Rebates,  etc.  168 

(h)     Action  to  Enjoin  Violations 168 

(i)      Penalty    169 

(j)      Constitutionality    169 

(k)     Purpose  of  Act 169 

Section     104. — Cold  Storage  Warehouses 170 

WARRANTY  OF  PERSONAL  PROPERTY. 

Section       82. — Bottles,  Boxes,  Siphons  and  Kegs 141 

(1)  Penalty 142 

(2)  Search   Warrants    142 

(3)  Accepting  Deposits   143 

(4)  Sale  of  Rights 143 

Section      81. — Damages  Allowed  on  Breach  of  Warranty 140 

Section      83. — Examination  of  Property  by  Purchaser 144 

Section      76. — Manufacturer's  Warranty  Against  Defects 137 

Section       73.— Warranty   of   Title 136 

Section       74. — Warranty  on  Sale  by  Sample 136 

Section       75. — Warranty   on   Agreement   to   Sell   Merchandise   Not   in 

Existence    137 

Section       77. — Warranty    of   Soundness 138 

Section       78. — Warranty  by  Trademarks  and  Other  Marks 138 

(a)  "Trademark"   Defined    138 

(b)  Recording  Trademarks    139 

(c)  Assignment  of  Trademarks 139 

(d)  Protection  of  Trademarks 139 

Section       79. — Warranty  of  Provisions  for  Domestic  Use 140 

Section       SO.— Warranty  on  Sale  of  Good  Will  of  Business 140 

WHOLESALERS'  AGENTS. 

Section     212. — Collections  by  Traveling  Agent 254 

Section     214. — Declarations  of  Wholesaler's  Agent 255 

Section     216.— Failure    to    Ship    Goods 255 

Section    213.— Giving  Credit 254 

Section     215. — -Notice  to  Wholesaler's  Agent 255 


INDEX  TO  SECTIONS.  29 

PAGE 

Section    217. — Notice  by  Wholesaler  of  Termination  of  Agency 255 

Section    211. — Purchaser's  Right  to  Return  Goods 254 

Section    210.— Sale  by  Sample 254 

Section    219.— Sale    of    Samples 258 

Section    209. — Traveling  Agents  253 

Section    218. — Wholesaler's  Repudiation  of  Agency 256 

PART  II. 
Bills  of  Lading. 

Section    586. — Acceptance  of  Bill  Indicates  Assent  to  Terms 539 

Section     592.— Altered    Bills     £42 

Section    598.— Adverse  Title  No  Defense 543 

Section    600. — Attachment  or  Levy  Upon  Goods 544 

Section     602. — Bill  Must  State  Charges  for  Lien  Claim 545 

Section     625. — Bill  Issued  When  Goods  Have  Not  Been  Received 553 

Section     589. — Carrier's  Liability  for  Misdelivery 540 

Section     595.— Carrier  Cannot  Set  Up  Title  in  Himself 543 

Section    601. — Creditor's  Remedies  to  Reach  Negotiable  Bills 545 

Section     627.— Definitions    553 

Section     617.— Draft  on  Buyer  by  Seller  of  Goods 550 

Section    583.— Duplicate  Negotiable  Bills  Must  Be  So  Marked 538 

Section     603.— Effect  of  Sale 545 

Section     594.— Effect  of  Duplicate  Bills 542 

Section    578.— Essential  Terms  of  Bill  of  Lading 537 

Section  616. — Form  of  Bill  as  Indicating  Rights  of  Buyer  and  Seller.  549 

Section     605. — Indorsement   546 

Section     612. — Indorser  Not  a  Guarantor 548 

Section    585. — Insertion  of  Name  of  Person  to  Be  Notified 539 

Section     596. — Interpleader  of  Adverse  Claimants 543 

Section     620. — Issue  of  Bill  for  Goods  Not  Received 551 

Section     621. — Issue  of  Bill  Containing  False  Statement 552 

Section     622.— Issue  of  Duplicate  Bill  Not  So  Marked 552 

Section     626. — Issue  of  Non-negotiable  Bill  Not  So  Marked 553 

Section    588. — Justification  of  Carrier  in  Delivering 540 

Section  599. — Liability  for  Non-receipt  or  Misdescription  of  Goods. . .  .  543 

Section     593.— Lost  or  Destroyed  Bills 5*42 

Section    628. — Losses  Not  Waived  by  Contract 554 

Section     623. — Negotiation  of  Bill  for  Mortgaged  Goods 552 

Section     618. — Negotion  Defeats  Vendor's  Lien 551 

Section     604. — Negotiation  of  Negotiable  Bills  by  Delivery 546 

Section  590. — Negotiable   Bills   Must  Be  Cancelled   Upon   Delivery  of 

Goods    541 

Section    582.— Negotiable  Bills  Must  Not  Be  Issued  in  Sets 538 

Section     581.— Negotiable  or  Order  Bill 538 

Section  624. — Negotiation  of   Bill   When   Goods  Have  Not  Been  Re- 
ceived   .                       553 


dO  INDEX  TO  SECTIONS. 

PAGE 

Section  577.— New  Law  of  1919 £37 

Section  613. — No  Warranty  Implied  from  Accepting  Payment  of  Debt  548 

Section  580. — Non-negotiable  or  Straight  Bill 538 

Section  584. — Non-negotiable  Bills  Must  Be  So  Marked 539 

Section    587. — Obligation  of  Carrier  to  Deliver 539 

Section     597. — Reasonable  Time  to  Ascertain  Validity  of  Claim 543 

Section     608. — Eights  of  Person  to  Whom  Bill  Has  Been  Negotiated.  .  546 
Section    609.— Rights  of  Person  to  Whom  Bill  Has  Been  Transferred. .  547 

Section     615. — Subsequent   Negotiation    549 

Section     606.— Transfer  of  Bills 546 

Section     610. — Transfer  of  Negotiable  Bill  Without  Indorsement 547 

Section  611.— Warranties  on  Sale  of  Bill 548 

Section  619. — When  Rights  and  Remedies  Are  Not  Limited £751 

Section  579. — What  Terms  May  Be  Inserted 537 

Section  591. — When  Part  of  Goods  Are  Delivered 541 

Section  614. — When  Negotiation  Not  Impaired  by  Fraud 549 

Section  607.— Who  May  Negotiate  Bills 546 

PART  III. 

Trade  Acceptances — Letters  of  Creiit — Bills  of  Exchanges. 

Bank  Checks. 

TRADE  ACCEPTANCES. 

Section    630. — Acceptance  Procedure 556 

Section     629. — Definition   of   Trade   Acceptance 556 

Section     633. — Discount  at  Federal  Reserve  Bank 558 

Section     634. — Form   of   Trade  Acceptance 558 

Section     631. — Trade  Acceptance  Not  a  Note 557 

Section     632. — Trade  Acceptance  Cannot  Be  Used  in  General  Contracts  557 

LETTERS  OF  CREDIT. 

Section    641. — Credit  Given  Must  Agree  With  Terms  of  Letter 560 

Section     636.— How  Addressed   559 

Section    642.— Intention  of  Parties C60 

Section     637. — Letters — General  or  Special. 559 

Section     639. — Letter  of  Credit  May  Be  a  Continuing  Guaranty 559 

Section    638.— Liability  of  the  Writer 559 

Section     635.— What  Is  a  Letter  of  Credit 559 

Section    640. — When  Notice  to  the  Writer  Necessary 560 

BILLS  OF  EXCHANGE. 

Section    6*7  — Acceptance    562 

Section    649. — Acceptance  of  Incomplete  Bill 563 


INDEX  TO  SECTIONS.  31 

PAGE 

Section    663. — Acceptance  for  Honor 568 

Section     643.— Bill  of  Exchange  Denned 561 

Section     645. — Bill  Treated  as  Promissory  Note 562 

Section     654. — Bill  Dishonored  by  Non-acceptance 566 

Section     665.— Bill  Payable  After  Sight 568 

Section     671.— Bills  in  Sets  One  Bill 570 

Section    674. — Damages  Allowed  on  Dishonor  of  Bill  of  Exchange 571 

Section    644. — Inland  and  Foreign  Bills 561 

Section    650. — Kinds   of  Acceptance 563 

Section     664. — Liability  of  Acceptor 568 

Section     672.— Liability  of  Holder 570 

Section     667.— Presentment  to  Acceptor  for  Honor 569 

Section     668. — Payment   for   Honor 569 

Section     673. — Payment   by   Acceptor 570 

Section     669.— Preference    of    Parties 569 

Section     655. — Protest   of    Bill    of   Exchange 566 

Section     656.— Protest— How  Made    566 

Section    657.— Protest— By  Whom  Made C67 

Section    658.— Protest— When  Made    567 

Section    659. — Protest — Where  Made 567 

Section     680.— Protest  Before  Maturity   567 

Section     661. — Protest — When  Dispensed  With  567 

Section     662.— Protest  of  Last  Bill 568 

Section     666.— Protest  of  Dishonored  Bill 569 

Section     646. — Referee  in  Case  of  Need 562 

Section    651. — Rights  of  Parties  as  to  Qualified  Acceptances 564 

Section    670. — Subsequent  Parties  Discharged 569 

Section    648. — Time  Allowed  Drawee  to  Accept 563 

Section     652. — When  Presentment  for  Acceptance  Must  Be  Made 564 

Section     653. — When  Presentment  Is  Excused C65 

BANK  CHECKS. 
Section     679.— Certified  Check   572 

Section     676.— Delivery  of  Check 572 

Section    691. — Drawing  Check  with  Intent  to  Defraud 578 

Section     686.— Forged  Checks 576 

Section    687. — Forged  Indorsements    576 

Section    688. — Garnishment  of  Money  on  Deposit 577 

Section  685. — Liability  of  Bank  to  Depositor  for  Refusal  to  Pay 

Checks  574 

Section  690.— Liability  of  Bank  for  Payment  of  Check  After  Death 

of  Drawer  578 

Section     689.— Lost  Check  C77 

Section    675. — Nature  of  Bank  Checks 572 

Section     677.— Negotiability    572 


32 


INDEX  TO  SECTIONS. 


PAGE 

Section  682. — Payment  of  Check  by  Mistake 573 

Section  678. — Possession  of  Check 572 

Section  680. — Presentment  and  Demand  for  Payment 573 

Section  684.— Refusal  to  Pay 574 

Section  683. — Rights  and  Liabilities  of  Indorsers 574 

Section  681. — Stopping  Payment  573 

PART  IV. 

Assignment  for  Benefit  of  Creditors. 

Section  699. — Accounting  by   Assignee - 584 

Section  692. — Assignment   by   Insolvent   Debtor 580 

Section  703. — Assignment  !Not  Revocable 585 

Section  702. — Assignee  Protected  for  Acts  Done  in  Good  Faith 585 

Section  698. — Bond  of  Assignee ....  - 584 

Section  701. — Compensation  of  Assignee 585 

Section  704. — Creditors'  Claims   585 

Section  705. — Creditor  Holding  Mortgage  or   Pledge 586 

Section  697. — Effect  of  Failure  to  Record  Assignment 583 

Section  696. — Failure  to  File  Inventory 583 

Section  69?. — Inventory  to  Be  Made  by  Debtor 582 

Section  700. — Property  Exempt  from  Assignment 584 

Section  694. — Void  Assignment   . , 582 

Section  693.— What  Is  Insolvency 582 

PART  V. 
Collection  of  Bills  and  Accounts. 

Section  735. — Accepting  Promissory   Note 595 

Section  724. — Agent's  Commissions  Upon  Collections 593 

Section  737. — Application  of  Payments  on  Account 596 

Section  716. — -Assignment   for   Collection 590 

Section  717. — Assignee  May  Sue  in  His  Own  Name 590 

Section  718. — Assignment  May  Be  Verbal  or  Written 591 

Section  719. — Assignment  by  One  Partner  of  Partnership  Account....  591 

Section  730. — Attachment    of   Debtor's   Property    in    Suit    to    Collect 

Account    594 

Section  722. — Authority  of  Agent  in  Making  Collections 592 

Section  720. — Collection  of  Accounts  When  Books  Are  Lost 591 

Section  725. — Collection  of  Bills  and  Accounts  When  Debtor  Is  Dead.  . .  593 

Section  736. — Collection  of  Notes  by  Agent C96 

Section  738. — Form  of  Assignment  of  an  Account 596 

Section  715. — Interest  on  a  Stated  Account 690 

Section  726.— In  What  Township  Suit  Must  Be  Brought 594 


INDEX  TO  SECTIONS. 


33 


PAGE 

Section  729. — In  What  County  Suit  in  Superior  Court  Must  Be  Brought  594 

Section    708. — Itemized  Account  587 

Section    706. — Methods  of  Making  Collections 587 

Section    731. — Means  for  Collection  to  Be  Employed  by  Agent 595 

Section    711. — Mutual  Account  588 

Section    709. — Open  and  Current  Account 587 

Section    732.— Payment  to  Wife  of  Creditor 595 

Section    733. — Payment  of  Note  to  Supposed  Agent 595 

Section    707. — Presentment  of  Bills  or  Statements  of  Account 587 

Section     723.— Ratification  of  Agent's  Acts 592 

Section     718.— Stated   Account    58!) 

Section     726. — Suit  in  Justice  Court  on  Bills  and  Accounts 593 

Section     728.- — Suit  in  Superior  Court  on  Bills  and  Accounts 594 

Section    734. — Taking  Goods  for  Creditor's  Claims 595 

Section    710. — When  Open  Account  Outlaws 588 

Section    714. — When  Stated  Account  Outlaws 589 

Section  721. — What  Debtor  May  Set  Off  Against  Assigned  Account..   592 


PART  VI. 

Notes  and  Mortgages. 
MORTGAGES. 

Section     855. — Assignment  of  Certificate  of  Sale 651 

Section    873. — Assignment  of  Mortgage 657 

Section    844.— Attorney  Fees  648 

Section    854.— Certificate  of  Sale 650 

Section     841. — Compound  Interest    647 

Section    852. — Costs    of   Foreclosure 650 

Section    870. — Collection  of  Lost  or  Destroyed  Note 656 

Section    829. — Declaration  of  Homestead 636 

Section    837. — Deed  as  Security  and  Agreement  to  Deed  Back 646 

Section     861. — Deficiency  Judgment   652 

Section     825. — Effect  of  Recording  Mortgages  of  Real  Property 635 

Section     826. — Effect  of  Recording  a  Chattel  Mortgage 635 

Section     867. — Excuse  for  Not  Presenting  Claim  in  Time 655 

Section     846. — First  and  Second  Mortgages 648 

Section  830. — Form  of  Declaration  of  Homestead  by  Husband  and  Wife  637 

Section     831. — Form  of  Declaration  of  Homestead  by  Husband 638 

Section    832. — Form  of  Declaration  of  Homestead  by  Wife 639 

Section     834.— Form  of  Real  Estate  Mortgage 641 

Section     836.— Form  of  Chattel  Mortgage 644 

Section    868. — Foreclosure  of  Mortgage  When  the  Maker  Is  Dead 655 

Section    869. — Foreclosure  of  Mortgage  Payable  in  Installments 655 

Section     875. — Form  of  Release  of  Mortgage 658 

Section     819. — How  Mortgage  Is  Executed  and  Acknowledged 633 


34 


INDEX  TO  SECTIONS. 


PAGE 

Section     866. — How  to  Collect  a  Note  When  Maker  Is  Dead 654 

Section    859.— How  to  Redeem 651 

Section    841. — Interest  on  Judgment 647 

Section     843. — Insurance  on  Mortgaged  Buildings 648 

Section  847. — In  What  Court  Suit  Must  Be  Brought  to  Foreclose  Mort- 
gage      648 

Section    838.— Lawful  Interest    647 

Section     839. — Legal  Rate  Where  No  Interest  Specified 647 

Section     872. — Liability  of  Partners  on  Partnership  Note 656 

Section     816.— Mortgage  Security  633 

Section    820. — Mortgage  of  Married  Woman 634 

Section    821.— Mortgage  of  Minor 634 

Section     822. — Mortgage  of  Partnership  Property 634 

Section     827. — Mortgage  Not  Recorded  Good  Between  Parties 636 

Section     828. — Mortgage  on  Homestead 636 

Section     845. — Mortgage   for  Future   Advances 648 

Section     871. — Note  Made  by  Partners 656 

Section     851.— Order  in  Which  Property  Must  Be  Sold 649 

Section  862. — Possession  of  Property  During  Foreclosure  Proceedings  653 
Section  8(53. — Possession  of  Real  Property  During  Time  for  Redemp- 
tion       653 

Section     876. — Power  of  Sale  in  Mortgage  or  Trust  Deed 658 

Section     824. — Proof  of  Execution  of  Mortgage 635 

Section     823. — Recording  Mortgages 634 

Section     849. — Renewal  of  Note  Does  Not  Renew  Mortgage 649 

Section     864.— Right  to  Rents  and  Profits .' 653 

Section     835.— Rules  Which  Apply  to  Chattel  Mortgages 643 

Section     875. — Release  and  Satisfaction  of  Mortgage 658 

Section     860.— The  Sheriff's  Deed 652 

Section     857.— Time    for   Redemption 651 

Section     833.— Value   of  Homestead 641 

Section  817. — What  Interest  in  Real  Property  May  Be  Mortgaged.  . . .   633 

Section     818.— What  Personal  Property  May  Be  Mortgaged 633 

Section     842. — Who  Must  Pay  Taxes  on  Mortgage 648 

Section     848. — When  Mortgage  Is  Outlawed 649 

Section     850.— What  Property  Can  Be  Sold  to  Satisfy  Mortgage 645 

Section     853.— Who  May  Buy  at  Foreclosure  Sale 650 

Section     856.— What  Property  Can  Be  Redeemed 651 

Section     858. — Who  May  Redeem 651 

Section  865. — Who  Must  Pay  for  Improvements  Made  During  Fore- 
closure Proceedings , 654 

NOTES. 

Section     805. — Agent's  Notice  of  Dishonor 629 

Section    778. — Apparent  Maturity  of  Note 614 

Section    784. — Assignment  of  Note  Not  Negotiable 620 

Section     776. — Attorney  Fees    614 

Section  791.— At  What  Place  Note  Must  Be  Presented  for  Payment. .  623 

Section     789.— By  Whom  Note  Must  Be  Presented  for  Payment 623 


INDEX  TO  SECTIONS. 


35 


PAGE 

Section    810. — Conditional  Delivery  690 

Section    755.— Date  of  Note 607 

Section     767. — Difference  Between  Negotiable  Note  and  Note  Not  Ne- 
gotiable     610 

Section  809.— Filling  Up  Blanks 639 

Section  752.— Form  of  Note 605 

Section  758.— Form  of  Note  Signed  With  an  X 608 

Section  762. — Form  of  Note  Payable  on  or  Before  a  Certain  Date 609 

Section  769.— Form    of   Joint   Note 611 

Section  772. — Form  of  Joint  and  Several  Note 612 

Section  798. — Form  of  Notice  of  Dishonor 626 

Section  804.— Form  of  Installment  Note 628 

Section     757. — How  Must  Be  Signed  by  Maker 607 

Section     796— How  Notice  of  Dishonor  May  Be  Given 625 

Section  774.— Interest    613 

Section  780. — Indorsement  of  Negotiable  Note 616 

Section  781. — Indorser  of  Non -Negotiable  Note 617 

Section  786. — Indorsement  "Without  Recourse" 621 

Section  782. — Indorsement  of  Entire  Instrument 617 

Section  815. — Indorsement  by  Corporation  or  Infant 632 

Section  802.— In  What  Court  Suit  to  Collect  Note  Must  Be  Brought.  .  628 

Section  803.— Installment  Note 628 

Section  808.— Instrument  Undated   629 

Section    768.— Joint  Note   611 

Section     771. — Joint  and  Several  Note 612 

Section     783. — Kinds   of   Indorsements 617 

(a)  Indorsement  Restrictive   618 

(b)  Qualified  Indorsement   618 

(c)  Conditional   Indorsement    618 

(d)  Payable  to  Bearer 618 

(e)  Payable  to  Two  or  More  Persons 619 

(f)  Indorsed  to  Person  as  "Cashier" 619 

(g)  Name  Misspelled  619 

(h)     In   Representative   Capacity 619 

(i)      Time  of  Indorsement 619 

(j)      Place  of  Indorsement 619 

(k)     Continuation   619 

(1)      Striking  Out  Indorsement 619 

(m)    Transfer  Without   Indorsement 619 

(n)     Prior  Party  May  Negotiate 620 

Section  775. — Legal   Rate   of  Interest 613 

Section  770.— Liability   on  Joint  Note 612 

Section  773. — Liability  of  Makers  of  Joint  and  Several  Note 613 

Section  785. — Liability  of  Indorsers 620 

Section  755. — Maker's  Name  Spelled  Wrong 608 

Section  749. — Must  Be  for  the  Payment  of  Money 604 

Section  750. — Must  Be  for  a  Certain  Specified  Amount 605 

Section  751. — Must  Not  Be  Subject  to  Any  Condition  or  Contingency  605 

Section     760. — Name  of  Person  to  Whom  Note  Is  Payable 608 

Section    741. — Note  Made  by  Minor 599 

Section     742.— Note  Made  to  Minor.  .  <»<)n 


OO  INDEX  TO  SECTIONS. 

PAGE 

Section    743. — Note  Made  by  Married  Woman ' 600 

Section     744. — Note  Made  to  Married  Woman 601 

Section    745. — Note  Made  by  Corporation 601 

Section     746. — Note  Made  to  Corporation 603 

Section    747.— Note  Must  Be  in  Writing 604 

Section     748. — Note  May  Be  in  Pencil 604 

Section    756.— Note  Not  Dated  Is  Valid 607 

Section    761. — Note  Payable  on  or  Before  a  Certain  Date 605 

Section     763.— Note  With  Payee  Blank 609 

Section     764.— Note  Payable  to  Order  of  Maker 609 

Section     795. — Notice  of  Dishonor 625 

Section     807. — Note  Payable  at  a  Bank  Is  an  Order  to  the  Bank 629 

Section     754.— Place  of  Payment 606 

Section    800. — Protest  of  Foreign  Note 627 

Section     814.— Procuration    632 

Section     787. — Rights  of  Indorsee  in  Due  Course  of  Business 621 

Section     811. — Rules  of  Construction 631 

Section     813. — Signature  of  Agent   632 

Section     806.— Time  of  Maturity : 629 

Section    753.— Time  of  Payment 606 

Section     790.— To  Whom  Note  Must  Be  Presented  for  Payment 623 

Section     812. — Trade  or  Assumed  Name 632 

Section     739. — What  Is  a  Promissory  Note 598 

Section     740.— Who  May  Be  Parties 598 

Section     765.— When  Note  Is  Negotiable 610 

Section     766.— When  Note  Is  Not  Negotiable 610 

Section     777.— When  Note  Is  Outlawed 614 

Section    779. — When  Outlawed  Note  Is  Renewed 615 

Section     788. — When  Note  Must  Be  Presented  for  Payment 622 

Section     792. — What  Will  Excuse  Presentment  for  Payment 623 

Section     793. — What  Is  Reasonable  Diligence 624 

Section     794. — When  a  Note  Is  Dishonored 625 

Section     797.— When  Notice  of  Dishonor  Must  Be  Given 626 

Section     799. — When  Notice  of  Dishonor  Is  Excused 627 

Section     801.— When  Suit  to  Collect  Note  Can  Be  Brought 627 


PART  VII. 

Attachments,  Judgments  and  Executions. 
ATTACHMENTS. 

Section     877. — Attachment  of  Debtor's  Property 

Section     888.— Attachment  of  Partnership  Property 

Section    890. — Bond  for  Release  of  Attached  Property 

Section    882, 
Section    883. 


660 
668 


-Creditor  Liable  for  Unlawful  Attachment 665 

-Creditor  Attaching  Personal  Property  Must  Pay  Mort- 
gage    666 


Section    889.- 
Section     885.- 


-Dissolution  of  Attachment 

-For   What   Property   Garnishee   Liable. 


668 
667 


INDEX  TO  SUBJECTS.  37 

i 

PAGE 

Section    884. — Garnishment    666 

Section    880. — Homestead  Money  Exempt 665 

Section    891. — Lien  of  Attachment 669 

Section     881. — Mortgaged  Property  May  Be  Attached 665 

Section     886. — Money  Due  as  Salary  to  Public  Officer 667 

Section    887. — Money  in  the  Hands  of  the  Law 668 

Section     878.— What  Property  Can  Be  Attached 660 

Section     879. — What   Property   Is   Exempt   from  Attachment   or   Exe- 
cution     661 

JUDGMENTS  AND  EXECUTIONS 

Section     898. — Exemption  Must  Be  Claimed  by  Debtor 671 

Section     894. — How   Long  Judgment   Lien   Continues 670 

Section     896. — How  Justice    Court   Judgment    Is   Made   Lien   on   Real 

Property   670 

Section     892. — Judgments     669 

Section     893. — Judgment  a  Lien  on  Real  Property 669 

Section     895. — Judgment  Lien  on  Property  in  Another  County 670 

Section     897. — Time  Within  Which  Execution-  May  Issue 671 


PART  VIII. 

Wills. 

Section     917.— Children    of   Devisee 681 

Section     904.- — Consent  to  Dispose  of  Property  by  Will 675 

Section     909.— Form   of  Olographic  Will 678 

Section     911. — Gifts   to   Subscribing  Witnesses 679 

Section     921.— Grounds  for  Contest  of  Will 682 

Section     912.— How  a  Will  Is  Revoked 679 

Section     920. — Interest    on    Legacies 081 

Section     906.— Kinds  of  Wills 67(5 

Section     899.— Making    a    Will 67.S 

Section     907. — Nuncupative  Wills   67(5 

Section     908. — Olographic   Wills    677 

Section     916. — Omission  to  Provide  for  Children 681 

Section     902. — One-half  of  Community   Subject  to  Testamentary  Dis- 
position   of   Wife 673 

Section     903. — One-half  Subject  to  Testamentary  Disposition  of  Hus- 
band      675 

Section    913. — Revocation  by   Marriage 680 

Section     914. — Revocation  by  Marriage  and  Birth  of  Issue 680 

Section     915.— Share  of  Child   Born   After  the  Will..  .  680 


3b  INDEX  TO  SECTIONS. 

PAGE 

Section    900.— Who  May  Make  a  Will 674 

Section     905.— Who  May  Take  by  Will 675 

(a)     Restriction  on  Dev?se  for  Charitable  Uses 675 

Section     918.— When  Will  Takes  Effect 681 

Section     919. — When  Legacies  Are  Due 681 

Section     901. — Will  of  Married  Woman 674 

Section     910. — Will  Attested  by  Witnesses 070 


PART  IX. 
Corporations  in  California. 

Section  1041.— Advances  of  Money  by  Director 749 

Section  1046. — Agreement  to  Divide  Capital  Stock  Among  Stockholders 

Void    751 

Section     934. — Amentment  of  Articles  of  Incorporation 690 

(a)  Majority  Vote  of  Directors 691 

(b)  Amended  Articles  Filed 692 

(c)  Changes   Not  Permitted 692 

Section     943. — Amount  of  Subscribed  Capital  to  Be  Paid  In 708 

Section     996. — Amount  of  Assessment 731 

Section  1015. — Amendment  of  By-Laws 740 

Section    939. — Annual  License  Tax 697 

(a)  Determination  of   Tax 697 

(b)  Tax  on  Corporations  Having  No  Capital  Stock...  698 

(c)  Tax  Authorizes  Transaction  of  Business 699 

(d)  License  Tax  for  Part  of  Year 699 

(e)  Corporations   Exempt    699 

(f)  Corporation  License  Tax  Exemption  Board 700 

(g)  Tax  Exemption  Determined  Before  Filing  Articles 

of   Incorporation    700 

(h)     Notice  of  Time  When  Tax  Payable -701 

(i)      Notice   of   Suspension   or  Forfeiture 701 

( j )      License  Tax  Lien   702 

(k)     Rights  of  Domestic  Corporations   Suspended 702 

(1)      Right   of  Foreign  Corporations   Forfeited 703 

(m)    Application  by  Stockholder  or  Creditor  to  Restore 

Rights    ,703 

(n)     Controller's    Certificate     704 

(o)     No  Dissolution  Until  Tax  Paid 705 

(p)     Restoration  of  Rights  Under  Acts  of  1905  and  1915  705 

(q)     Use   of  New   Name 705 

(r)     Surrender  of  Right  to  Engage  in  Intrastate  Busi- 
ness       700 

(s)      False    Statement    700 

Section     925. — Articles   of   Incorporation 685 

Section     967. — Assignment  of  Accounts 718 

Section     982.— Assignee  of  Creditor  May  Sue  -Stockholders 725 

Section     995. — Assessment   of   Stock 730 

Section  1043.— Authority   of   President 750 

Section  1014. — Book  of  By-Laws • 740 

Section  1011. — By-Laws  of  Corporation 739 

Section  1038. — Can  a  Corporation  Perform  Corporate  Acts,  Such  as  the 
Mortgaging  of  Its  Real  Property,  -While  There  Is  a 

Vnrnnev  in  Its  Bn.-ml  of  Directors?..                             .  74S 


INDEX  TO  SUBJECTS.  39 

PAGE 

Section     942. — Capital  Stuck 707 

Section     929. — Certificate  of  Secretary  of  State 688 

Section    954. — Certificates  of  Stock  Are  Not  Negotiable 712 

Section    993. — Certificate  of  Increase  or  Decrease  of  Capital  Stock ...  730 

Section    931. — Cost    of   Incorporating 689 

Section     935. — Change   of  Name 693 

Section     936. — Change  of  Place  of  Business 693 

Section     949. — Compromise  With  Subscriber   for  Stock 709 

Section     961. — Corporation  Must  Keep  Within  Object  of  Its  Creation..  71f> 

Section     983. — Creditor's   Right  to    Unpaid   Subscriptions 72.3 

Section     941. — Corporations  to  Loan  Money  on  Chattel  Mortgages 707 

Section  1060. — Corporate   Scurities    Act 758 

(a)  Meaning    of    "Security" 758 

(b)  "Sale"     759 

(c)  "Agent"    759 

(d)  "Broker"    759 

(e)  Permit   to   Sell   Securities 760 

(f)  Examination    of   Application 761 

(g)  Certificate  of  Agent  or  Broker 762 

(h)     Certificate  Issued   763 

(i)      Advertisements    Submitted   to    Commissioner 764 

(j)      Report  by  Company  on  Sale  of  Securities 765 

(k)     Statement  by  Broker  on  Sale  of  Securities 765 

(1)      Papers  Open  to  Public  Inspection 765 

(m)    Review  of  Orders,  Etc.,  of  Commissioner 766 

( n )     Securities   Void    766 

(o)     Penalty  for  Company  Violating  Act 766 

(p)     Penalty  for  Officers,  Etc 767 

(q)     State    Corporation    Department    Created 768 

(r)     Powers    of    Commissioner 768 

(s      Fees    769 

(t)      Copies  of  Orders,  Etc 771 

(u)     Subscription  for  Shares  Prior  to  Incorporation...  772 

(v)     Election  of  Officers  Prior  to  Issuing  Shares 772 

Section     959. — Deed  Without  Corporate  Seal 714 

Section     971. — Denial  That  a  Corporation  Exists 719 

Section     992. — Decrease   of  Capital  Stock. 729 

Section  1021. — Directors  for  the  First  Year 741 

Section  1042. — Directors  in  Two  Corporations 749 

Section  1045. — Dividends    751 

Section  1051. — Dissolution    of    Corporation 753 

Section  1052. — Disposition  to  Be  Made  of  Property  Upon  Dissolution..  754 

Section     940. — Duplicate  of  Lost  Certificate 707 

Section  1031. — Duties  of  President,  Secretary  and  Treasurer 745 

Section  1022.— Election   of  Directors 742 

Section     933. — Extending   Corporate    Existence 690 

Section  1005. — Extension  of  Time  for  Payment  and  Sale 735 

Section  1047.— Extent  of  Debts  to  Be  Created 751 

Section  1050. — Examination    of   Corporations 753 

Section     990.— Failure   to    Elect    Officers 728 

Section  1053. — False  Reports    754 

Section     928. — Filing  Articles    of   Incorporation 688 

Section  1059. — Financial  Statement  to  Stockholders 757 

Section    923. — For  What  Purpose  Corporations  May  Be  Formed 684 

Section     926. — Form  of  Articles  of  Incorporation 685 


40 


TNDEX  TO  SECTIONS. 


PAGE 

Section     980. — Fraudulent   Transfer    724 

Section  1000. — Form  of  Notice  of  Assessment 733 

Section  1003.— Form  of  Notice  of  Sale 734 

Seqtion     938. — Foreign  Corporations    694 

(a)  Affidavit  Showing  Capital  Stock 695 

(b)  Representative  of  Foreign  Corporation 695 

(c)  Benefit  of  Law 690 

Section  1056. — General  Powers  of  Corporations 755 

Section    987. — Holding  Property  in  Other  Counties 720 

Section  1001. — How  Assessment   May  Be  Enforced 733 

Section  1012. — How  By-Laws  Adopted 73!t 

Section  1062. — Income  Tax  on  Corporations 77-'J> 

(a)  1919  Amendments  775 

(b)  Tax   Rates    775 

(c)  Exchange  of  Stock 770 

(d)  Net  Losses    770 

(e)  Deductions     770 

(f )  Credits    777 

(g)  Partnerships    777 

(h)     Individual   Returns    778 

(i)      Partnership  Returns    778 

(j)      Returns  When  Accounting  Period  Is  Changed 778 

(k)     Corporation    Tax    778 

(1)      Payment    in   Installments 779 

(m)    War   Excess   Profit   Tax 779 

(n )     Luxury  Taxes    780 

(o)     Tax  on  Employment  of  Child  Labor 781 

(p)  1920  Decision  of  United  States  Supreme  Court.  .  .  .   782 

Section     991.— Increase  of   Capital   Stock 728 

Section     965. — Lease   of   Franchise 717 

Section     998. — Levy  of  Assessment 731 

(a)  Levy  MUSL  Be  Made  at  Regular  or  Specially  Called 

Meeting  732 

(b)  Adjournment  of  Time  of  Holding  Regular  Meeting 

by  Minority  of  Directors  to  Future  Day  Not 
a  Regular  Meeting — Assessment  Levied  at  Such 
Meeting  Void  732 

(c)  Directors'     Meetings — Adjournment     by     Minority 

Unauthorized  732 

Section  932. — Limit  of  Corporate  Existence 689 

Section  764. — License  LaAV  Construed  628 

Section  968.— Liability  of  Promoters  718 

Section  974 — Liability  of  Stockholder  for  Furnishing  Information  to 

Rival  Corporation  721 

Section  976. — Liability  of  Stockholder  for  Corporation  Debts 722 

Section  977.— Liability  of  Member  Where  There  Is  No  Capital  Stock  723 
Section  986.— Liability  of  Stockholders  in  Distillery  for  Federal 

Taxes  720 

Section  989. — Liability  of  Purchaser  of  Subscription  Stock 727 

Section  1009. — Lien  for  Assessment 737 

Section  1040. — Liability  of  Directors  for  Money  Embezzled 749 

Section    957.— Mortgage  of  Shares  of  Stock 714 

Section     966. — Mortgage  of  Corporation   Property 717 


INDEX  TO  FORMS.  41 

PAGE 

Section     793. — Motives    of    Stockholders    in    Making    Examination    of 

Books    720 

Section    922. — Nature   of   Corporations 684 

Section     930. — Name  of  Corporation  Must  Be  New 688 

Section     964. — Notice   to   Corporation 717 

Section    999. — Notice  of  Assessment 732 

Section  1002.— Notice   of    Sale , 734 

Section  1023. — Notice   of  Meetings . 742 

Section     927. — Number  of  Signers 688 

Sction  1019. — Number  of  Directors 741 

Section  1058. — Number  of  Directors — Increase  or  Decrease 756 

Section  1030. — Organization  of  Board  of  Directors 745 

Section  1032.— Other   Officers    745 

Section     997. — :0rder  Levying  Assessment 731 

Section     994.— Paper  in  Which  Notices  Must  Be  Published 730 

Section     978.— Pledgee  or  Trustee  Not  Liable  for  Debts 723 

Section     946. — Preferred  and  Common  Stock 708 

Section  1044. — President   May   Employ  Attorney 750 

Section  1007. — Purchase  of  Delinquent  Stock  by  the  Corporation 736 

Section  1036.— Publicity  Cannot  Make  Illegal  Act  of  Directors  Valid.  747 

Section  1061.— Public  Utilities  772 

Section  1020. — Qualification    of  Directors 741 

Section  1033. — Quorum   of   Directors 744 

Section     953. — Remedy     Against     Corporation     Refusing    to     Register 

Transfer  of  Stock 712 

Section     956. — Remedy  Against  Corporation  for  Refusing  to  Recognize 

Stockholder    713 

Section     975. — Remedy   of   Stockholder  When   Inspection   of   Books   Is 

Refused    722 

Section  1016. — Repealing  Old  and  Adopting  New  By-Laws 740 

Section  1017. — Record    of    Amendments 740 

Section  1035. — Regular   and   Special   Meetings 747 

Section  1048. — Records   of  Corporation 754 

Section  1049. — Removal  of  Directors  from  Office 752 

Section     937.— Removal  From  One  Location  to  Another  in  Same  City  694 

Section  1006.— Sale  of  Stock  for  Assessment 736 

Section     958. — Seal   of   Corporation 714 

Section  1039. — Services  of  Director  Outside  of  His  Duties  as  Such 705 

Section     945.— Shares  of  Stock 708 

Section     944.— Stockholders    and    Members 708 

Section     972. — Stockholder's  Right  to  Inspect  Books  and  Records 720 

Section     981. — Stockholder   May   Sue   Other   Stockholders 724 

Section     947.— Subscription    for    Stock 708 

Section  1008. — Suit   to  Recover  Amount   of  Assessment 737 

Section  1018.— The  Board  of  Directors 741 

Section  1055. — Transfer  of  Foreign  Concessions 755 

Section  1054. — Transfer  of  Franchise 754 

Section     949.— Transfer  of  Shares   of   Stock 711 

Section     950.— Transfer  of  Stock  Held  by  Non-resident. .  .'. 711 

Section     951. — Transfer  of  Stock  Held  by  Married  Woman 711 

Section  1010. — Trustee  Not  Liable   for  Assessments  on  Stock 738 

Section  1037. — Vacancy  in  Board  of  Directors .   747 


42  INDEX  TO  SECTIONS. 

PAGE 

Section    952.— Void   Certificates    712 

Section     962. — Void  Contract  Cannot  Be  Ratified 715 

Section  1029.— Voting  by  Proxy 744 

Section  1034. — Vote  of  Director  on  Matter  in  Which  He  Is  Interested.  746 

Section  1057. — Voting  Trust  Agreements  in  Marketing  Corporations..  756 

Section     924. — Who   May  Form   a  Corporation 685 

Section  955. — When  Corporation  Cannot  Ctaim  Its  Own  Stock  Invalid  713 

Section     960. — What  Real  Estate  May  Be  Held  by  Corporation 714 

Section     963. — When  Corporation  Bound  by  Its  Own  Invalid  Act 715 

Section     969. — What  Is  a  Corporation  De  Facto 715 

Section     970. — Who  May  Question  the  Validity  of  a  Corporation 719 

Section     979.— When  Liability  for  Stockholder  Begins 726 

Section     985.— When  Liability  of  Stockholder  Is  Satisfied 723 

Section  1004. — Who   Are   Liable   on   Assessments 735 

Section  1013.— What  By-Laws  May  Provide  For 739 

Section  1024. — Who  May  Vote  at  Election  of  Directors 743 

Section  1025. — Who  May  Vote  Stock  in  Hands  of  Pledgee  or  Trustee. . .   743 

Section  1026. — Who   May  Vote    Stock  in  Hands   of   Administrator   or 

Executor    744 

Section  1027. — Who  May  Vote  Stock  Belonging  to  Minor 744 

Section  1028. — Who  Mav  Vote  Stock  Belonging  to  Insane  Person 744 

Section  984.— Within  What  Time  Suit  Against  Stockholder  Must  Be 

Commenced    725 

Section  988.— Within  What  Time  Corporation  Must  Commence  Busi- 
ness  .                                                                                  .  727 


PART  X. 
Bank  Laws  of  California. 

Section  1071. — Authority  to  Become  Member  of  Federal  Reserve  Bank  793 
Section  1086.— Advertising  by   Bank 835 

Section  1119.— Bank   Directors    862 

Section  1107.— Bank  Reports    848 

(a)     Publication   of   Statement 850 

Section  ,1083.— Branch  Banks   835 

Section  1072 — Bank  Converting  Into  National  Banking  Association...   794 

Section  1094.— Change  to  Capital  Stock 841 

Section  1063.— Commercial  Banks   783 

Section  1064. — Copy   of  Articles   of   Incorporation 784 

Section  1065. — Capital  and  Deposit  Liabilities 784 

Section  1108. — Conduct  of  Business   in  Unsafe  Manner 851 

Section  1104. — Certificates   of   Deposit   and   Time   Certificates 84(5 

(a)     Conditions  of  Payment  to  Depositors 84(5 

Section  1088.— Deposits  of  Dead  Persons 838 

(a)     Deposits  of  Married  Women  or  Minors 837 

Section  1069. — Deposits  of  Funds  in  Another  Bank 761 

Section  1091. — Departmental    Banking    840 

Section  1102.— Deposits  by  Order  of  Court 844 

Section  1114.— Deposit  of  State  Money 858 

Section  1115. — Deposit  of  County  or  City  Money 859 

Section  1093.— Dividends    /. ' 840 

Section  1099.— Dutv  as  to  Certified  Checks..  .   84.'? 


INDEX  TO  FOEMS.  43 

PAGE 

Section  1103. — Estate  Moneys , 845 

Section  1100. — Examination  of  National  Banks 844 

Section  1110.— Failure  to  Mike  Reports 85G 

Section  1073. — Foreign    Banking    795 

(a)  Information  Regarding  Foreign  Branches 791 

(b)  Regulations    by    Superintendent :  797 

Section  1082. — Inspection    of    Banks 832 

(a)     Extra  Examinations    833 

fb)     Three  Reports  Each  Year 834 

Section  1  lOfi. — Impairment    of   Capital 848 

Section  1121.— Intent  to  Defraud— Bank  Check   863 

Section  1088. — Investment  in  Capital  Stock  of  Corporations 790 

(a)  Stock  of  Trust  Company 790 

(b)  Stock  of  Safe  Deposit  Corporation 791 

Section  1113.— Lien  of  Bank 858 

Section  1080.— List    of    Stockholders 839 

Section  1077. — Limitation    on   Loans 815 

(a)  Requirements  for  Bill  of  Exchange 816 

(b)  Bills  Not  Eligible  for  Discount  or  Purchase 817 

(c)  Credit  Reports    817 

(d)  Limitation  on  Amount 817 

(e)  Loans   on   Bonds 818 

(f)  Loans  on  Real   Estate 819 

(ff)     Loans  on  Capital  Stock  of  Corporations 820 

(h)     No  Loans  on  Mining  Stock 820 

Section  1080. — Loans  to  Officer  of  Commercial  Bank 825 

(a)  Loans  to  Director,  Agent  or  Employee 825 

(b)  Credit  to  Directors 826 

(c)  Penalty    827 

(d)  Loan    to    Corporation    Owned    or    Controlled    by 

Directors    828 

(e)  Loans    to    Directors    on    Security 828 

Section  1079. — Loans  of  Commercial   Banks 822 

(a)     Comnuting  Liabilities   824 

Section  1076. — Loan  to  Director  or  Officer 813 

(a)  Loan  to  A»ent  or  Employee 814 

(b)  Loans  to  Director  on  Security 815 

Section  1084. — Meetings   of  Bank   Directors 835 

Section  1116. — National  Bank  Cannot  Deal  in  Stocks 861 

Section  1070. — National   Banking   Association    Under   Federal   Reserve 

Act    791 

(a)     Charge  by  State  Banking  Department  for  Services  792 

Section  1085.— Oath   of  Directors 835 

Section  1090.— Partnership   List    839 

Section  1112.— Par  Value  of  Capital  Stock 858 

Section  1001.— Posting  of  Certificate 844 

Section  1074. — Purchase    of   Real    or    Personal    Property    by    Savings 

Banks    '. 797 

(a)  Limitations  on  Purchase  of  Personal  Property.  .  .  .  798 

(b)  Purchase    of   Bonds ' 79S 

(c)  Security     801 

(d)  Bonds,  Etc.,  Certified  by  Superintendent  of  Banks  807 


44  INDEX  TO  SECTIONS. 

PAGE 

(e)  Legality  of  Previous  Investments  Not  Affected...  807 

(f)  Investment   Value   of  Bonds 808 

(h)     Bonds  of  Public  Utilities 808 

(h)     State  Does  Not  Guarantee  Validity  of  Bonds 809 

(i)  Advertisement  of  Bonds  as  Legal  Investment....  809 

(j)  Superintendent  of  Banks  May  Investigate  Bonds.  810 

(k)     Certificates  Revoked   811 

(1)      Renewal  or  Extension  of  Certificate 811 

(in)    Expenses   811 

Section  1097.— Purchase  of  Its  Own  Capital  Stock 843 

Section  1067. — Preference  to  Depositors 788 

(a)  Borrowing   Money 788 

(b)  Partial  Payments  790 

(c)  Overdrafts   790 

(d)  Bad  Debts    790 

Section  1087. — Reports    on  Dead   Persons 837 

Section  1111. — Report   of   Directors 857 

Section  1095.— Safe  Deposit  Department 842 

Section  1096.— Sale  of  Assets 842 

Section  1075. — Savings  Banks  Not  to  Trade  in  Real  Estate 811 

(a)  Drafts 812 

(b)  Savings  Banks  Borrowing  Money 812 

Section  1078.— Total  Reserves  of  Savings  Banks 820 

(a)  Reserves  of  Member  of  Federal  Reserve  Bank 821 

(b)  Failure  to  Maintain  Reserves 821 

(c)  Dealings  With  Commercial  Banks 821 

(d)  Power  to  Receive  Liberty  Bonds 822 

Section  1066. — Total  Reserves  of  Commercial  Banks 785 

fa)     Reserve  Depositaries   786 

(b)  Required  Capital  and  Surplus  of  Depositary 787 

(c)  Restoration  of  Reserves 787 

(d)  "Reserves   on  Hand" 788 

(e)  "Reserves   on  Deposit" 788 

(f )  "Total  Reserves"    788 

(s)     "Reserve   Depositary"    788 

Section  1117.— Taking  of  Stock  in  Satisfaction  of  Pledge 861 

Section  1081. — Trust  Companies    828 

(a)  May   Receive    Deposits 829 

(b)  Segregation   of  Capital   and   Surplus    in    Cities   of 

Less  Than  100,000   83(1 

(c)  In  Cities  of  More  Than   100.000 830 

(d)  Oath  May  Be  Taken  by  Officer 831 

fe)     Trust    Company    as    Member    of    Federal    Reserve 

Bank    831 

(f)      Authority  of  Foreign  Corporation  as  Trustee 832 

Section  1120. — Unclaimed  Deposits    862 

Section  1092. — Unincorporated  Bankers    840 

Section  1098. — Unlawfully  Advertising  as  Savings  Bank 843 

Section  1105.— Use  of  Word  "Trust" 847 

Section  1118. — When    Suit    to   Recover    Money    from    Bank    May    Be 

Brought 861 

Section  1109.— When   Superintendent   May  Take   Possession    of  Bank.   851 


INDEX  TO  FORMS.  45 

PAGE 

PART  XI. 

Mines  and  Mining. 

Section  1189.— Abandoned  Oil  Wells 906 

Section  1144. — Annual  Labor  and  Assessment  Work 875 

Section  1183. — Authority    of    Mine    Superintendent    to    Purchase    Sup- 
plies       903 

Section  1190.— Capping  Gas  Wells ' 90(5 

Section  1172. — Character  of  Annual  Assessment  Work 897 

Section  1186. — Consolidation  of  Mining  Corporations 904 

Section  1180. — Damages  for  Trespass  on  Mining  Claim 902 

Section  1138. — Discovery  on  Placer  Ground 872 

Section  1139.— Discovery    of   Oil 873 

Section  1156. — Discovery  of  Vein  Passing  Through  Placer  Claim 882 

Section  1161.— Entry  of  Coal  Lands 883 

Section     897. — Error  in  Description  in  Location  Notice 897 

Section  1179. — Extra  Lateral  Right   or  Right   to   Pursue  the   Vein   or 

Lode    on    its    Dip    Beyond   the    Side    Lines    of    the     y 

Claim    " 900 

Section  1191. — Extraction  of  Minerals  from  the  Waters  of  Streams  or 

Lakes    907 

Section  1175.- — Failure    to   Comply   With   Local    Customs    in   Working 

Mining  Claims   898 

Section  1 133. — Form  of  Notice  of  Location  of  Lode  Claim 860 

Section  1134. — Form  of  Notice  of  Location  of  Placer  Claim 870 

Section  1148. — Form  of  Proof  of  Assessment  Work 878 

Section  1168.— Form   of  Mining  Deed 769 

Section  1163.— Form   of   Mining  Lease 885 

Section  1166.— Form  of  Oil  Lease 890 

Section  1140. — Homesteader    and    Oil    Locator 873 

Section  1162. — How  to  Obtain  a  Patent  to  a  Mining  Claim 884 

Section  1187. — Hours  of  Work  in  Underground  Mine 905 

Section  1184.— Hydraulic   Mining    903 

Section  1177. — Intersecting  Veins   899 

Section  1160. — Liens  on  Mining  Claims 883 

Section  1124. — Local    Rules   and   Customs 864 

Section  1132.— -Location   Notice    868 

Section  1151. — Location   by   Agents 879 

Section  1152. — Location  by  Minors 879 

Section  1154. — Location  oif   Tunnel  Claim 880 

Section  1155. — Lode  and  Placer  Claims  in  the  Same  Ground 881 

Section  1131. — Marking  the  Boundaries 868 

Section  1 150. — Mineral   Entries  Within   Forest  Reserves 879 

Section  1157.— Mill  Sites   . .  882 

Section  1159. — Mining  Partnerships    883 

Section  1163.— Mining  Lease 885 

Section  1117.— Mining  Deeds   .' 894 

Section  1192. — Mortgage   of  Mining  Property 907 

Section  1142.— Oil  and  Asphaltum 874 


46  INDEX  TO  SECTIONS. 

PAGE 

Section  1165. — Oil  and   Gas  Leases 888 

(a)  Right  to  Bore  for  Oil  Necessarily  Exclusive 889 

(b)  Lessee  Must  Begin  Operations  Within  a  Reasonable 

Time 889 

(c)  Failure  to  Commence  Work  Forfeits  the  Lease.  .  .  .  889 

(d)  Work  Must  Be  Prosecuted  with  Diligence 889 

(e)  Lease  Must  Be  Literally  Complied  With 889 

(f)  Failure  to  Find  Oil 890 

(g)  Net  Proceeds    890 

(h)     Failure  to  Pay  Royalty 800 

Section  1176. — Overlapping  Locations    899 

Section  1192a. — Oil    and    Gas    Perimits    and    Leases    on    Government 

Land— 1920  Act   of  Congress 908 

(a)  Oil   and   Gas   Permit 908 

(b)  Location   and  Monuments 908 

(c)  Leases    909 

(d)  Term   of   Lease — Royalty 910 

(e)  Preference   Right    910 

(f)  Royalty   Before   Lease 910 

(e)     Drilling  and  Waste 910 

(h)     Lease  in  Producing  Oil  or  Gas  Field 911 

(i)      Renewal    of   Lease 911 

(j)      Relinnuishment    of   Claims   Acquired   Under   Prior 

Mining  Laws    912 

(k)     Naval   Petroleum  Reserve.  . 913 

(1)      Conflicting  Claims    913 

(m)  Protection  of  Bona  FHe  Ocrunants  or  Claimants.  .  914 

(n)     Preference  on  Lands  Entered  as  Agricultural 915 

(o)     Permit  Mav  Be  Cancelled 916 

(p)     Number  of  Leases 916 

(q)     Pine   Lines    917 

(r)      Rights  of  Wav  for  Other  Purposes 918 

(s)      Assignment    of   Lease 919 

(t)      Regulations  bv  Secretary  of  the  Interior 990 

(u)     Royalty  Paid  in  Oil  or  Gas 920 

Section  1147. — Proof  of  Assessment  Work 877 

(a)     Recording  Fees    877 , 

Section  1135. — Recording  Location  Notice 870 

Section  1149. — Relocation  of  Cl<>im  After  Forfeiture 878 

Section  1174.— Resumption   of  Work 808 

Section  1178.— Rule  That  End  Lines  Shall  Parallel  Each  Other 899 

Section  1182.— School  Lands   902 

Section  1 136.— Size  of  Lode  Claim 871 

Section  1137.— Size   of  Placer  Claim 872 

Section  1123.— State   Laws    864 

Section  1181. — State  Homestead   on   Mining  Claim 902 

Section  1185.— Tailings   and   Debris 904 

Section  1130.— The    Discovery    867 

Section  1141. — 'Time    Within    Which    Location    Must    Be    Made    After 

Discovery    ^ 874 

Section  1158. — Timber  for  Mining  Purposes 883 

Section  1173.— Time  Within  Which  Relocation  Can  Be  Made 897 

Section  1143. — Transfer  of  Rights  by  Member  of  Association 875 

Section  1187. — -Transfer  of  Stock  in  Mining  Corporations 905 


INDEX  TO  FORMS.  47 

PACK 

Section  1153. — Tunnel  Claims  88U 

Section  1122.— United  States  Laws 864 

Section  1126.— Upon  What  Land  Mining  Claim  May  Be  Located 865 

Section  1127. — Valuable  Mineral  Deposit   86.1 

Section     975. — Water  and  Water  Rights  for  Mining  Purposes 759 

Section  1125. — Who  May  Locate  a  Mining  Claim 865 

Section  1128.— What  Is  Mining 866 

Section  1129.— 'What  Constitutes  a  Valid  Location 866 

(a)  Appropriation    866 

(b)  Performance  of  Essential  Acts 866 

(c)  Marking  of  Boundaries  Main  Act 867 

(d)  Posting   of   Notice 867 

(e)  Completion  of  Location 867 

(f)  Prior  Posting  Unnecessary  to  Prior  Discovery....  867 

Section  1145.— When  First  Work  Must  Be  Done. 876 

Section  1146.— Where  Work  Should  Be  Done 876 

Section  1169. — Working  Mine  on  Shares 896 

Section  1170. — When  Boundary  Marks  Are  Sufficient 896 


PART  XII. 

Estates  of  Deceased  Persons. 

Section  1246. — Accounts  of  Executors  and  Administrators 951 

Section  1225. — Administration  When  Estate  Does  Not  Exceed  Fifteen 

Hundred  Dollars   936 

Section  1256. — Advancements     958 

Section  1230. — Allowance  and  Rejection  of  Claims 938 

Section  1234. — Allowance  of  Claim  in  Part 939 

Section  1242.— Attorney   Fees    ' 947 

Section  1211. — Bond   of   Executor    or   Administrator 928 

Section  122G  —  Claims  Against   the   Estate 936 

Section  1228.— Claims  Barred  if  Not  Presented  in  Time 937 

Section  1229.— Claims  Must  Be  Verified    938 

Section  1232.— Claim  When  Suit  Pending 939 

Section  1258. — Claim    of    Executor    or   Administrator 939 

Section  1236.— Claims    Paid    Without    Vouchers 958 

Section  1241. — Compensation  of  Executors  or  Administrators 946 

Section  1253. — Distribution  of  Community  Property  on  Death  of  Hus- 
band       957 

Section  1254. — Distribution  of  Community  Property  on  Death  of  \Vife  957 

Section  1257. — Discharge  of  Administrator  or  Executor 958 

Section  1259. — Distribution   When   Decedent   Was   Not   a    Resident    of 

the  State   959 

Section  1248. — Erection  of  Monument 951 

Section  1194. — Executors  and  Administrators 923 

Section  1199.— Executor  May  Decline  to  Act 924 

Section  1223.— Exempt  Property   "...  935 

Section  1224. — Extra  Allowance   935 

Section  1238. —Estate  Chargeable  With  Debts..  .  940 


48  INDEX  TO  SECTIONS. 

PASK 

Section  1237. — Failure  to  Present  Mortgage  Claim 940 

Section  1250.— Final   Distribution    of   Estate 952 

Section  1218. — Inventory  and  Appraisement 931 

Section  1252.— Inheritance  of  Husband  and  Wife  from  Each  Other 956 

Section  1260.— Inheritance  Tax  Law 900 

(1)  By  Will  of  Resident 960 

(2)  By  Will  of  Non-resident 960 

(3)  Transfer  Without  Adequate  Consideration 960 

(4)  Taxes  to  Be  Lien  Against  Property 961 

(5)  Exercise  of  Power  of  Appointment  Deemed  Trans- 

fer     ' 961 

(a)  Rates   of  Tax... 962 

( 1 )  When  Beneficiary  Is  Husband,  etc 962 

(2)  When  Brother,  etc 962 

(3)  When  Brother  of  Father,  etc 962 

(4)  Other  Degrees  of  Consanguinity. 963 

(b)  Rates  on  Property  in  Excess  of  $25,000 963 

(c)  Exemptions   965 

(d)  When  Taxes  Are   Due 960 

(e)  Executor  to  Deduct  Tax  from  Property  Before  De- 

livery to  Legatee 966 

Section  1204. — Letters   Testamentary    926 

Section  1207. — Letters   of   Administration 927 

Section  1227.— Notice   to    Creditors 936 

Section  1206. — Married  Woman  or  Corporation  May  Act 927 

Section  1221.— Money  in  Bank 932 

Section  1210. — Oath  of  Executor  or  Administrator 928 

Section  1232. — Payment  of  Judgments .  .  . 939 

Section  1245. — Partial  Allowance  to  Executor,  Administrator  or  Attor- 
ney     950 

Section  1249.— Partial  Distribution  of  Estate 952 

Section  1243. — Payment  of  Debts  Bearing  Interest 948 

Section  1247.— Payment  of  Debts 951 

Section  1203.— Proof  of  Foreign  Will 962 

Section  1196.— Production  of  Will 924 

Section  1200.— Proof  of  Will 925 

Section  1222. — Probate  Homestead  and  Family  Allowance 933 

(a)     Setting  Off  of  Recorded  Homestead 933 

Section  1205. — Revocation  of  Letters 926 

Section  12lo.— Release  of  Bondsmen 930 

Section  1216. — Resignation  of  Executor  or  Administrator 930 

Section  1255.- — Rights  of  Illegitimate  Child 957 

Section  1239.— Sale  of  Property  to  Pay  Debts 941 

(a)     Perishable  and  Depreciating  Property  to  Be  Sold.  941 

(b)'    Selling  Personal  Property 941 

(c)  Order  of  Sales 941 

(d)  When  Executor  or  Administrator  May  Sell  Prop- 

erty    942 

Interested  Persons  May  Apply  for  Order  of  Sale.  942 

Posting  of  Public  Auction  Sale  Notices 942 

Private  Sale  of  Real   Estate.  .  .  942 


INDEX  TO  FORMS.  49 

PAGE 

(h)     Order  of  Confirmation  of  Sale 944 

(i)      Conveyances   945 

(j)      Commissions  for  Sale  of  Real  Estate 945 

(k)     Sale  of  Contracts  for  Purchase  of  Lands 946 

(1)      Holder  of  Lien  or  Mortgage  May  Purchase  Lands.  946 

Section  1240.— Sale    Under  a  Will 946 

Section  1193. — Settlement  of  Estates 923 

Section  1212. — Separate  Bonds   929 

Section  1214. — Special  Administrator    930 

Section  1235. — Statute   of   Limitations 93!) 

Section  1217. — Suit  Against  Bondsmen 931 

Section  1231. — Suit  on  .Rejected  Claim 938 

Section  1251. — Succession   to   Property 953 

Section  1213.— When  Executor  May  Act  Without  Bonds 92!) 

Section  1219. — When  Additional  Inventory   Required 932 

Section  1220. — When  Ivo  Appraisement  Required 932 

Section  1195.— Where  Letters  Will   Be  Granted 923 

Section  1197.— Who  May  Petition  for  Probate  of  Will 923 

Section  1198. — When  Executor  Forfeits  Right  to  Letters 923 

Section  1208. — Who  Are  Entitled  to  Letters  of  Administration 927 

Section  1209. — Who  Are  Incompetent  to  Act  as  Executor  or  Adminis- 
trator      928 

Section  1244.— When  Claimant  Cannot  Be  Found 948 

(a)     Form  of  Creditor's  Claim 949 


PART  Xin. 
Automobile  Law  of  California. 

Section  1262.— Automobile  Act   of   1919 968 

•  Section  1261. — Automobile   Denned    968 

Section  1265.— Cleats,  Etc.,  on  Tires 986 

Section  1280. — Failure  to  Redeliver  to  Customer 1008 

Section  1290.— Form  of  Notice  of  Sale : 1012 

Section  1278. — Garages  and  Garage  Keepers 1007 

Section  1276.— General  Penalties    1005 

Section  1271. — Intoxicated  Driver — Penalty  990 

Section  1270. — Liability  for  Damages 990 

Section  1281.— lability  for  Theft  of  Articles  Left  in  Garage 1008 

Section  1282. — Liability  of  Garage  Keepers  for  Damage  to  Car  Taken 

Out  Without  Leave   1009 

Section  1283.— Liability  for  Loss  of  Car 1009 

Section  1284. — Liability  as  a  Renter  of  Machines 1010 

Section  1285. — Liability  of  Lessee  for  Care  of  Hired  Automobile 1010 

Section  1286.— Liability  for  Repair  Work 101 1 

Section  1287. — Lien  for  Storage  and  Repairs 1011 

Section  1264.— Lights    983 

(a)  Bicycles    984 

(b)  Motorcycles    984 

(c)  Motor  Trucks 984 

(d)  Overhanging  Loads 984 

(e)  Headlights  98.1 

(f )  Testing  Lighting  Devices 98ti 

(g)  Spotlights    9HD 


50  INDEX  TO  SECTIONS. 

PAGE 

Section  1274. — Operator's  and  Chauffeur's  Licenses 1003 

(a)  Certificates  1003 

(b)  Chauffeur's  Badge 1003 

(c)  Minor's  License 1004 

Section  1268. — Permits  by  Department  of  Engineering 989 

Section  1288. — Possession  Essential  to  Validity  of  Lien 1012 

Section  1263. — Registration   of  Automobiles 968 

(a)  Trailers    970 

(b)  Notice  of  Change  of  Address 970 

(c)  The  Registration    970 

(d)  Assignment  of  Number 971 

(e)  Number  Plates .* 971 

(f)  Renewal  of  Registration 971' 

(g)  Registration  Fees   972 

(h)     Certificate  of  Registration 973 

(i)      Transfer  of  Ownership   975 

( j)      Joint  Statement 975 

(k)     New  Registration  Certificate 976 

(1)      Transfer  by  Operation  of  Law 976 

(m)  When  Vehicle  Not  to  Be  Operated  on  Highway.  .  977 

(n)     Registration  Refused  or  Revoked 977 

(0)  Dealer's  Registration   977 

(p)     Moving  Unregistered  Vehicle 979 

(q)     Dealer's  Notice  of   Sale 980 

(r)      Notice  of  Dismantling 980 

(s)      Notice  of  Transfer  of  Engine 980 

(t)      Display  of  Number  Plates 981 

(u)     Display  of  Registration   Certificates 982 

(v)     Added  Penalty  for  Failure  to  Register 982. 

(w)    Operation   Pending  Renewal   of  Registration 983 

Section  1279. — Relation  of  Garage  Keeper  to  His  Customer 1007 

Section  1277. — Revocation   of   License 1005 

(a)     Complaints  of  Reckless  Driving 1006 

Section  1291. — Removing  Automobiles  Subject  to  Sale 1013 

Section  1272.— Rules  of  the  Road ' 991 

(a)  Passing  Vehicles   991 

(b)  Overtaking  Vehicles  991 

(      (c)     Distance  Between  Vehicles 991 

(d)  Intersecting  Right   of   Way 992 

(e)  Turning  at  Intersections 992 

( f )  Horses,  Precautions  on  Meeting 992 

(g)  Slow-moving  Vehicle    993 

( h )  Mirror  Required    993 

(1)  Arm  Signals    994 

(k)  Passing  Street  Cars 994 

(1)  Police  and  Fire  Department  Vehicles 995 

( m)  Fire   Hydrants   Protected 996 

(n )  Width  of  Vehicle   990 

(o)  Repairing  Vehicle  on  Highway 997 

(p)  Livestock  on  Highway 998 

(q)  Firearms    998 

(r)  Leaking  Contents^  Etc 998 

(s)  Wind  Shields    : 998 

Section   1289.— Sale  of  Car  to  Satisfy  Lien.  .  .  .1012 


INDEX  TO  FORMS.  51 

PAGE 

Section  1273. — Speed  Limits  998 

(a)  Speed  Limit  of  Trucks 1001 

(b)  Arrests  for  Speeding 1002 

Section  1267.— Trailer   Limitation    980 

Section  1266.— Total  Weight  Limit 987 

(a)  Weight  Limit  Per  Inch  of  Tire 987 

(b)  Penalty 988 

Section  1275. — Using  Car  Without  Owner's  Consent 1005 

Section  1269.— Weight  on  Bridges,  Etc 990 


PART  XIV. 
Trust  Deeds. 

Section  1298. — Action  by  Trustees 1015 

Section  1307. — Appointment  of  Trustee  in  Case  of  Vacancy 1018 

Section  1309. — Bank  May  Buy  Property  from  Stockholder  Trustee.  ..  1019 

Section  1299. — Beneficiaries   Take  No   Title  by  Deed 1016 

Section  1304. — Compensation  of  Trustee    1017 

Section  1309.— Creditor  as  Trustee 1019 

Section  1300.— Devise  and  Transfer  of  Trust  Property 1016 

Section  1306.— Discharge  of  Trustee    1018 

Section  1292.— Extent   of   This    Subject 1014 

Section  1317.— Form   of   Trust   Deed 1021 

Section  1315.— Lease  of  Trust  Property 1021 

Section  1313.— Liability   for   Breach   of   Trust 1017 

Section  1297. — Number  of  Trustees 1015 

Section  1302.— Power  of  Trustee  1016 

Section  1313. — Possession  of  Estate  Upon  Termination  of  Trust 1020 

Section  1296.— Profits  of  Land  Liable  to  Creditors 1015 

Section  1295.— Purposes  for  Which  Trust  Deed  May  Be  Made 1014 

Section  1311. — Reconveyance  to   Grantor 1019 

Section  1312.— Revocation  by  Deed    1020 

Section  1316.— Sale  of  Trust  Property   1021 

Section  1308. — Survivorship  Between  Co-trustees. 1019 

Section  1314.— Suit  for  Balance  After  Sale 1020 

Section  1305.— Termination   of  the   Trust 1018 

Section  1293.— Trust   Deed  Defined    1014 

Section  1301. — When   Beneficiary   Cannot    Dispose    of  His   Interest    in 

Trust   Estnte    .  .  .101C. 


02  INDEX  TO  SECTIONS. 

PAGE 

PART  XV 

Assignment  of  Contracts,  Guaranty  of  Accounts,  and 

Power  of  Attorney. 
ASSIGNMENT  O*'  CONTRACT  . 

Section  1319. — Assignment    Without   Consent    1027 

Section  1322.— Assignment    of    Wife's    Earnings 1028 

Section  1323. — Assignment  of  Wages    1028 

Section  1326 — Assignment  by  Corporation    1029 

Section  1327.— Damages  for  Tort 1029 

Section  1328. — Form  of  Assignment  of  Contract 1029 

Section  1329. — Form    of    Indorsed    Assignment 1030 

Section  1330.— Form  of  Assignment  of  Debt  Due 1030 

Section  1331. — Form  of  Assignment  of  Account 1031 

Section  1332. — Form  of  Assignment  of  Lease 1031 

Section  1333. — Form   of  Assignment   of  Mortgage 1031 

Section  1334. — Form    of    Assignment    of    Contract    for    Sate    of    Real 

Estate    1031 

Section  1325. — Non-negotiable   Contracts    1029 

Section  1324.— Order  Drawn   on  Debtor    1029 

Section  1321.— .Time  of  Assignment 1028 

Section  1320. — Verbal  or  Written  Assignments 1028 

Section  1318.— What   Can   Be   Assigned 1026 

GUARANTY  OF  ACCOUNTS. 

Section  1336. — Consideration     1032 

Section  1342. — Continuing  Guaranty    1034 

Section  1344.— Death   of  Guarantor 1034 

Section  1343. — Exoneration  of  Guarantor    1034 

Section  1347. — Form  of  Guaranty  of  Account 1035 

Section  1335.— Guaranty  Defined 1030 

Section  1337. — Guaranty  Must  Be  in  Writing 1032 

Section  1339. — Guaranty  That  an  Obligation  Is  Good  or  Collectable.  .  1033 

Section  134G.— Guaranty   Must  Be  Certain 1035 

Section  1345. — Judgment  Against   Principal 1035 

Section  1340. — Liability  of  Guarantor 1033 

Section  1341.— Liability  Upon  Guaranty  of  a  Conditional  Obligation ..  1033 

Section  1338.— Offer   to    Become    Guarantor 1032 

POWERS  OF  ATTORNEY. 

Spot  ion   1350. — Commercial  Power  of  Attorney,  with  Authority  to  Sell 


INDEX  TO  SECTIONS.  53 

PAGE 

Real  Estate    1039 

Section  1354. — General  Power  of  Attorney 1037 

Section  1349. — Married  Woman's  Power  of  Attorney 1036 

Section  1348. — Power  of  Attorney  Must  Be  in  Writing 1036 

Section  1353. — Power  of  Attorney  Coupled  with  an  Interest 1037 

Section  1364. — Revocation  of  Power  of  Attorney 1030 

Section  1352. — Revocation  of  Power  of  an  Agent 1037 

Section  1350. — Signature  of  Attorney  in  Fact 103G 

Section  1355. — Special  Power  of  Attorney 1038 


PART  XVI. 
Workmen's  Compensation  Law. 

Section  1356. — Workmen's   Compensation  Act    1043 

(a)  Employer's  Liability    1043 

(b)  Payment  1045 

Workmen   Under   Partnership   Agreements 1045 

Time  of  Disability   Payments 1046 

Disability  Less  Than  Seven  Days 1046 

No  Recovery  for  First  Seven  Days 104ti 

Amount   of  Disability   Payments 1047 

Aggregate  Disability  Payments    1047 

Computation    of   Payments   When   Disability    Per- 
manent     1047 

Permanent  Disabilities  Presumed  to  Be  Total 1049 

Schedule    for    Determination    of    Permanent    Dis- 
abilities     104!) 

(c)  Death  Benefits    1049 

If  Deceased  Employee  Leaves  Dependents 1050 

If    Deceased    Employee    Leaves    Persons    Partially 

Dependent    1050 

If  No  Dependents 1051 

Average   Annual   Earnings    1051 

Average  Weekly  Earnings    1051 

When  Less  Than  Five  Days   or  Seasonal 1052 

Overtime,   Board,   Etc 1052 

If  Injured  Employee  Is  Under  21 1053 

(d)  Weekly  Loss  in  Wages  in  Case  of  Temporary  Par- 

tial  Disability    " 1053 

(e)  Who  Are  Deemed  Wholly  Dependent 1053 

(f )  Notice  to  Employer    1055 

(g)  Medical   Examination  of  Employee 105(5 

(h)     Hearing   on   Disputes    105fi 

(i)      Claim   Not  Assignable    1057 

Lien  Against  Amount  Due  as  Compensation 1057 

Notice  of  Clflim    1058 

(i)      Liability  of  Principal  Employers  and  Contractors.  1058 
(k)     When    Person    Other    Than    Employer   Liable    for 

Damages    1059 

(1)      Contents  of  Release  or  Compromise  Agreement.  .  .10(51 

(m)    Compensation  Payable  in  Lump  Sum 1002 

(n)     Ways   for  Securing  Payment  of  Compensation. .  .1062 


54  INDEX  TO  SECTIONS. 

PAGE 
(o)     Employer    Relieved    from    Liability    by    Insurance 

Carrier    1062 

(p)     Jurisdiction  of  Commission  Over  Places  of  Employ- 
ment     1064 

(q)     Obeying  Order   1084 

(r)      Report   of   Injuries 1064 


PART  XVII. 
Common  Law  Companies. 

Section  1357. — Common  Law  and  Statute  Law 1066 

Section  1358. — Common  Law  Company • 1066 

Section  1362.— Certificates 1068 

Section  1361. — Limited   Individual   Liabilities    1067 

Section  1363.— Meetings  of  the  Shareholders 1068 

Section  1364— Power  of  the  Trustees   1068 

Section  1360.— Shareholders     4 1067 

Section  1359. — Term  of  Existence  of  the  Company 1066 

Section  1365. — Trust   Method — Advantages   of 1068 


PART  XVIII. 
Taxes  and  Tax  Titles. 

Section  1422.— All  Costs  Must  Be  Paid  Before  Redemption 1102 

Section  1370. — Assessment  of  Taxable  Property 1074 

Section  1385. — Arbitrary  Assessments   1081 

Section  1386. — Assessment  of  Unknown  or  Absent  Owners 1082 

Section  1407.— Additional  Sum  Collected  to  Defray  Costs 1093 

Section  1404. — Annual  Publication  of  Delinquent  Tax  Lists 1091 

Section  1369. — Assessment  at  Full  Cash  Value 1074 

Section  1379. — Cemetery  Lands  Exempt  from  Taxation 1079 

Section  1419. — Clerical  Errors  in  Certificate  of  Sale 1101 

Section  1399.— Collector's  Notice  That  Taxes  Are  Due 1089 

Section  1383. — Conditions  of  Assessment  of  Property 1080 

Section  1387.— Consigned  Property   1083 

Section  1396.— County  Board  of  Equalization 1087 

Section  1434. — Corporation  Taxes   1111 

(1)  Public  Service   Corporations    1112 

(2)  Insurance  Companies   1113 

(3)  State  and  National  Banks 1113 

(4)  Tax  on  Unincorporated  Banks  and  on  Branches  and 

Agencies  of  Foreign  Banks 1114 

(5)  Tax  on  Franchise  1115 

(6)  Gross  Receipts  from  Operation  Defined 1116 

(7)  "Operative  Property"  Defined  1117 

(8)  Operative  Property  Exempt  from  Local  Taxation.  .1118 

(9)  Plants  Under  Construction  1119 

(10)  When  No  Service  Is  Rendered  to  Public 1119 

(11)  Report  of  Public  Service  Companies 1119 

(12)  Separate  Reports  of  Certain  Subsidiary  Companies.  1122 


INDEX  TO  SECTIONS.  55 

PAQE 

(13)  Hearings  and  Decisions  by  State  Board 1122 

(14)  Insurance  Commissioner  to  Report 1124 

(15)  Additional   Statements  by   Insurance   Companies ..  1 124 

(16)  Bank  Reports 1125 

(17)  Owners  of  Franchise  Report 1126 

(18)  Arbitrary  Assessment  in  Case  of  Failure  or  Refusal 

to   Report    1128 

(19)  Penalty  for  Failure  or  Refusal  to  Report 1129 

(20)  Penalty  for  False  Report 1129 

(21)  Extension  of  Time  for  Filing  Report 1129 

(22)  Bank  Waiver  of  Assessment  to  Individual  Stock- 

holder    -.-' 1129 

(23)  Correction  of  Assessment 1130 

(24)  When  Due  and  When   Delinquent 1130 

(25)  Sale  of  Property  for  Taxes 1131 

(26)  Taxes  a  Lien   1131 

(27)  Taxes  Erroneously  Collected  1132 

(28)  Protest  of  Taxes    1132 

(29)  Controller  to  Send  Notice  of  Delinquent  Taxes 1133 

(30)  Charter  Forfeited  for  Delinquent  Taxes 1133 

(31)  Relief  from  Forfeiture   1134 

(32)  State  Board  to  Equalize  Assessments 1135 

Section  1378. — Exemption  of  Church  Property 1078 

Section  1412. — Evidence  of  Tax  Deeds 1095 

Section  1381.— Federal  Securities  Not  Taxable  by  the  State 1079 

Section  1372.— Ferries   1076 

Section  1428. — Fraudulent   Assessment    1108 

Section  1380. — Funds  of  Fraternal  Benefit  Society  Exempt 1079 

Section  1410. — How  Redemption  Is  Made 1094 

Section  1433.— Inheritance  Taxes 1111 

Section  1406. — Land  Sold  for  Taxes  Incumbered  by  Trust  Deed  or  Mort- 
gage     1092 

Section  1398.— Lien  of  Taxes   1088 

Section  1420.— Mistakes  Which  Do  Not  Affect   Sale   of  Property   for 

Taxes 1101 

Section  1405.— Notice  of  Sale  1092 

Section  1393. — Notice  of  Meeting  to  Equalize  Assessments 1084 

Section  1395.— Official  Maps  of  City  Lots  or  Blocks 1084 

Section  1421. — 'Property  Sold  to  State  Assessed  Subsequently 1102 

Section  1425. — Payment  Under  Protest  1104 

Section  1424.— Partial  Redemption   1104 

Section  1402. — Payment  of  Taxes  of  Decedents  and  Insolvents 1090 

Section  1401.— Place  of  Payment   1090 

Section  1394. — Persons  Claiming  Ownership    1084 

Section  1392. — Property  Not  Taxed  in  Previous  Year 1084 

Section  1391. — Property  Concealed,  Misrepresented,  Etc 1083 

Section  1367.— Property  Subject  to  Taxation 1070 

Section  1390. — Property  and  Money  in  Litigation 1083 

Section  1382.— Public  Property  Not  Subject  to  Taxation 1079 

Section  1416. — Personal  Property  at  Risk  of  Owner 1098 


56  INDEX  TO  SECTIONS. 

PAGE 

Section  1418. — Public  Lands  Upon  Which  Final  Payment  Has  Not  Been 

Made    1 100 

Section  1430.— Railroad  Bonds    1109 

Section  1384. — Kailroads  and  Franchises    1081 

Section  1417. — Refund  of  Erroneously  Collected  Taxes 1098 

Section  1429.— Seat  in  Stock  Exchange 1108 

Section  1426. — Sale  of  Property  Purcnased  by  State 1105 

Section  1414. — Seizure  and  Sale  of  Personal  Property  for  Taxes 1098 

Section  13ti8. — Shares  of  Stock  in  Corporations 1073 

Section  1377. — Statement  by  Tax  Collector 1078 

Section  1371. — Statement  ol  Property  Owned 1075 

Section  1374. — Statement  of  Tax  Kate  Sent  to  Controller 1077 

Section  1375. — Statements  from  "Assessment  BOOK" 1077 

Section  1376. — Statement  of  Amount  Charged  Sent  to  Controller 1077 

Section  1413. — State  Lands  Sold  for  Delinquent  Taxes 1095 

Section  1431.— Taxation  of  Ship  on  the  High  Seas 1109 

Section  1897. — Tax    Levy     1088 

Section  1411.— Tax  Deeds  Made  After  Five  Years 1094 

Section  1432. — Taxation  of  Oil  Leases 1110 

Section  1408. — Tax  Sales   1093 

Section  1409. — Time  for  Redemption  of  Property ! 1094 

Section  1415. — Title  of  Personal  Property  Sold  for  Taxes 1098 

Section  1397. — Taxes  on  Any  Particular  Parcel  of  Land  May  Be  Paid 

Separately ' 1089 

Section  1366.— Tax  Laws  Strictly  Construed 1070 

Section  1388. — Undistributed  Property  of  Deceased  Person 1083 

Section  1389. — Vessels  and  Boats 1083 

Section  1427. — Void  Sale — Failure  to  Mail  Notice  to  Party  Last  As- 
sessed     1 107 

Section  1373.— Water  Ditches    1076 

Section  1403.— When  Taxes  Are  Delinquent     1091 

Section  1423. — When  Former  Owners  May  Redeem  Lands  Sold  for  De- 
linquent  Taxes    1 102 


PART  I. 

BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS. 
Making  of  Contracts. 

Section  1. — BUSINESS  CONTRACTS. — By  the  above  head- 
ing is  meant  the  contracts  and  obligations  which  are  con- 
nected directly  with  the  usual  business  affairs  of  a  com- 
munity. There  are  many  relations  in  life  which  constitute 
or  arise  out  of  contracts,  and  yet  which  are  not  connected 
with  the  ordinary  business  affairs  of  men.  Such  relations 
it  is  not  the  purpose  of  this  book  to  indicate,  but  only  the 
contracts,  the  obligations,  the  rights  and  liabilities  of 
business  men  in  every-day  affairs,  as  defined  by  the  laws 
of  California. 

Section  2. — PARTIES  TO  CONTRACTS. — A  contract  is  an 
agreement  to  do  or  not  to  do  a  certain  thing.  It  is  essen- 
tial to  the  existence  of  a  contract  that  there  should  be 
parties  capable  of  contracting,  their  consent,  a  lawful 
object,  and  a  sufficient  consideration.  With  reference  to 
the  parties  to  a  contract,  the  law  of  California  provides 
that  all  persons  are  capable  of  contracting,  except  minors, 
persons  of  unsound  mind,  and  persons  deprived  of  civil 
rights.  A  minor  in  this  State  cannot,  under  the  age  of  18, 
make  a  contract  relating  to  any  interest  in  real  property, 
or  relating  to  any  personal  property  not  in  his  immediate 
possession  or  control.  But  a  minor  may  make  any  other 
contract,  and  it  will  be  good,  unless  disaffirmed  and  repu- 
diated. The  contract  of  a  minor,  if  made  by  him  before  he 
is  18  years  of  age,  may  be  disaffirmed  by  the  minor  him- 
self, either  before  his  majority  or  within  a  reasonable 
time  afterwards,  or,  in  case  of  his  death  within  that 
period,  by  his  heirs  or  personal  representatives;  and  if 
the  contract  be  made  by  the  minor  when  he  is  over  the 

57 


58  BUSINESS  LAW  FOR  BUSINESS  MEN. 

age  of  18,  be  can  disaffirm  it,  but  must  restore  the  consid- 
eration to  the  party  from  whom  it  was  received,  or  pay  its 
equivalent.  There  is  one  exception  to  the  law  above 
stated:  A  minor  cannot  disaffirm  a  contract,  because  he 
was  under  age,  to  pay  the  reasonable  value  of  things 
necessary  for  his  support  or  the  support  of  his  family,  if 
the  contract  was  entered  into  by  him  when  he  was  not 
under  the  care  of  a  parent  or  guardian  able  to  provide  for 
him  or  his  family. 

A  minor  in  California  is  a  male  under  the  age  of  21  or 
a  female  under  the  age  of  18. 

A  person  entirely  without  understanding  has  no 
power  to  make  a  contract  of  any  kind,  but  he  is  liable  for 
the  reasonable  value  of  things  furnished  to  him  necessary 
for  his  support  or  the  support  of  his  family.  Where  a 
person  is  of  unsound  mind,  and  yet  is  not  entirely  with- 
out understanding,  he  may  enfer  into  a  contract  at  any 
time  before  his  unsoundness  of  mind  has  been  judicially 
determined,  but  such  contract  will  be  voidable,  subject  to 
rescission.  After  his  incapacity  has  been  judicially  deter- 
mined, a  person  of  unsound  mind  cannot  make  any  con- 
veyance or  other  contract,  until  a  court  has  decided  that 
his  reason  is  restored. 

A  person  deprived  of  civil  rights  is  not  capable  of 
making  a  contract  while  in  that  condition.  A  person  is 
deprived  of  civil  rights  when  he  is  sentenced  to  imprison- 
ment in  the  State  prison  for  life,  and  his  civil  rights  are 
suspended  during  the  term  when  he  is  sentenced  for  a 
term  less1  than  life.  A  convict  may,  however,  make  and 
acknowledge  a  sale  and  conveyance  of  property. 

With  the  exceptions  above  stated,  all  persons  in  Cali- 
fornia are  capable  of  being  parties  to  contracts. 

Civil  Code,  Sections  33,  34,  38,  39,  40,   1556; 
Penal  Code,  Sections  673,  674,  675. 

(a)  Contracts  of  Married  Women. — A  married  woman 
has  all  the  rights  in  respect  to  property,  real  or  personal ; 
and  the  acquisition,  use,  enjoyment  and  disposition  there- 


Section  2,  Sub-division  (a)  page  59,  "Business  Law  for  Business  Men"- 
SUITS  BY  OR  AGAINST  A  MARRIED  WOMAN— A  married  woman 
may  be  sued  without  her  husband  being  joined  as  a  party,  and  may  sue  with- 
out her  husband  being  joined  as  a  party  in  all  actions,  including  those  for  in- 
jury to  her  person,  libel,  slander,  false  imprisonment,  or  malicious  prosecution, 
or  for  the  recovery  of  her  earnings,  or  concerning  her  right  or  claim  to  the 
homestead  property. 

Act  of  the  Legislature  of  California,  approved   May   16,    1921;   in  effect 
July  16,  1921. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  59 

of;  and  to  make  contracts  in  respect  thereto  with  any 
person,  including  her  husband ;  and  to  carry  on  any  busi- 
ness, trade  or  occupation ;  and  to  exercise  all  powers  and 
enjoy  all  rights  in  respect  thereto  and  in  respect  to  her 
contracts,  and  be  liable  on  such  contracts,  as  if  she  were 
unmarried. 

Judgment  for  or  against  a  married  woman  may  be 
rendered  and  enforced  in  any  court,  as  if  she  was  single. 

A  contract  made  by  a  married  woman  does  not  bind 
her  husband  or  his  property. 

Civil  Code,  Sections  158,  162. 

(b)  Liability  of  Separate  Property  of  Wife  for 
Debts. — The  separate  property  of  the  wife  is  liable  for 
her  own  debts  contracted  before  or  after  her  marriage, 
but  is  not  liable  for  her  husband 's  debts ;  provided,  that 
the  separate  property  of  the  wife  is  liable  for  the  pay- 
ment of  debts  contracted  by  the  husband  or  wife  for  the 
necessaries  of  life  furnished  to  them  or  either  of  them 
while  they  are  living  together;  provided,  that  the  pro- 
visions of  the  foregoing  proviso  shall  not  apply  to  the 
separate  property  of  the  wife  held  by  her  at  the  time  of 
her  marriage  or  acquired  by  her  by  devise,  succession, 
or  gift,  other  than  by  gift  from  the  husband,  after 
marriage. 

Amendments  of  1915,  page  920. 

Section  3. — CONSENT  OF  PARTIES  TO  CONTRACT. — To 
constitute  a  valid  contract,  the  consent  of  the  parties  to 
it  must  be  freely  given,  and  there  must  be  a  mutual  con- 
sent, and  their  consent  to  the  agreement  must  be  com- 
municated by  each  to  the  other.  The  laws  of  California 
but  follow  the  principles  of  natural  justice  when  they 
provide  that,  when  the  consent  of  a  party  to  a  con- 
tract is  not  given  freely  and  voluntarily,  but  is  obtained 
by  fraudulent  acts  or  misrepresentations,  the  contract 
cannot  stand,  and  will  be  set  aside  by  the  courts  when- 
ever the  facts  are  proved.  Some  of  the  facts  which  will 


60  BUSINESS  LAW  FOB  BUSINESS  MEN. 

render  a  contract  invalid,  by  reason  of  insufficient  con- 
sent of  the  parties,  are  where  the  consent  of  any  party 
has  been  obtained  by  imprisonment  of  the  person,  or 
unlawful  detention  of  his  property,  or  threats  to  injure 
his  person,  property,  or  character,  or  deceiving  him  by 
misrepresenting  or  concealing  the  truth,  or  by  making  a 
promise  without  any  intention  of  performing  it.  When- 
ever any  of  these  facts  appear,  to  the  injury  of  a  party, 
the  courts  of  California  will  set  aside  the  contract.  Also, 
a  contract  will  be  set  aside,  because  free  consent  was  not 
given,  whenever  one  party  in  whom  another  has  con- 
fidence uses  that  confidence  for  the  purpose  of  taking  an 
unfair  advantage  over  the  latter,  or  whenever  one  party 
takes  an  unfair  advantage  of  another's  weakness  of 
mind,  or  whenever  one  party  takes  a  grossly  oppressive 
and  unfair  advantage  of  another's  necessities  or  distress. 
Also,  consent  will  not  be  considered  mutual  and  free, 
whenever  a  mistake  is  made  in  entering  into  a  contract, 
where  either  party,  without  negligence  on  his  part,  acts 
under  an  unconscious  ignorance  or  forgetfulness  of  a 
fact,  past  or  present,  material  to  the  contract,  or  acts  in 
the  belief  that  a  thing  material  to  the  contract  exists  or 
has  existed  when  in  fact  the  thing  does  not  exist  and 
never  did  exist.  Also,  a  contract  will  be  set  aside  when- 
ever all  the  parties  act  under  a  misapprehension  of  the 
law,  all  supposing  that  they  know  and  understand  it; 
also,  because  of  misapprehension  of  the  law  by  one  party 
to  a  contract,  of  which  the  other  party  is  aware  at  the 
time  of  contracting,  but  which  he  does  not  rectify. 

Civil  Code,  Sections  1565,  1567,  1569,  1570,  1572, 
1575,  1577,  1578. 

Section  4. — WHEN   CONSENT  is  NOT   MUTUAL. — Con- 
sent of  the  parties  is  not  mutual  unless  the  parties  all 
agree  upon  the  same  thing  in  the  same  sense. 
Civil  Code,  Section  1580. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  61 

Section  5. — PROPOSAL  OF  CONTRACT,  ACCEPTANCE,  AND 
REVOCATION. — One  party  may  propose  a  thing,  but  the 
proposal  must  be  accepted  before  a  contract  is  created. 
An  acceptance  must  be  absolute  and  unqualified.  If  one 
party  makes  a  proposition,  and  the  other  replies  with  a 
proposition  on  his  part,  there  is  no  contract,  because  the 
parties  have  not  mutually  agreed  upon  anything.  The 
proposal  may  be  revoked  at  any  time  before  it  is  accepted. 
It  is  revoked  by  giving  notice  of  its  withdrawal  to  the 
person  to  whom  the  proposal  was  made.  It  is  also 
revoked,  where  a  certain  time  was  given  in  which  to 
accept,  by  the  expiration  of  that  time  without  notice  of 
acceptance ;  it  is  also  revoked  by  the  failure  of  the  person 
to  whom  the  proposal  is  made  to  do  some  act  which  is 
required  of  him  as  a  condition  preceding  the  acceptance ; 
and  a  proposal  is  necessarily  considered  revoked  by  the 
death  or  insanity  of  the  proposer.  Any  usual  and  reason- 
able mode  of  giving  notice  of  acceptance  of  a  proposal 
may  be  adopted,  as,  by  mail,  or  in  person,  or  by  mes- 
senger, and  it  will  be  sufficient  to  constitute  a  contract. 
But  the  proposer  may  prescribe  a  certain  mode  in  which 
notice  of  acceptance  must  be  given,  and  the  proposer 
will  not  be  bound  unless  the  mode  prescribed  by  him  is 
adopted. 

Civil  Code,  Sections  1582,  1583,  1585, 1586,  1587. 

Section  6. — OBJECTS  OF  CONTRACT. — The  object  of  a 
contract  must  be  lawful  when  the  contract  is  made,  and 
possible  of  performance,  and  certain  in  its  terms.  How- 
ever, the  law  considers  everything  possible  except  that 
which  is  impossible  in  the  nature  of  things,  and,  there- 
fore, to  render  a  contract  invalid  for  impossibility  of  per- 
formance, it  must  be  apparent  from  the  nature  of  the 
thing  agreed  upon  that  it  will  not  be  possible  to  perform 
it.  Where  a  contract  has  but  a  single  object,  and  such 
object  is  unlawful,  whether  in  whole  or  in  part,  or  wholly 
impossible  of  performance,  or  so  vaguely  expressed  as 
to  be  wholly  unascertainable,  the  entire  contract  is  void. 


62  BUSINESS  LAW  FOR  BUSINESS  MEN. 

But  where  a  contract  has  several  distinct  objects,  of 
which  one  at  least  is  lawful,  in  whole  or  in  part,  the  con- 
tract is  void  as  to  the  unlawful  object,  and  valid  as  to 
the  rest. 

Civil  Code,  Sections  1595, 1596, 1597,  1598,  1599. 

Section  7. — CONSIDERATION  OF  A  CONTRACT. — The  con- 
sideration of  a  contract  need  not  necessarily  be  money. 
Of  course,  the  consideration  must  be  lawful,  that  is,  it 
must  not  be  contrary  to  any  express  provision  of  law,  or 
against  the  policy  of  express  law,  or  contrary  to  good 
morals.  But  the  consideration  may  consist  in  any  benefit 
conferred  or  agreed  to  be  conferred  upon  the  promisor  by 
any  other  person,  to  which  the  promisor  is  not  already 
lawfully  entitled,  or  in  any  prejudice  suffered  or  agreed 
to  be  suffered  by  the  person  to  whom  the  promise  is  made, 
which  he  is  not  already  lawfully  bound  to  suffer.  The 
abandonment  of  a  right,  or  forbearing  to  enforce  a  claim, 
or  any  detriment  suffered  by  the  promisee,  will  constitute 
sufficient  consideration  for  a  contract,  and  be  as  binding 
as  though  the  payment  of  money  were  agreed  upon. 
Civil  Code,  Sections  1605,  1607,  1667. 

Section  8. — WHAT  CONTRACTS  MAY  BE  VERBAL. — All 
contracts  may  be  entered  into  verbally,  except  such  as 
are  specially  required  by  law  to  be  in  writing.  If  the 
contract  is  one  which  the  law  does  not  specially  require 
to  be  in  writing,  the  verbal  agreement  of  the  parties  is 
as  good  as  any  other,  and  as  binding  as  it  would  be  if 
reduced  to  writing. 

Section  9. — WHAT  CONTRACTS  MUST  BE  IN  WRITING.— 
The  law  of  California  provides  that  the  following  con- 
tracts are  invalid,  unless  the  contract,  or  some  note  or 
memorandum  describing  its  terms,  is  put  into  writing  and 
subscribed  by  the  party  to  be  charged,  or  by  his  agent : 
(1)  An  agreement  that  by  its  terms  is  not  to  be  per- 
formed within  a  year  from  the  making  thereof;  (2)  A 
special  promise  to  answer  for  the  debt,  default,  or  nns- 


BUSINESS  CONTKACTS  AND  LEGAL  OBLIGATIONS.  63 

carriage  of  another ;  but  there  is  one  exception  to  this  pro- 
vision, where  it  appears  that  the  promise  was  such  as  the 
law  considers  an  original  obligation  on  the  part  of  the 
promisor;  (3)  An  agreement  made  upon  consideration 
of  marriage,  other  than  a  mutual  promise  to  marry;  (4) 
An  agreement  for  the  sale  of  goods,  chattels,  or  things  in 
action,  at  a  price  not  less  than  two  hundred  dollars,  unless 
the  buyer  accepts  or  receives  part  of  such  goods  and  chat- 
tels, or  the  evidences,  or  some  of  them,  of  such  things  in 
action,  or  pay  at  the  time  some  part  of  the  purchase 
money ;  but,  when  a  sale  is  made  at  auction,  an  entry  by 
the  auctioneer  in  his  sale  book,  at  the  time  of  the  sale,  of 
the  kind  of  property  sold,  the  terms  of  the  sale,  the  price, 
and  the  names  of  the  purchaser  and  person  on  whose 
account  the  sale  is  made,  is  a  sufficient  memorandum;  (5) 
An  agreement  for  the  leasing  for  a  longer  period  than 
one  year,  or  for  the  sale  of  real  property,  or  for  an  in- 
terest therein ;  and  such  agreement,  if  made  by  an  agent 
of  the  party  sought  to  be  charged,  is  invalid,  unless  the 
authority  of  the  agent  is  in  writing,  and  subscribed  by  the 
party  sought  to  be  charged ;  (6)  An  agreement  authoriz- 
ing or  employing  an  agent  or  broker  to  purchase  or  sell 
real  estate  for  compensation  or  commission;  (7)  An 
agreement  which  by  its  terms  is  not  to  be  performed  dur- 
ing the  lifetime  of  the  promisor;  (8)  Or  an  agreement  to 
devise  or  bequeath  any  property,  or  to  make  any  provi- 
sion for  any  person  by  will. 

Civil  Code,  Section  1624. 

Section  10. — CONTRACTS  AGAINST  PUBLIC  POLICY.— 
There  are  certain  contracts  which  the  law  says  are  against 
public  policy,  and  therefore  invalid.  Generally  any  con- 
tract which  has  for  its  object  the  violation  of  any  law  of 
the  land  would  be  illegal,  without  reference  to  the  ques- 
tion of  public  policy.  But  the  State  recognizes  the  usual 
and  natural  distinctions  between  morality  and  immoral- 
ity, that  which  is  inherently  right  and  that  which  is  inher- 
ently wrong,  and  forbids,  on  the  ground  of  public  policy, 


64  BUSINESS  LAW  FOR  BUSINESS  MEN. 

certain  contracts  which  may  not  be  forbidden  by  the 
statutes.  Therefore  it  is  said  that  all  contracts  in  viola- 
tion of  morality  are  void ;  that  agreements  to  do  acts  for- 
bidden by  the  law  of  God,  or  which  are  manifestly  in 
furtherance  of  immorality,  and  tend  to  contaminate  the 
public  mind,  can  not  be  enforced  in  the  courts  of  this 
State.  Some  illustrations  of  this  rule  are,  where  lodgings 
are  leased  for  purposes  of  prostitution ;  where  a  contract 
is  made  for  the  printing  or  sale  of  obscene  or  libelous 
books;  so,  also,  contracts  to  prevent  competition  at  an 
auction  sale,  contracts  in  restraint  of  trade,  contracts  in 
restraint  of  marriage,  marriage  brokerage  contracts, 
wagers,  and  gambling  contracts ;  all  of  these,  or  others  of 
like  character,  are  opposed  to  good  morals,  and  are  void, 
whether  expressly  prohibited  by  statute  or  not. 

Section  11. — CONTRACTS  IN  EESTRAINT  OF  TRADE.— 
Every  contract  by  which  any  one  is  restrained  from  exer- 
cising a  lawful  profession,  trade,  or  business  of  any  kind, 
is  to  that  extend  void.  The  courts  have  found  great  diffi- 
culty, however,  in  determining  what  are  contracts  in  re- 
straint of  trade,  within  the  meaning  of  the  law.  It  is  the 
public  policy  to  encourage  trade  and  traffic,  and  any  con- 
tract which  would  have  the  effect  of  depriving  the  public 
of  the  advantages  of  competition  in  trade  is  void,  as 
opposed  to  public  policy.  Thus,  where  all,  or  nearly  all, 
of  an  article  of  trade  or  commerce  within  a  community 
or  district  is  brought  within  the  hands  of  one  man  or  set 
of  men,  so  as  to  practically  bring  the  handling  or  produc- 
tion of  the  commodity  within  such  single  control,  to  the 
exclusion  of  competition  or  free  traffic  therein,  this  con- 
stitutes a  monopoly,  and  is  in  restraint  of  trade.  Reason- 
able combinations  to  regulate  prices  are  valid.  But  if 
one  agrees  with  another  that  he  will  never  again  at  any 
time  or  place  work  at  his  trade,  or  carry  on  his  business, 
or  exercise  his  profession,  such  a  contract,  being  without 
limitation  as  to  time  or  place,  is  considered  to  be  in  re- 
straint of  trade,  and  is  void. 

Civil  Code,  Section  1673. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  65 

Section  12.— SALE  OF  GOOD  WILL  OF  A  BUSINESS. — The 
sale  of  the  good  will  of  a  business  forms  an  exception 
to  the  law  stated  in  the  last  Section.  One  who  sells  the 
good  will  of  a  business  may  agree  with  the  buyer  that  he 
will  not  carry  on  a  similar  business  within  a  specified 
county  or  city,  so  long  as  the  buyer,  or  any  person  to 
whom  the  buyer  shall  dispose  of  the  good  will,  carries  on 
a  like  business  at  the  same  place.  There  is  an  exception, 
also,  in  the  case  of  partners.  Partners  may,  upon  a  dis- 
solution of  the  partnership,  make  a  valid  contract  that 
none  of  them  will  carry  on  a  similar  business  within  the 
whole  or  a  part  of  the  same  city  or  town  where  the  part- 
nership business  has  been  transacted. 

Civil  Code,  Sections  1674,  1675. 

Section  13. — ALTERATION  OF  VERBAL  CONTRACT. — Con- 
tracts, verbal  or  written,  may  be  subsequently  altered,  so 
as  to  make  the  terms  or  conditions  different  from  what 
they  were  at  first.  But  where  the  contract  was  verbal 
only,  the  law  provides  that  the  consent  of  the  parties  to 
its  alteration  in  any  respect  must  be  expressed  in  writing, 
and  where  the  consent  to  the  alteration  is  thus  given  and 
made,  in  writing,  it  does  not  require  a  new  consideration. 
Civil  Code,  Section  1697. 

Section  14. — ALTERATION  OF  WRITTEN  CONTRACT. — A 
contract  in  writing  may  be  altered  by  a  contract  in 
writing,  or  by  an  executed  oral  agreement,  and  not 
otherwise.  The  executed  oral  agreement,  which  will  be 
sufficient  to  alter  a  previous  written  contract,  must  con- 
sist in  the  doing  or  the  suffering  of  something  not  re- 
quired to  be  done  or  suffered  by  the  terms  of  the  writing. 
So,  if  the  parties  verbally  agree  upon  the  doing  of  some- 
thing, which  one  or  the  other  would  be  bound  to  do  in 
the  proper  fulfilment  of  the  written  contract,  this  does 
not  constitute  an  executed  oral  agreement  to  alter  the 
previous  writing. 

Civil  Code,  Section  1698. 


66  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Section  15. — EXPRESS  CONTRACTS. — An  express  con- 
tract is  one  the  terms  of  which  are  stated  in  words,  from 
which  words,  used  in  a  writing  or  orally  between  the 
parties,  the  agreement  between  the  parties  is  ascertained. 

Section  16. — IMPLIED  CONTRACTS. — An  implied  con- 
tract is  one  the  existence  and  terms  of  which  are  mani- 
fested by  the  conduct  of  the  parties.  The  conduct  of  the 
parties  toward  each  other,  the  circumstances  surround- 
ing the  transaction,  may  be  such  that  the  law  will  imply 
that  certain  agreements  were  entered  into,  although  no 
evidence  other  than  such  circumstances  or  conduct  may 
exist  as  proof  of  the  contracts.  The  law  will  imply  that 
a  party  did  make  such  a  stipulation  as,  under  the  circum- 
stances disclosed,  he  ought,  upon  the  principles  of  hon- 
esty, justice,  and  fairness,  to  have  made.  Thus,  if  one 
party  accepts  the  services  of  another,  or  receives  his 
goods,  having  reaped  the  benefit  of  such  services  or 
goods,  the  law  implies  a  promise  on  his  part  to  pay  for 
them. 

Civil  Code,  Section  1621. 

Section  17. — TERMINATION  OF  CONTRACTS. — A  contract 
is  terminated,  of  course,  when  it  has  been  fully  per- 
formed, but  it  may  also  be  rescinded  or  canceled  under 
certain  circumstances. 

Section  18. — RESCISSION  OF  CONTRACT. — A  party  to  a 
contract  may  rescind  it,  if  his  consent  to  it,  or  the  consent 
of  any  party  jointly  contracting  with  him,  was  given  by 
mistake,  or  obtained  through  duress,  menace,  fraud,  or 
undue  influence  on  the  part  of  the  party  as  to  whom  he 
rescinds,  or  on  the  part  of  any  other  party  to  the  contract 
jointly  interested  with  the  latter.  A  party  to  a  contract 
may  also  rescind  it  if,  through  the  fault  of  the  party  as  to 
whom  he  rescinds,  the  consideration  for  his  obligation 
fails,  in  whole  or  in  part ;  or  if  the  consideration  becomes 
entirely  void,  for  any  cause;  or  if  the  consideration, 
before  it  is  rendered  to  him,  fails  in  a  material  respect, 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  67 

from  any  cause.    A  party  to  a  contract  may  also  rescind 
it  by  consent  of  all  the  other  parties. 
Civil  Code,  Section  1689. 

Section  19. — EXTINCTION  OF  WRITTEN  CONTRACT  BY 
CANCELLATION. — The  destruction  or  cancellation  of  a 
written  contract,  or  of  the  signature  of  the  parties,  with 
the  intent  to  extinguish  the  obligation,  does  extinguish  it 
as  to  all  the  parties  consenting  to  the  act.  But  where  a 
contract  is  executed  in  duplicate,  the  destruction  of  one 
copy,  while  the  other  exists,  will  not  have  the  effect  of  ex- 
tinguishing the  contract. 

Civil  Code,  Sections  1699,  1701. 

Section  20. — INTERPRETATION  OF  CONTRACTS. — The  es- 
sential thing  in  the  interpretation  of  a  contract,  in  ascer- 
taining what  is  meant  by  it,  is  to  find  the  intention  of  the 
parties.  The  law  of  California  provides  that  a  contract 
must  be  so  interpreted  as  to  give  effect  to  the  mutual 
intention  of  the  parties  at  the  time  of  contracting,  so  far 
as  that  intention  is  ascertainable  and  lawful.  The  lan- 
guage of  a  contract  is  to  govern  its  interpretation  if  the 
language  is  clear  and  explicit,  and  does  not  involve  an 
absurdity.  When  a  contract  has  been  reduced  to  writing, 
the  intention  of  the  parties  is  to  be  ascertained  from  the 
writing  alone,  if  possible.  When,  through  fraud,  mistake, 
or  accident,  a  written  contract  fails  to  express  the  real 
intention  of  the  parties,  oral  evidence  will  be  received  in 
the  courts  to  show  what  the  intention  of  the  parties  really 
was,  and.  when  ascertained,  the  real  intention  will  govern, 
and  the  erroneous  parts  of  the  writing  will  be  dis- 
regarded. The  whole  of  a  contract  is  to  be  taken  together, 
so  as  to  give  effect  to  every  part,  if  reasonably  practi- 
cable. The  whole  contract  is  to  be  considered,  in  arriving 
at  the  intention  of  the  parties.  A  contract  must  be  given 
such  an  interpretation  as  will  make  it  lawful,  operative, 
definite,  reasonable,  and  capable  of  being  carried  into 
effect,  if  this  can  be  done  without  a  violation  of  the  inten- 


68  BUSINESS  LAW  FOR  BUSINESS  MEN. 

tion  of  the  parties.  Words  used  in  a  contract  are  to  be 
understood  in  their  ordinary  and  popular  sense,  unless 
used  by  the  parties  in  a  technical  sense,  or  unless  a  special 
meaning  is  given  to  the  words  by  usage  or  custom.  A  con- 
tract may  be  explained  by  reference  to  the  circumstances 
under  which  it  was  made  and  the  matter  to  which  it  re- 
lates. However  broad  may  be  the  terms  of  a  contract,  it 
extends  only  to  those  things  which  it  appears  the  parties 
really  intended  to  include  in  it. 

Civil  Code,  Sections  1636, 1638,  1639, 1640,  1641, 
1643,  1644,  1647, 1648. 

Section   21. — PRINTED  AND   WRITTEN  PARTS  OF  CON- 
TRACT.— Where  a  contract  is  partly  written  and  partly 
printed,  the  written  parts  control  the  printed  parts. 
Civil  Code,  Section  1651. 

Section  22. — TIME  OF  PERFORMANCE  OF  CONTRACT. — If 
the  time  is  specified  in  the  contract  for  its  performance, 
the  stipulation  of  the  parties  will  control.  If  no  time  is 
specified,  the  law  allows  a  reasonable  time.  What  is  a 
reasonable  time  for  the  performance  of  a  contract  de- 
pends upon  the  circumstances  and  the  nature  of  the  thing 
to  be  done, 

Section  23. — PLACE  OF  PERFORMANCE. — A  contract  is 
supposed  to  be  made  at  some  place,  and  the  place  where 
it  becomes  complete  is  the  place  where  it  is  made.  If  a 
contract  is  made  by  exchange  of  letters,  or  telegrams,  it  is 
held  to  have  been  made  at  the  place  where  the  letter  is 
mailed  or  telegram  filed,  containing  an  unconditional  ac- 
ceptance by  one  party  of  the  offer  of  the  other.  If  the 
communications  are  oral,  either  with  or  without  tele- 
phone, between  parties  on  opposite  sides  of  a  county 
line,  the  law  deems  the  contract  to  have  been  made  in  the 
county  where  the  offer  of  one  is  accepted  by  the  other. 
(Decided  by  the  Supreme  Court  of  California,  in  the  case 
of  Bank  of  Yolo  vs.  The  Sperry  Flour  Company,  which 
decision  is  priiited'm  Volume  XXVI,  California  Decisions, 
page  936.) 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  69 

Section  24. — CONTEACTS  BY  LETTER  OB  TELEGRAPH.— 
Contracts  may  lawfully  be  made  by  telegraph.  And 
where  a  person  telegraphs  a  proposal  to  another,  who  ac- 
cepts it  by  telegraph,  these  telegraphic  communications 
constitute  a  contract  in  writing  which  the  law  will  en- 
force. 

Where  parties  have  exchanged  letters  and  telegrams 
with  a  view  to  an  agreement,  and  have  arrived  at  a  point 
where  a  clear  and  definite  proposition  is  made  on  one  side 
and  accepted  on  the  other,  with  an  understanding  that  the 
agreement  shall  be  reduced  to  a  formal  writing,  the  con- 
tract is  complete,  though  no  formal  writing  is  ever 
executed. 

Section  25.— THE  ANTI-TRUST  LAW.— The  State  of 
California  has  passed  laws  intended  to  prevent  the  for- 
mation of  trusts  or  combinations  whereby  monopolies 
may  be  created  or  maintained.  What  is  known  as  the 
Cartwright  Law  was  intended  to  be  a  rigid  anti-trust  law. 
The  law  provides : 

"A  trust  is  a  combination  of  capital,  skill  or  acts  by 
two  or  more  persons,  firms,  partnerships,  corporations  or 
associations  of  persons,  or  of  any  two  or  more  of  them  for 
either,  any  or  all  of  the  following  purposes : 

"1.  To  create  or  carry  out  restrictions  in  trade  or 
commerce. 

"2.  To  limit  or  reduce  the  production,  or  increase  the 
price  of  merchandise  or  of  any  commodity. 

"3.  To  prevent  competition  in  manufacturing,  mak- 
ing, transportation,  sale  or  purchase  of  merchandise, 
produce  or  any  commodity. 

U4.  To  fix  at  any  standard  or  figure,  whereby  its 
price  to  the  public  or  consumer  shall  be  in  any  manner 
controlled  or  established,  any  article  or  commodity  of 
merchandise,  produce  or  commerce  intended  for  sale, 
barter,  use  or  consumption  in  this  state. 

"5.  To  make  or  enter  into  or  execute  or  carry  out 
any  contracts,  obligations,  or  agreements  of  any  kind  or 


70  BUSINESS  LAW  FOK  BUSINESS  MEN. 

description,  by  which  they  shall  bind  or  have  bound  them- 
selves not  to  sell,  dispose  of  or  transport  any  article  or 
any  commodity  or  any  article  of  trade,  use,  merchandise, 
commerce  or  consumption  below  a  common  standard 
figure,  or  fixed  value,  or  by  which  they  shall  agree  in  any 
manner  to  keep  the  price  of  such  article,  commodity  or 
transportation  at  a  fixed  or  graduated  figure,  or  by  which 
they  shall  in  any  manner  establish  or  settle  the  price  of 
any  article,  commodity  or  transportation  between  them  or 
themselves  and  others,  so  as  to  directly  or  indirectly  pre- 
clude a  free  and  unrestricted  competition  among  them- 
selves, or  any  purchasers  or  consumers  in  the  sale  or 
transportation  of  any  such  article  or  commodity,  or  by 
which  they  shall  agree  to  pool,  combine  or  directly  or  indi- 
rectly unite  any  interests  that  they  may  have  connected 
with  the  sale  or  transportation  of  any  such  article  or  com- 
modity, that  its  price  might  in  any  manner  be  affected. 
Every  such  trust  as  is  defined  herein  is  declared  to  be 
unlawful,  against  public  policy  and  void." 

The  remainder  of  the  act  is  taken  up  with  provisions 
for  punishment  of  those  who  violate  the  law.  It  is  made 
the  duty  of  the  attorney-general  to  bring  suit  for  a  for- 
feiture of  the  charter  of  any  corporation  violating  the  law, 
and  to  enjoin  any  foreign  corporation  from  further  doing 
business  in  this  state ;  any  person  guilty  of  'violating  the 
law  is  punishable  by  a  fine  of  not  less  than  fifty  dollars 
nor  more  than  five  thousand  dollars,  or  by  imprisonment 
not  less  than  six  months  nor  more  than  one  year,  or  both 
such  fine  and  imprisonment;  and  each  day's  violation  of 
the  provisions  of  the  act  constitutes  a  separate  offense. 
For  each  day's  violation  of  the  law,  in  any  particular,  the 
guilty  person,  firm,  or  corporation  forfeits  fifty  dollars, 
the  payment  of  which  may  be  compelled  by  the  attorney- 
general  or  the  district  attorney.  Any  person  injured  in 
his  business  or  property  by  a  violation  of  the  law,  may 
sue  for  damages,  and  when  his  damages  are  ascertained, 
may  be  given  judgment  for  double  the  amount. 

The  intention  of  the  law  is  evident  on  its  face.    It  was 


BUSINESS  CONTBACTS  AND  LEGAL  OBLIGATIONS.  71 

intended  to  prohibit  combinations  of  persons,  firms,  part- 
nerships, corporations  or  associations  by  which  trade  or 
commerce  shall  be  restrained  or  production  limited,  or 
competition  prevented,  or  the  price  fixed  of  an  article  of 
merchandise  or  produce,  to  the  injury  of  the  public  at 
large.  If  all  the  manufacturers  of  salt,  or  flour,  for  in- 
stance, should  enter  into  a  combination  and  arbitrarily 
fix  the  selling  price,  so  as  to  deprive  the  public  of  the  ad- 
vantages of  competition,  this  would  be  in  restraint  of 
trade,  and  a  violation  of  the  law.  Or,  if  ali  the  manu- 
facturers of  lumber  in  California  should  enter  into  an 
agreement  that  they  would  shut  down  their  mills  for  six 
months  in  the  year,  and  thus  bring  up  the  price  of  lumber 
to  a  figure  which  would  be  oppressive  and  ruinous  to  the 
public  in  its  effects  upon  building  operations,  this  would 
be  a  violation  of  the  intent  and  spirit  of  the  law.  But  the 
law  does  not  intend,  nor  would  the  legislature  have  the 
power  to  enact,  that  a  person  can  no  longer  do  with  his 
own  property  as  he  pleases.  Notwithstanding  the  Cart- 
wright  law,  the  manufacturer  may  still  prescribe  the  price 
at  which  his  own  brand  of  a  particular  commodity  shall 
be  sold,  the  wholesaler  may  still  protect  the  standing  and 
trademark  of  any  particular  article  distributed  by  him  by 
fixing  the  retail  price,  the  producer  may  still  fix  the  price 
of  his  own  product,  and  any  owner  of  property  may  still 
have  the  right  to  select  his  own  customers. 

The  Legislature  of  1909  adopted  an  amendment  to  the 
Oartwright  law,  providing  * '  that  no  agreement,  combina- 
1ion  or  association  shall  be  deemed  to  be  unlawful  or 
within  the  provisions  of  this  act,  the  object  and  business 
of  which  are  to  conduct  its  operations  at  a  reasonable 
profit  or  to  market  at  a  reasonable  profit  those  products 
which  can  not  otherwise  be  so  marketed;  provided,  fur- 
ther, that  it  shall  not  be  deemed  to  be  unlawful,  or  within 
the  provisions  of  this  act,  for  persons,  firms  or  corpora- 
tions, engaged  in  the  business  of  selling  or  manufacturing- 
commodities  of  a  similar  or  like  character,  to  employ, 
form,  organize  or  own  any  interest  in  any  association, 


72  BUSINESS  LAW  FOB  BUSINESS  MEN. 

firm  or  corporation,  having  as  its  object  or  purpose 
the  transportation,  marketing  or  delivery  of  such  com- 
modities." 

Two  new  sections  were  also  added  to  the  Cartwright 
law,  reading  as  follows :  "It  shall  be  lawful  to  enter  into 
agreements  or  form  associations  or  combinations,  the 
purpose  and  effect  of  which  shall  be  to  promote,  en- 
courage or  increase  competition  in  any  trade  or  industry, 
or  which  are  in  furtherance  of  trade."  "Labor,  whether 
skilled  or  unskilled,  is  not  a  commodity  within  the  mean- 
ing of  this  act. ' ' 

Act  of  the  Legislature,  approved  March  20, 1909. 

(a)  Fixing  Prices  Under  the  Cartwright  Law. — A  con- 
tract for  the  sale  of  olive  oil  by  the  manufacturer,  in 
which  he  exacts,  as  part  of  the  consideration  for  the  sale, 
a  promise  by  the  purchaser  that  he  will  not  sell  the  oil  for 
less  than  a  stipulated  price,  does  not  tend  to  create  a 
monopoly  and  is  not  in  restraint  of  trade.  There  is  no 
provision  of  the  Cartwright  Act  which  prohibits  the 
making  of  such  a  contract.  There  is  nothing  either  un- 
reasonable or  unlawful  in  the  effort  by  a  manufacturer  to 
maintain  a  standard  price  for  his  goods,  but  it  is  simply 
a  means  of  securing  the  legitimate  benefits  of  the  reputa- 
tion which  his  product  may  have  attained.  A  monopoly 
exists  where  all,  or  so  nearly  all,  of  an  article  of  trade  or 
commerce  within  a  community  or  district  is  brought 
within  the  hands  of  one  man  or  several  men,  as  to  prac- 
tically bring  the  handling  or  production  of  the  commodity 
within  such  control  to  the  exclusion  of  free  traffic  therein. 
The  producer  is,  in  the  first  instance,  under  no  obligation 
to  sell  his  product ;  and  when  he  does  sell  it,  he  has  the 
right  to  exact,  as  part  of  the  consideration  for  the  sale,  a 
promise  by  the  purchaser  that  he  will  not  sell  it  at  less 
than  a  stipulated  price.  (Decided  by  the  Supreme  Court 
of  California,  in  the  case  of  Grogan  vs.  Chaff ee,  which 
decision  is  printed  in  Volume  XXXVII,  California  de- 
cisions, page  522.) 


Section  27,  page  73,  "Business  Law  for  Business  Men" — HOLIDAYS  IN 
CALIFORNIA — Holidays  within  the  meaning  of  this  code,  are  every  Sun- 
day, the  first  day  of  January,  twelfth  day  of  February,  to  be  known  as  Lin- 
coln day,  twenty-second  day  of  February,  thirtieth  day  of  May,  fourth  day  of 
July,  ninth  day  of  September,  first  Monday  in  September,  twelfth  day  of  Oc- 
tober, to  be  known  as  "Columbus  day,"  twenty-fifth  day  of  December,  elev- 
enth day  of  November,  known  as  "Armistice  day,"  every  day  on  which  an 
election  is  held  throughout  the  state,  except  a  general  primary  election,  and 
every  day  appointed  by  the  President  of  the  United  States  or  by  the  Governor 
of  this  State  for  a  public  fast,  thanksgiving  or  holiday. 

If  the  first  day  of  January,  twelfth  day  of  February,  twenty-second  day 
of  February,  the  thirtieth  day  of  May,  the  fourth  day  of  July,  the  ninth  day 
of  September,  the  twelfth  day  of  October,  the  twenty-fifth  day  of  December 
or  eleventh  day  of  November  falls  upon  a  Sunday,  the  Monday  following  is  a 
holiday. 

Every  Saturday  from  twelve  o'clock  noon  until  twelve  o'clock  midnight 
is  a  holiday  as  regards  the  transaction  of  business  in  the  public  offices  of  this 
State,  and  also  in  political  divisions  thereof  where  laws,  ordinances  or  char- 
ters provide  that  public  offices  shall  be  closed  on  holidays;  this  shall  not  be 
construed  to  prevent  or  invalidate  the  issuance,  filing,  service,  execution  or 
recording  of  any  legal  process  or  written  instrument  whatever  on  such  Sat- 
urday afternoon. 

Act  of  the  Legislature  of  California,  approved  May  19,  1921;  in  effect 
July  19,  1921. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  73 

Section  26. — CONTRACTS  COMING  DUE  ON  A  HOLIDAY.— 
Where  a  contract  by  its  terms  requires  the  payment  of 
money,  or  the  performance  of  a  condition,  on  a  legal  holi- 
day, such  payment  may  be  made  or  condition  performed 
on  the  next  business  day  succeeding  such  holiday,  with 
the  same  force  and  effect  as  if  made  or  performed  on  the 
day  named  in  the  contract. 

Section  27. — HOLIDAYS  IN  CALIFORNIA. — The  following 
are  legal  holidays  in  the  State  of  California :  Every  Sun- 
day, the  first  day  of  January,  twelfth  day  of  February,  to 
be  known  as  Lincoln  Day,  twenty-second  day  of  February, 
thirtieth  day  of  May,  fourth  of  July,  ninth  day  of  Septem- 
ber, first  Monday  in  September,  twelfth  day  of  October, 
to  be  known  as  Columbus  Day,  twenty-fifth  day  of  Decem- 
ber, every  day  on  which  an  election  is  held  throughout  the 
state,  and  every  day  appointed  by  the  president  of  the 
United  States  or  by  the  governor  of  this  state  for  a  public 
fast,  thanksgiving  or  holiday. 

If  the  first  day  of  January,  twelfth  day  of  February, 
twenty-second  day  of  February,  the  thirtieth  day  of  May, 
the  fourth  day  of  July,  the  ninth  day  of  September,  the 
twelfth  day  of  October  or  the  twenty-fifth  day  of  Decem- 
ber falls  upon  a  Sunday,  the  Monday  following  is  a  holi- 
day. 

Every  Saturday  from  twelve  o  'clock  noon  until  twelve 
o  'clock  midnight  is  a  holiday  as  regards  the  transaction  of 
business  in  the  public  offices  of  this  state,  and  also  in 
political  divisions  thereof  where  laws,  ordinances  or  char- 
ters provide  that  public  offices  shall  be  closed  on  holidays ; 
provided,  this  shall  not  be  construed  to  prevent  or  in- 
validate the  issuance,  filing,  service,  execution  or  record- 
ing of  any  legal  process  or  written  instrument  whatever 
on  such  Saturday  afternoons. 

•Act  of  the  Legislature,  approved  March  20, 1917. 


74  BUSINESS  LAW  FOB  BUSINESS  MEN. 

AGREEMENTS  FOB  SALE. 

Section  28. — KINDS  or  AGEEEMENTS  FOE  SALE. — An 
agreement  for  sale  is  either  (1)  an  agreement  to  sell,  (2) 
an  agreement  to  buy,  or  (3)  a  mutual  agreement  to  sell 
and  buy.  The  difference  between  a  sale  and  an  agreement 
for  sale  is,  that  in  a  sale  the  subject  of  the  contract  be- 
comes the  property  of  the  buyer  as  soon  as  the  contract 
is  concluded,  while  in  an  agreement  for  sale  the  title  to 
the  property  remains  in  the  vendor  until  the  contract  is 
executed.  An  agreement  to  buy  is  a  contract  by  which 
one  engages  to  accept  from  another  and  pay  a  price  for 
the  title  to  a  certain  thing.  An  agreement  to  sell  is  a 
contract  by  which  one  engages,  for  a  price,  to  transfer  to 
another  the  title  to  a  certain  thing.  An  agreement  to  sell 
and  buy  is  a  contract  by  which  one  engages  to  transfer 
the  title  to  a  certain  thing  to  another,  who  engages  to 
accept  the  same  from  him  and  to  pay  a  price  therefor. 
Any  property  which,  if  in  existence,  might  bo  the  subject 
of  sale,  may  be  the  subject  of  an  agreement  for  sale, 
whether  the  property  itself  is  then  in  existence  or  not. 

Civil  Code,  Sections  1726,  1727, 1728,  1729,  1730. 

Section  29. — AGEEEMENT  TO  SELL  REAL  PEOPEETY. — An 
agreement  to  sell  real  property  binds  the  seller  to  execute 
a  conveyance  in  form  sufficient  to  pass  the  title  to  the 
property.  No  agreement  for  the  sale  of  real  property,  or 
any  interest  in  real  property,  is  valid,  unless  the  agree- 
ment, or  some  note  or  memorandum  of  its  terms,  be  in 
writing  and  subscribed  by  the  party  to  be  charged  or  his 
agent.  If  the  agreement,  or  the  note  or  memorandum  of 
it,  is  subscribed  by  the  agent  of  the  party,  it  is  necessary 
to  the  validity  of  the  instrument  that  the  agent's  authority 
from  his  principal  shall  be  in  writing,  also. 

Civil  Code,  Sections  1731,  1741. 

% 

Section  30. — FORM  OF  AGEEEMENT  TO  SELL  REAL  PEOP- 
EETY.— Agreements  to  sell  real  property  are  usually  pre- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  75 

pared  in  the  form  of  a  bond  for  a  deed.    The  following 
form  will  be  sufficient  under  the  laws  of  California: 

AGREEMENT  FOR  SALE  OF  REAL  ESTATE.— 

This  Agreement,  made  and  entered  into  the ... 

day  of ,  19 ,  between 

,  of  the  County  of 

,  State  of  California,  the  party  of  the  first 

part,  and 

of  the  same  place,  the  party  of  the  second  part,  wit- 
nesseth : 

That  the  said  party  of  the  first  part,  in  consideration 
of  the  covenants  and  agreements  on  the  part  of  the  said 
party  of  the  second  part  hereinafter  contained,  agrees  to 
sell  and  convey  unto  the  said  party  of  the  second  part, 
and  said  second  party  agrees  to  buy,  all  those  certain  lots 

or  parcels  of  land,  situate  in  the  County  of 

State  of  California,  bounded  and  described  as  follows, 
to-wit:  

(Here  insert  description  of  property.) 

for  the  sum  of Dollars,  lawful  money 

of  the  United  States;  and  the  said  party  of  the  second 
part,  in  consideration  of  the  premises,  agrees  to  pay  to 

the  said  party  of  the  first  part,  the  said  sum  of 

Dollars,  in  gold  coin  of  the  United 

States,  at  the  times  and  in  the  amounts  as  follows,  to-wit : 

(Here  insert  terms  of  payments  agreed  upon.) 

It  is  agreed  that  all  deferred  payments  shall  bear  in- 
terest at  the  rate  of per  cent  per  annum, 

payable  semi-annual ly. 

And  the  said  party  of  the  second  part  agrees  to  pay 
all  State,  City,  and  County  taxes,  or  assessments  of  what- 
soever nature,  which  are  or  may  become  due  on  the  prem- 
ises above  described. 

In  the  event  of  a  failure  to  comply  with  the  terms 
hereof  by  the  said  party  of  the  second  part,  the  said 


76  BUSINESS  LAW  FOR  BUSINESS  MEN. 

party  of  the  first  part  shall  be  released  from  all  obligation 
in  law  or  equity  to  convey  said  property,  and  the  said 
party  of  the  second  part  shall  forfeit  all  right  thereto. 

Time  is  of  the  essence  of  this  contract. 

And  the  said  party  of  the  first  part,  on  receiving  such 
payment,  at  the  time  and  in  the  manner  above  mentioned, 
agrees  to  execute  and  deliver  to  the  said  party  of  the 
second  part,  or  to  his  assigns,  a  good  and  sufficient  deed 
to  the  premises  herein  described,  free  and  clear  of  en- 
cumbrances. 

And  it  is  understood  that  the  stipulations  aforesaid 
are  to  apply  to  and  bind  the  heirs,  executors,  administra- 
tors, and  assigns  of  the  respective  parties  hereto. 

IN  WITNESS  WHEREOF,  we  have  hereunto  set  our 
hands  and  seals  the  day  and  year  first  above  written. 

.! (Seal.) 

(Seal.) 

(If  the  above  agreement  is  intended  to  be  recorded,  it 
must  be  acknowledged.) 

Section  31. — OPTION  TO  BUY  REAL  PROPERTY. — The 
owner  may  give  another  person  an  option  to  buy  his  prop- 
erty, the  purchase  then  depending  upon  the  mere  will  of 
the  person  receiving  the  option.  The  holder  of  an  option 
is  not  bound  to  take  the  property,  but  the  owner  who 
signed  the  option  is  bound  to  sell,  if  he  is  notified,  before 
the  option  expires,  of  the  intention  of  the  holder  to  accept 
the  condition  of  the  option.  If  the  holder  of  the  option 
elects  to  take  the  property,  he  must  notify  the  owner, 
before  the  time  stated  in  the  option  expires,  that  he  will 
pay  the  price  fixed  and  demand  a  deed  to  the  property. 
Before  the  time  expires,  the  option  holder  should  tender 
the  price  and  demand  his  deed.  If  the  owner  refuses  to 
make  a  deed,  when  the  money  is  tendered,  the  courts  can 
be  called  upon  to  enforce  the  option  and  compel  the  exe- 
cution of  a  good  and  sufficient  conveyance. 

Section  32. — FORM  OF  OPTION. — The  following  is  a 
form  of  an  option  to  be  used  in  this  State : 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  77 

AGREEMENT  FOR  SALE  OF  REAL  ESTATE.  - 

For  the  consideration  of Dollars, 

to  me  in  hand  paid,  the  receipt  of  which  is  hereby  ac- 
knowledged. I  hereby  agree  to  sell  to 

or  assigns,  at  any  time  within days 

from  the  date  hereof,  the  following-described  real  estate, 

situate  in  the  County  of ,  State  of  California, 

to-wit:    : 

(Here  describe  the  property.) 

for  the  sum  of Dollars,  payable 

n  s  follows,  to-wit : 

(Here  insert  terms  agreed  upon.) 

I  will  furnish  the  said 

within days  from  date,  a  complete  and  accu- 
rate Abstract  of  Title  to  said  land. 

Time  is  of  the  essence  of  this  agreement. 

I  have  received  from  said 

the  sum  of Dollars 

as  a  deposit,  which  I  will  credit  him  with  on  the  purchase 
price,  should  he  complete  the  purchase;  otherwise,  I  am 

to  retain  the  said Dollars,  for 

my  own  use,  as  liquidated  damages. 

In  witness  whereof  I  have  hereunto  set  my  hand  and 

seal  this dav  of 19 

.T. (Seal.) 

Section  33. — AGREEMENT  TO  SELL  PERSONAL  PROPERTY. 
If  an  agreement  is  made  to  buy  or  sell  personal  prop- 
erty, and  the  price  is  two  hundred  dollars  or  over,  the 
agreement  is  not  valid  unless  the  agreement  itself,  or 
some  note  or  memorandum  giving  its  terms,  is  in  writing, 
and  subscribed  by  the  party  to  be  charged  or  his  agent. 
There  is  an  exception  to  the  law,  which  is  where  an  agree- 
ment is  made  to  manufacture  a  thing,  from  materials  to 
be  furnished. 

Civil  Code,  Sections  1739,  1740. 


78  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Section  34. — FORM  OF  AGREEMENT  TO  SELL  PERSONAL 
PROPERTY. — The  following  is  a  sufficient  form  of  agree- 
ment to  sell  personal  property : 

AGREEMENT  FOB  SALE  OF  PERSONAL  PROP- 
ERTY.— This  Agreement,  made  the day 

of ,  19 ,  between 

,  of  the  County  of 

State  of  California,  the  party  of  the  first  part,  and 

,  of  the  same 

place,  the  party  of  the  second  part,  witnesseth : 

That  the  said 

the  party  of  the  first  part,  for  the  consideration  herein- 
after mentioned,  agrees  to  sell  to  the  said 

! ,  the  party  of  the  second 

part,  the  following-described  personal  property,  situate 

in  the  County  of ,  State  of  California, 

to-wit:  

(Here  describe  the  property.) 

said  property  to  be  delivered  to  said  party  of  the  second 

part,  at ,  on  or  before  the 

day  of ,  19._ 

In  consideration  whereof,  the  said 

,  the  party  of  the 

second  part,  agrees  to  pay  to  the  party  of  the  first  part 

the  sum  of Dollars,  gold  coin  of  the 

United  States,  on  the  said day  of 

,  19 ,  or  sooner  on  the  delivery  of  said  prop- 
erty as  aforesaid. 

IN  WITNESS  WHEREOF,  we  have  hereunto  set  our 
hands  and  seals  the  day  and  year  first  above  written. 

" :..: (Seal.) 

: (Seal.) 

(If  agreement  is  to  be  recorded,  it  must  be  acknowledged.) 


BUSINESS  CONTRACTS  AND  LEGAL,  OBLIGATIONS.  79 

SALE  OF  PERSONAL  PROPERTY 

Section  35. — WHEN  GOODS  SOLD  MUST  BE  DELIVERED.— 
One  who  sells  personal  property,  whether  it  was  in  his 
possession  at  the  time  of  sale  or  not,  must  put  it  into  a 
condition  fit  for  delivery,  and  deliver  it  to  the  buyer 
within  a  reasonable  time  after  demand.  This  rule  will 
not  apply  in  some  cases,  however,  where  the  seller  has  a 
lien  on  the  property.  Until  the  seller  does  put  the  goods 
into  a  condition  fit  for  delivery,  the  title  does  not  pass. 
Title  does  not  pass  when  the  property  sold  has  not  been 
identified,  nor  when  something  remains  to  be  done  for 
the  purpose  of  ascertaining  the  price,  as  by  weighing, 
measuring,  or  testing  the  goods,  where  the  price  is  to 
depend  upon  the  quantity  or  quality  of  the  goods.  The 
property  must  be  delivered  within  a  reasonable  time  after 
demand.  What  is  a  reasonable  time  depends  upon  all  the 
circumstances  of  the  particular  transaction. 
Civil  Code,  Section  1753. 

Section  36. — WHERE  DELIVERY  MUST  BE  MADE. — In  the 
absence  of  an  agreement  to  the  contrary,  the  place  where 
the  property  is  at  the  time  of  the  agreement  of  sale 
is  the  place  of  delivery;  or  if  the  article  is  not  then  in 
existence,  it  is  deliverable  at  the  place  where  it  is  manu- 
factured or  produced. 

Civil  Code,  Section  1754. 

Section  37. — WHEN  PRICE  OF  GOODS  BOUGHT  MUST  BE 
PAID. — Unless  by  agreement  the  price  is  stipulated  to  be 
paid  at  a  different  time,  the  law  is  that  the  buyer  must 
pay  the  price  of  the  thing  sold  on  its  delivery,  and  must 
take  it  away  within  a  reasonable  time  after  the  seller 
offers  to  deliver  it.  Of  course,  the  buyer  and  seller  may 
agree  upon  any  terms  of  payment,  contrary  to  the  pro- 
visions of  the  law  stated  above.  After  personal  property 
has  been  sold,  and  until  the  delivery  is  completed,  the 
seller  must  keep  the  property  without  charge  until  the 
buyer  has  had  a  reasonable  opportunity  to  remove  it. 


80  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Section  38.— EIGHT  TO  INSPECT  GOODS  BEFORE  AC- 
CEPTANCE.— On  an  agreement  for  sale  with  warranty  the 
buyer  has  a  right  to  inspect  the  thing  sold,  at  a  reason- 
able time,  before  accepting  it,  and  if  the  seller  refuse  to 
permit  the  buyer  to  inake  a  reasonable  inspection  of  the 
thing  sold,  in  a  proper  manner  and  at  a  proper  time,  the 
buyer  may  rescind  the  contract  and  refuse  to  take  the 
goods. 

Civil  Code,  Section  1785. 

Section  39. — EXPENSE  OF  TRANSPORTATION. — One  who 
sells  personal  property  must  bring  it  to  his  own  door,  or 
to  some  other  convenient  place,  for  its  acceptance  by  the 
buyer,  but  further  transportation  is  at  the  risk  and  ex- 
pense of  the  buyer. 

Civil  Code,  Section  1755. 

Section  40. — BUYER'S  DIRECTIONS  AS  TO  MANNER  OF 
SENDING  THINGS  SOLD. — If  a  seller  agrees  to  send  the 
thing  sold  to  the  buyer,  he  must  follow  the  directions  of 
the  latter  as  to  the  manner  of  sending,  or  it  will  be  at  his 
own  risk  during  its  transportation.  Therefore,  if  the 
buyer  directs  that  the  goods  be  shipped  by  a  certain  line 
or  lines  of  carriers,  the  seller,  if  he  desires  to  avoid  the 
risk  of  transportation,  must  obey  the  buyer's  directions. 
If  he  follows  such  directions,  the  transportation  is  at  the 
risk  of  the  buyer.  Also,  if  there  are  no  special  directions 
by  the  buyer  as  to  the  manner  of  shipment,  and  the  seller 
uses  ordinary  oare  in  forwarding  the  goods,  the  trans- 
portation is  at  the  buyer's  own  risk. 
Civil  Code,  Section  1757. 

Section  41. — THE  BULK  LAW. — This  law  provides  that 
the  sale,  transfer,  or  assignment  of  a  stock  in  trade  (or  of 
such  a  quantity  of  a  stock  in  trade  as  to  be  substantially 
the  whole  thereof) ,  in  bulk,  is  to  be  conclusively  presumed 
fraudulent  and  void,  as  against  the  existing  creditors  of 
the  vendor,  unless  notice  is  first  given  by  the  vendor. 


Section  41,  page  80,  "Business  Law  for  Business  Men" — THE  BULK 
LAW — On  page  81  make  the  third  sentence,  now  reading,  "the  sale  shall  in 
no  eyent  occur  within  five  days  of  the  date  when  the  notice  is  recorded"  to 
read  as  follows:  "The  sale  shall  in  no  event  occur  within  seven  days  of  the 
date  when  the  notice  is  recorded." 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  81 

The  notice  must  be  in  writing,  and  must  be  recorded  in 
the  county  where  the  stock  of  goods  is  located,  at  least 
seven  days  prior  to  the  sale  or  transfer.  If  the  stock  is 
located  in  two  or  more  counties,  the  notice  must  be  re- 
corded in  each  county;  for  instance,  if  the  vendor  has  a 
store  in  Sonoma  County  and  a  store  in  Mendoeino  County, 
and  intends  to  sell  or  transfer  the  stock  in  both,  he  must 
file  his  notice  in  the  office  of  the  County  Recorder  in  each 
county.  The  required  notice  must,  to  be  legal,  be  in 
writing,  and  must  state  the  name  and  address  of  the 
vendor,  transferor,  or  assignor ;  the  name  and  address  of 
the  intended  vendee,  transferee,  or  assignee;  a  general 
statement  of  the  character  of  the  property  or  merchandise 
intended  to  be  sold,  transferred,  or  assigned ;  the  time  and 
place  of  the  payment  of  the  purchase  price  agreed  upon ; 
or,  if  the  intended  sale  is  to  be  at  public  auction,  the 
notice  must  state  that  fact  in  addition,  with  the  time, 
terms,  and  place  of  such  sale.  The  sale  shall  in  no  event 
occur  within  five  days  of  the  date  when  the  notice  is 
recorded.  The  above  law  does  not  apply  to  the  sale  of 
goods  in  the  ordinary  course  of  trade  and  in  the  usual 
method  of  business.  It  is  intended  only  to  protect  the 
wholesaler  against  the  sale  or  transfer  or  assignment  by 
the  retailer  of  his  stock  of  goods  before  they  are  paid  for 
by  him.  The  effect  of  the  law  is  this :  If  a  stock  is  sold 
without  the  notice,  the  wholesaler  can  follow  the  goods, 
and  recover  from  the  vendee  whatever  damages  he  has 
sustained  by  reason  of  the  fraudulent  sale,  transfer,  or 
assignment ;  and  if  the  notice  is  given,  the  wholesaler  will 
have  an  opportunity  to  protect  himself  by  suit  and  attach- 
ment of  the  property  within  the  five  days.  The  law  does 
not  apply  to  a  case  where  the  debtor  makes  an  assignment 
of  the  property  for  the  benefit  of  creditors  generally,  nor 
does  it  apply  to  any  sale,  transfer,  or  assignment  of  any 
property  which  is  by  law  exempt  from  execution.  For  a 
list  of  property  exempt  from  execution,  see  under  the 
head  of  " Attachments." 

Statutes  of  1917,  page  255. 


82  BUSINESS  LAW  FOB  BUSINESS  MEN. 

Section  42.— FORM  OF  NOTICE  OF  SALE  OF  STOCK  OF 
GOODS.— 

Notice  is  hereby  given  that 

residing  at ,  vendor, 

has  sold  to ,  vendee, 

residing  at ,  all  that 

property  or  merchandise  belonging  to  the  vendor  now  lo- 
cated at ,  and  particularly 

described  as  follows,  to-wit:  A  stock  of  groceries  (or 
other  merchandise,  describing  it)  now  in  the  store  at 

No Howard  Street,  in  the  City  and  County  of 

San  Francisco,  State  of  California;  that  the  purchase 

price  agreed  upon  is  the  sum  of Dollars, 

and  that  the  said  agreed  purchase  price  will  be  paid  by 

the  vendee  to  the  vendor  on  the :day  of 

,  19 ,  at  No Street,  City 

and  County  of  San  Francisco,  State  of  California ;  that 

the  name  of  the  vendor  is , 

and  that  he  resides  at ,  and 

that  the  name  of  the  vendee  is , 

and  he  resides  at 

Vendor. 

Subscribed  and  sworn  to  before  me  this day 

of ,19 

Notary  Public  in  and  for  the  City  and  County 
of  San  Francisco,  State  of  California. 

Section  43. — BILL  OF  SALE. — A  bill  of  sale  need  not  be 
in  any  particular  form  to  be  valid.  It  is  not  essential  to 
its  validity  that  it  be  recorded,  although  it  may  be  for 
the  best  interests  of  all  parties  that  it  should  be  filed  for 
record.  A  bill  of  sale  is  not  required  to  be  acknowledged, 
if  it  is  not  to  be  recorded ;  but  it  must  be  acknowledged,  if 
it  is  to  be  recorded. 

Section  44. — FORM  OF  BILL  or  SALE. — The  following  is 
a  form  of  bill  of  sale : 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  83 


of  the  County  of ,  State  of  California,  the 

party  of  the  first  part,  for  and  in  consideration  of  the  sum 

of Dollars,  gold  coin  of  the  United 

States  of  America,  to  me  in  hand  paid  by 

,  of. ,  the  party 

of  the  second  part,  the  receipt  whereof  is  hereby  acknowl- 
edged, do  by  these  presents  grant,  bargain,  sell,  and  con- 
vey unto  the  said  party  of  the  second  part,  his  executors, 
administrators,  and  assigns,  the  following  described  per- 
sonal property: 

(Here  describe  property  sold.) 

To  have  and  to  hold  the  same  to  the  said  party  of  the 
second  part,  his  executors,  administrators,  and  assigns 
forever.  And  I  do  for  myself,  my  heirs,  executors,  and 
administrators,  covenant  and  agree  to  and  with  the  said 
party  of  the  second  part,  his  executors,  administrators, 
and  assigns,  to  warrant  and  defend  the  sale  of  said  prop- 
erty, goods,  and  chattels  hereby  made,  unto  the  said  party 
of  the  second  part,  his  executors,  administrators,  and 
assigns,  against  all  and  every  person  and  persons,  whom- 
soever, lawfully  claiming  or  to  claim  the  same. 

In  witness  whereof,  the  said  party  of  the  first  part  has 

hereunto  set  his  hand  and  seal,  the day 

of ,19 

(Seal.) 

Section  45. — ADULTEKATED,  MISLABELED  OR  MISBRANDED 
FOODS  AND  LIQUORS. — It  is  unlawful  to  brand  or  label  an 
imitation  under  the  distinctive  name  of  another  article  of 
food ;  or,  to  label,  brand,  or  color,  so  as  to  deceive  or  mis- 
lead a  purchaser;  or,  to  put  up  a  domestic  product  and 
label  it  as  a  foreign  product ;  or,  to  fail  to  state  on  pack- 
ages the  weight  or  measure,  plainly  and  correctly,  when 
goods  are  so  put  up  or  offered  for  sale;  or,  if  the  label 
on  package  goods  contains  a  false  or  misleading  state- 
ment regarding  the  ingredients  or  the  substance  con- 
tniued  therein;  or,  if  the  goods  put  up  are  an  imitation 


84  BUSINESS  LAW  FOB  BUSINESS  MEN. 

or  adulteration,  or  offered  for  sale  under  a  false  name  or 
designation. 

Act  of  the  Legislature,  approved  February  22, 
1909. 

The  law  provides  a  penalty  for  its  violation,  a  fine  of 
not  less  than  five  nor  more  than  five  hundred  dollars,  or 
imprisonment  in  the  county  jail  not  exceeding  six  months, 
or  both  such  fine  and  imprisonment. 

Food  found  to  be  adulterated,  mislabeled  or  mis- 
branded  may  be  ordered  destroyed  by  any  court  or  judge. 

No  dealer  can  be  prosecuted  under  the  provisions  of 
this  act,  when  he  can  establish  a  guaranty  signed  by  the 
wholesaler,  jobber,  manufacturer  or  other  party  residing 
in  the  United  States  from  whom  he  purchased  such  article, 
to  the  effect  that  the  same  is  not  adulterated,  mislabeled 
or  misbranded  within  the  meaning  of  the  law,  and  can 
also  establish  by  satisfactory  evidence  that  the  article 
sold  by  him  was  mislabeled  and  that  at  the  time  of  making- 
such  sale  he  was  not  aware  of  that  fact.  Said  guaranty,  to 
afford  protection,  must  contain  the  name  and  address  of 
the  party  or  parties  making  the  sales  of  such  article  to 
said  dealer,  and  an  itemized  statement  showing  the  ar- 
ticles purchased ;  or  a  general  guaranty  may  be  filed  with 
the  secretary  of  the  United  States  department  of  agri- 
culture by  the  manufacturer,  wholesaler,  jobber  or  other 
party  in  the  United  States  and  be  given  a  serial  number, 
which  number  shall  appear  on  each  and  every  package  of 
goods. 

Act  of  the  Legislature,  approved  April  26,  1911 . 

The  standard  of  purity  of  food  and  liquor  shall  be  that 
published  in  circular  number  nineteen,  the  food  inspection 
decisions  and  the  service  and  regulatory  announcements 
of  the  bureau  of  chemistry  of  the  United  States  depart- 
ment of  agriculture.  Nothing  in  this  section  contained 
shall  authorize  or  permit  any  adulteration  of  any  food  or 
liquor  because  the  standard  of  purity  of  such  food  or 


BUSINESS  CONTEAOTS  AND  LEGAL  OBLIGATIONS.  85 

liquor  shall  not  be  proclaimed  by  the  secretary  of  the 
United  States  department  of  agriculture. 

When  an  examination  or  analysis  of  the  directors  of 
the  state  laboratory  shows  that  any  provisions  of  this  act 
have  been  violated,  notice  of  that  fact,  together  with  a 
copy  of  the  certificate  of  the  findings,  shall  be  furnished 
to  the  party  or  parties  from  whom  the  sample  was  ob- 
tained, or  who  executed  the  guarantee,  as  provided  in  this 
act,  and  a  day  shall  be  fixed  by  the  secretary  of  the  state 
board  of  health,  at  which  said  parties  may  be  heard  before 
the  state  board  of  health,  or  before  any  two  members 
thereof  and  the  secretary.  The  hearing  shall  be  held  at 
such  place  as  the  state  board  of  health  or  its  secretary 
may  designate,  and  at  least  fifteen  days'  notice  thereof 
shall  be  served  upon  the  party  complained  of.  These 
hearings  shall  be  private  and  confined  to  questions  of 
fact.  Parties  interested  therein  may  appear  in  person  or 
by  attorney  and  may  propound  interrogatories  and  sub- 
mit oral  or  written  evidence  to  show  any  fault  or  error 
in  the  findings  made  by  the  director  of  the  state  labora- 
tory. If  the  examination  or  analysis  be  found  correct,  or 
if  the  party  or  parties  fail  to  appear  at  such  hearing, 
after  notice  duly  given  as  provided  herein,  the  secretary 
of  the  state  board  of  health  shall  forthwith  transmit  a 
certificate  of  the  facts  so  found  to  the  district  attorney  of 
the  county  in  which  said  adulterated,  mislabeled  or  mis- 
branded  food  was  found.  No  publication  as  in  this  act 
provided  shall  be  made  until  after  said  hearing  is  con- 
cluded. 

Act  of  the  Legislature,  approved  April  30,  1919 ; 
in  effect  July  22, 1919. 

Section  46. — COLD  STORAGE  EGGS  AND  BUTTER. — Every 
person,  firm,  company  or  corporation,  who  sells  or  offers 
to  sell  any  cold  storage  eggs  or  butter  as  fresh  eggs  or 
butter,  or  by  any  means  whatever  represents  the  same  to 
be  fresh  eggs  or  butter,  is  guilty  of  a  misdemeanor. 

Cold  storage  eggs  or  butter,  that  have  been  in  storage 


86  BUSINESS  LAW  FOE  BUSINESS  MEN. 

for  a  longer  period  than  three  months,  must  have 
stamped,  marked  or  branded  upon  all  sides  of  the  recep- 
tacle holding  the  same,  in  black  face  letters  two  inches  in 
length,  the  period  of  time  during  which  the  same  have 
been  in  cold  storage.  Any  person,  firm,  company  or  cor- 
poration selling  or  off eiing  for  sale  any  cold  storage  eggs 
or  butter  must  display  in  a  conspicuous  place  in  the  sales 
room  the  sign,  in  black  face  letters  not  less  than  six  inches 
in  length  upon  a  white  ground,  "Cold  Storage  Eggs  or 
Butter  Sold  Here. ' '  The  penalty  for  violation  of  this  pro- 
vision is  imprisonment  in  the  county  jail  for  a  term  not 
exceeding  six  months  or  a  fine  of  two  hundred  and  fifty 
dollars  or  both. 

All  butter  sold  as  certified  butter  must  be  conspicu- 
ously marked  with  the  name  of  the  commission  certify- 
ing it. 

Statutes  and  Amendments,  1911,  pages  285,  356, 
382. 

Section  47. — EGGS  IN  TRANSIT  MOEE  THAN  THIRTY-ONE 
DAYS. — For  the  purpose  of  this  act  the  words,  "person, 
firm,  company  or  corporation,"  shall  include  wholesalers, 
retailers,  jobbers,  and  every  person,  firm,  company  or 
corporation  owning,  operating  or  conducting  any  place  of 
business  where  eggs  are  sold  or  offered  for  sale. 

Every  person,  firm,  company  or  corporation  who  sells, 
offers  for  sale,  or  has  in  his  or  their  possession  for  sale, 
or  consigns,  ships  or  presents  to  any  dealer,  commission 
merchant,  consumer,  or  other  person,  any  egg  or  eggs 
which  said  egg  or  eggs  is  or  were  produced  at  any  place 
requiring  thirty-one  days  or  more  to  transport  the  eggs 
to  the  selling  point,  shall,  before  so  doing,  cause  to  be 
stamped,  marked  or  branded  upon  the  container  thereof 
in  black-faced  letters  not  less  than  one-half  of  an  inch  in 
height  the  word  ' l  storage. ' ' 

Every  person,  firm,  company  or  corporation  selling  or 
offering  for  sale  any  eggs  which  were  produced  at  any 
place  requiring  thirty-one  days  or  inore  to  transport  the 


Section  47,  page  86,  "Business  Law  for  Business  Men" — EGGS  IMPORT- 
ED FROM  FOREIGN  COUNTRIES— All  eggs,  powdered  eggs,  and  egg 
products  imported  into  the  State  of  California  from  foreign  countries,  shall 
be  sold  subject  to  inspection  by  the  State  Board  of  Health.  The  State  Board 
of  Health  must  inspect  such  eggs  and  issue  a  permit  for  their  sale,  if  found 
fit  for  human  consumption.  A  label  must  be  affixed  to  the  container  reading, 
"Foreign  Eggs,"  "Foreign  Powdered  Eggs,"  or  "Foreign  Egg  Products," 
"Inspected  (inserting  the  date)  by  California  State  Board  of  Health."  All 
such  foreign  eggs,  foreign  powdered  eggs  and  foreign  egg  products  shall  be 
sold  only  from  the  original  containers.  Any  person,  firm  or  corporation 
violating  any  of  the  provisions  of  this  act  or  any  rules  and  regulations  made 
pursuant  to  the  provisions  of  this  act  by  the  State  Board  of  Health  shall, 
upon  conviction,  be  punished  for  the  first  offense  by  a  fine  not  exceeding  five 
hundred  dollars  ($500),  and  for  the  second  offense  by  a  fine  not  exceeding 
one  thousand  dollars  ($1,000),  or  by  an  imprisonment  for  not  more  than  ninety 
(90)  days,  or  by  both  such  fine  and  imprisonment. 

Act  of'  the  Legislature  of  California,  approved  June  3,  1921;  in  effect 
August  3,  1921. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  87 

eggs  to  the  selling  point,  prior  to  the  date  of  sale  or  offer- 
ing for  sale,  shall  display  in  a  conspicuous  place  in  his  or 
their  public  salesroom  a  sign  which  shall  not  be  less  than 
one  foot  in  height  and  six  feet  in  length,  bearing  the 
words  "storage  eggs  sold  here"  in  black-faced  letters  not 
less  than  six  inches  in  height  and  one  inch  in  width  upon 
a  white  ground. 

Every  person,  firm,  company  or  corporation  who  re- 
ceives eggs  that  have  been  produced  at  any  place  requir- 
ing thirty-one  days  or  more  to  transport  the  eggs  to  the 
selling  point,  prior  to  their  sale  or  offering  for  sale,  shall, 
immediately  thereafter,  report  to  the  state  board  of  health 
the  number  of  eggs  received,  the  date  when  received  and 
the  place  where  such  eggs  were  produced,  and  the  name 
of  the  person,  firm,  company  or  corporation  to  whom  sold. 

It  shall  be  the  duty  of  the  state  board  of  health  to 
enforce  the  provisions  of  this  act,  and  to  that  end  the 
said  board  may  make  necessary  rules  and  regulations. 

Every  person,  firm,  company  or  corporation  who  shall 
fail  to  comply  with  any  of  the  provisions  of  this  act  is 
guilty  of  a  misdemeanor  and  upon,  conviction  thereof  shall 
be  punished  by  imprisonment  in  the  county  jail  for  not 
more  than  six  months ;  or  by  a  fine  of  not  more  than  two 
hundred  dollars,  or  by  both  such  fine  and  imprisonment  in 
the  discretion  of  the  court. 

Statutes  of  1917,  Chapter  173. 

Section  48. — SANITARY  REGULATION  OF  FOOD  PRODUCING 
ESTABLISHMENTS. — The  law  provides  as  follows: 

"Every  building,  room,  basement  or  cellar,  occupied, 
or  used  as  a  bakery,  confectionery,  cannery,  packing- 
house, slaughterhouse,  restaurant,  hotel,  grocery,  meat 
market,  or  other  place  or  apartment,  used  for  the  produc- 
tion, preparation  for  sale,  manufacture,  packing,  storage, 
sale  or  distribution  of  any  food,  shall  be  properly  lighted, 
drained,  plumbed  and  ventilated,  and  conducted  with 
strict  regard  to  the  influence  of  such  conditions  upon  the 
health  of  the  operatives,  employees,  clerks  or  other  per- 


88  BUSINESS  LAW  FOE  BUSINESS  MEN. 

sons  therein  employed,  and  the  purity  and  wholesomeness 
of  the  food  therein  produced,  kept,  handled  or  sold ;  and 
for  the  purpose  of  this  act  the  term  'food'  shall  include 
all  articles  used  for  food,  drink,  confectionery  or  condi- 
ment, whether  simple  or  compound,  and  all  substances 
and  ingredients  used  in  the  preparation  thereof. 

1 '  The  floors,  sidewalls,  ceilings,  furniture,  receptacles, 
utensils,  implements  and  machinery  of  every  establish- 
ment or  place  where  food  is  manufactured,  packed, 
stored,  sold  or  distributed,  shall  at  no  time  be  kept  in  an 
unclean,  unhealthf ul  or  unsanitary  condition ;  and  for  the 
purposes  of  this  act,  unclean,  unhealthful  and  unsanitary 
conditions  shall  be  deemed  to  exist  if  food  in  the  process 
of  manufacture,  preparation,  packing,  storing,  sale  or  dis- 
tribution is  not  securely  protected  from  flies,  dust,  dirt^ 
unsanitary  conditions,  and  as  far  as  may  be  necessary, 
by  all  reasonable  means  from  all  other  foreign  or  in- 
jurious contamination;  and  if  the  refuse,  dirt,  and  the 
waste  products  subject  to  decomposition  and  fermenta- 
tion incident  to  the  manufacture,  preparation,  packing, 
storing,  selling  and  distributing  of  food,  are  not  removed 
daily ;  and  if  all  trucks,  trays,  boxes,  baskets,  buckets,  and 
other  receptacles,  chutes,  platforms,  racks,  tables,  shelves, 
and  all  knives,  saws,  cleavers,  and  all  other  utensils,  re- 
ceptacles, and  machinery,  used  in  moving,  handling,  cut- 
ling,  chopping,  mixing,  canning,  and  all  other  processes 
used  in  the  preparation  of  food,  are  not  thoroughly 
cleaned  daily;  and  if  the  clothing  of  operatives,  em- 
ployees, clerks,  and  other  persons  therein  employed,  is 
unclean,  or  if  they  dress  or  undress,  or  leave  or  store  their 
clothing  therein. 

"The  sidewalls  and  ceilings  of  every  bakery,  confec- 
tionery, hotel  and  restaurant  kitchen,  shall  be  well  plas- 
tered, or  ceiled,  with  metal  or  lumber,  or  shall  be  oil 
painted  or  kept  well  lime  washed,  or  otherwise  kept  in 
good  sanitary  condition;  and  all  interior  woodwork  of 
every  bakery,  confectionery,  hotel  and  restaurant  kitchen, 
shall  be  kept  well  oiled  or  painted  with  oil  paint,  and  be 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  89 

kept  washed  clean  with  soap  and  water  or  otherwise  kept 
in  a  good  sanitary  condition;  and  every  building,  room, 
basement  or  cellar,  occupied  or  used  for  the  preparation, 
manufacture,  packing,  storage,  sale  or  distribution  of 
food,  shall  have  an  impermeable  floor,  made  of  cement  or 
tile  laid  in  cement,  brick,  wood  or  other  suitable,  non- 
absorbent  material  which  can  be  flushed  and  washed  clean 
with  water. 

"The  doors,  windows  and  other  openings  of  every 
food  producing  or  distributing  establishment,  where  prac- 
ticable, shall  be  fitted  with  stationary  or  self-closing 
screen  doors  and  wire  window  screens,  of  not  coarser  than 
fourteen  mesh  wire  gauze. 

"Every  building,  room,  basement  or  cellar,  occupied 
or  used  for  the  preparation,  manufacture,  packing,  can- 
ning, sale  or  distribution  of  food,  shall  have  convenient 
toilet  or  toilet  rooms,  separate  and  apart  from  the  room 
or  rooms  where  the  process  of  production,  manufacture, 
packing,  canning,  selling  or  distributing,  is  conducted. 
The  floors  of  such  toilet  rooms  shall  be  of  cement,  tile 
laid  in  cement,  wood,  brick  or  other  non-absorbent  ma- 
terial, and  shall  be  washed  and  scoured  daily.  Such 
toilets  shall  be  furnished  with  separate  ventilating  pipes 
or  flues,  discharging  into  soil  pipes,  or  on  the  outside  of 
the  building  in  which  they  are  situated.  Lavatories  and 
washrooms  shall  be  adjacent  to  toilet  rooms,  and  shall  be 
supplied  with  soap,  running  water  and  towels,  and  shall 
be  maintained  in  a  clean  and  sanitary  condition.  Opera- 
tives, employees,  clerks  and  all  persons  who  handle  the 
material  from  which  food  is  prepared,  or  the  finished 
product,  before  beginning  work  and  immediately  after 
visiting  a  toilet  or  lavatory  shall  wash  their  hands  and 
arms  thoroughly  in  clean  water. 

"Cuspidors,  for  the  use  of  operatives,  employees, 
clerks  and  other  persons,  shall  be  provided,  and  each  cus- 
pidor shall  be  emptied  and  washed  out  daily  with  disin- 
fectant solution,  and  not  less  than  five  ounces  of  such 
solution  shall  be  left  in  each  cuspidor  while  in  use.  No 


90  BUSINESS  LAW  FOR  BUSINESS  MEN. 

operative,  employee,  clerk  or  other  person,  shall  expec- 
torate or  discharge  any  substance  from  his  nose  or 
rnouth,  on  the  floor  or  interior  side  wall  of  any  building, 
room,  basement,  or  cellar  where  the  production,  manufac- 
ture, packing,  storing,  preparation  or  sale  of  any  food  is 
conducted. 

"No  person  shall  be  allowed  to,  nor  shall  be,  reside  or 
sleep  in  any  room  of  a  bake  shop,  public  dining-room, 
hotel  or  restaurant  kitchen,  confectionery,  or  other  place 
where  food  is  prepared,  produced,  manufactured,  served 
or  sold. 

* '  No  employer  shall  require,  permit  or  suffer  any  per- 
son to  work,  nor  shall  any  person  work,  in  a  building, 
room,  basement,  cellar,  place  or  vehicle,  occupied  or  used 
for  the  production,  preparation,  manufacture,  packing, 
storage,  sale,  distribution  or  transportation  of  food,  who 
is  afflicted  or  affected  with  any  venereal  disease,  small 
pox,  diphtheria,  scarlet  fever,  yellow  fever,  tuberculosis, 
consumption,  bubonic  plague,  Asiatic  cholera,  leprosy, 
trachoma,  typhoid  fever,  epidemic  dysentery,  measles, 
mumps,  German  measles,  whooping-cough,  chicken  pox, 
or  any  other  infectious  or  contagious  disease. 

"The  members  of  the  State  Board  of  Health,  inspec- 
tors and  agents,  appointed  by  said  board,  and  all  local 
health  officers  and  inspectors,  shall  have  full  power  at  all 
times  to  enter  every  building,  room,  basement,  cellar,  or 
any  place  occupied  or  used,  or  suspected  of  being  occu- 
pied or  used,  for  the  production,  manufacture,  prepara- 
tion, storage,  sale  or  distribution  of  food,  and  to  inspect 
the  premises  and  all  utensils,  implements,  receptacles,  fix- 
tures, furniture  and  machinery  used  as  aforesaid,  and  if, 
upon  inspection,  any  such  building,  room,  basement,  cel- 
lar, or  any  such  place,  vehicle,  employer,  operative,  em- 
ployee, clerk,  driver,  or  other  person,  is  found  to  be  in 
violation  or  violating  any  of  the  provisions  of  this  act,  or 
if  the  production,  preparation,  manufacture,  packing, 
storing,  sale  or  distribution  of  food  is  being  conducted  in 
a  manner  detrimental  to  the  health  of  the  employees  or 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  91 

operatives  or  to  the  character  or  quality  of  the  food 
therein  being  produced,  manufactured,  packed,  stored, 
sold,  distributed  or  conveyed,  the  officer  or  inspector 
making  the  examination  shall  at  once  make  a  written  re- 
port of  the  same  to  the  District  Attorney  of  the  county, 
who  shall  prosecute  all  persons  violating  any  of  the  pro- 
visions of  this  act,  and  also  to  the  State  Board  of  Health. 
The  State  Board  of  Health,  from  time  to  time,  as  in  its 
discretion  it  may  determine,  may  publish  such  reports  in 
its  monthly  bulletins. 

"All  buildings,  rooms,  basements,  cellars,  and  other 
places  and  things,  kept,  maintained,  or  operated,  or  which 
are,  in  violation  of  the  provisions  of  this  act  or  any  of 
them,  and  all  food  produced,  prepared,  manufactured, 
packed,  stored,  kept,  sold,  distributed  or  transported,  in 
violation  of  the  provisions  of  this  act  or  any  of  them,  are 
hereby  declared  to  be  public  nuisances,  dangerous  to 
health.  Such  nuisances  may  be  abated  or  enjoined,  in  an 
action  brought  for  that  purpose  by  the  local  or  State 
Board  of  Health,  or  they  may  be  summarily  abated  in 
the  manner  provided  by  law  for  the  summary  abatement 
of  public  nuisances  dangerous  to  health. 

"Any  person,  firm  or  corporation,  whether  as  prin- 
cipal or  agent,  employer  or  employee,  who  violates  any  of 
the  provisions  of  this  act  shall  be  guilty  of  a  mis- 
demeanor, and  each  day  that  conditions  or  actions,  in  vio- 
lation of  this  act,  shall  continue,  shall  be  deemed  to  be  a 
separate  and  distinct  offense,  and  for  each  offense,  upon 
conviction,  he  shall  be  punished  by  a  fine  of  not  less  than 
twenty-five  dollars,  nor  more  than  five  hundred  dollars, 
or  shall  be  imprisoned  in  the  county  jail  for  a  term  not 
exceeding  six  months,  or  by  both  such  fine  and  im- 
prisonment." 

Act  of  the  Legislature,  approved  March  6,  1909. 
Section  49. — POISONOUS  CONFECTIONERY. — It  is  unlawful 
to  manufacture  or  offer  for  sale  any  confectionery  con- 
taining terra  alba,  barytes,  talc,  chrome  yellow,  or  other 
mineral  substance  or  poisonous  color  or  flavor,  or  other 


92  BUSINESS  LAW  FOR  BUSINESS  MEN. 

ingredient  deleterious  or  detrimental  to  health,  or  any 
vinous,  malt,  or  spirituous  liquor  or  compound  or  narcotic 
drug. 

Act  of  the  Legislature,  approved  March  13, 1909. 

Section  50. — IMITATION  MILK. — For  the  purposes  of 
this  act  certain  manufactured  substances,  certain  mix- 
tures and  compounds  shall  be  known  and  designated  as 
"imitation  milk,"  namely:  (a)  any  mixture  or  compound 
composed  of  skim  milk  or  condensed,  evaporated  or  pow- 
dered skim  milk  and  any  edible  oil  or  fat  other  than 
natural  milk  fat,  whether  with  or  without  any  other  in- 
gredient or  ingredients;  (b)  any  mixture  or  compound 
made  in  imitation  or  semblance,  or  having  the  appearance 
or  semblance,  of  milk  or  condensed  or  evaporated  milk, 
or  when  so  made  or  having  such  appearance  or  semblance 
calculated  or  intended,  whether  by  intent  of  the  com- 
pounder  or  other  person,  or  by  reason  of  the  appearance 
or  other  characteristic  of  the  mixture  or  compound,  for 
use  or  disposition  as  or  for  milk,  or  as  or  for  condensed 
or  evaporated  milk,  or  to  induce  its  purchase,  or  use  as 
or  for  milk  or  condensed  or  evaporated  milk. 

(a)  Manufacture  and  Sale  of  Imitation  Milk. — No 
person  by  himself,  his  agents  or  servants  shall  render, 
manufacture,  sell,  offer  for  sale,  expose  for  sale,  or  have 
in  his  possession  with  intent  to  sell  or  to  use,  or  to  serve 
to  patrons,  customers,  boarders  or  inmates  of  any  hotel, 
dwelling-house,  restaurant,  public  conveyance  or  board- 
ing house,  any  article,  product  or  compound  made  wholly 
or  in  part,  out  of  any  imitation  milk;  provided,  that 
nothing  in  this  section  shall  be  construed  to  prohibit  the 
manufacture  or  sale,  under  regulations  hereinafter  pro- 
vided, of  imitation  milk,  of  substances  or  compounds  that 
may  be  used  as  imitation  milk,  of  a  separate  and  distinct 
character  not  resembling  milk  or  condensed  or  evaporated 
milk,  and  in  such  a  manner  as  will  advise  the  purchaser 
and  consumer  of  its  real  character,  colored  or  containing 
ingredients  that  cause  it  to  look  unlike  pure  whole  cow's 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  93 

milk  or  the  condensed  or  evaporated  produce  made  there- 
from ;  and  provided,  further,  it  is  not  adulterated  within 
the  meaning  of  this  act;  and  provided,  further,  that 
nothing  in  this  act  shall  be  construed  to  prevent  or  pro- 
hibit the  manufacture,  sale,  or  use,  for  cooking  purposes, 
of  imitation  milk  as  defined  by  section  one  of  this  act. 

(b)  Imitation  Milk  to  be  Labeled. — Each  person,  who 
by  himself,  or  another,  lawfully  manufactures  any  imita- 
tion milk,  or  any  substitute  that  may  be  used  as  and  sub- 
stituted for  milk  or  condensed  or  evaporated  milk,  shall 
mark  the  same  by  printing,  stamping  or  stenciling  upon 
the  top,  if  the  top  be  of  sufficient  size  and  upon  the  sides 
of  each  case,  box,  carton,  or  other  package,  in  which  that 
article  or  substance  shall  be  kept,  and  in  which  it  shall 
be  removed  from  the  place  where  it  is  produced  or  put  in 
a  clear  manner,  in  the  English  language,  the  words, 
''imitation  milk,"  in  printed  letters  in  plain  roman  type, 
each  of  which  shall  not  be  less  than  one  inch  in  height 
and  one-half  inch  in  width,  and  in  addition  to  the  above 
shall  prepare  a  statement,  printed  in  plain  roman  type, 
of  a  size  not  smaller  than  pica,  stating  in  the  English 
language  its  name,  and  the  name  and  address  of  the 
manufacturer,  the  name  of  the  place  where  manufactured 
or  put  up,  and  also  the  name  and  actual  percentages  of 
the  various  ingredients  used  in  the  manufacture  of  such 
imitation  milk;  and  shall  place  a  copy  of  said  statement 
within  and  upon  the  contents  of  each  case,  box,  carton,  or 
other  package,  and  next  to  that  portion  of  each  case,  box, 
carton,  or  other  package  as  is  commonly  and  most  con- 
veniently opened,  and  in  addition  thereto  shall  label  each 
bottle,  can,  container,  or  other  package  containing  imita- 
tion milk  with  the  words  ' 'imitation  milk"  printed  in 
black-face  plain  roman  capital  letters  of  a  size  not  less 
than  twelve  point,  and  said  words  shall  appear  upon  the 
main  or  principal  label  of  said  bottles,  cans,  containers, 
or  other  packages  containing  any  imitation  milk,  and  in 
addition  thereto  said  main  or  principal  label  shall  con 
lain  or  bear  the  words:  "Not  suitable  for  infant  food," 


94  BUSINESS  LAW  FOR  BUSINESS  MEN. 

in  plain  legible  type. 

(c)  Adulteration. — Imitation  milk,  not  condensed  or 
evaporated,  shall  be  deemed  adulterated  within  the  mean- 
ing of  this  act  if  it  contains  less  than  three  per  cent  of 
edible  fats,  or  oils,  and  imitation  milk,  if  evaporated  or 
condensed,  shall  be  deemed  adulterated  within  the  mean- 
ing of  this  act  if  it  contains  less  than  seven  and  eight- 
tenths  per  cent  of  edible  fats  or  oils. 

(d)  Display  of  Sign  ~by  Restaurants. — No  keeper  or 
proprietor  of  any  bakery,  hotel,  boarding  house,  res- 
taurant, saloon,  lunch  counter,  or  any  place  of  public 
entertainment,  and  no  person  having  charge  thereof,  or 
employee  thereat,  and  no  employer  when  such  board  is 
furnished  as  compensation,  or  part  of  the  compensation 
of  any  employee,  shall  place  before  any  patron  or  em- 
ployee for  use  as  food,  any  imitation  milk,  unless  there 
shall  be  displayed  in  a  prominent  place  in  said  bakery, 
hotel,  boarding  house,  restaurant,  saloon,  lunch  counter, 
or  other  place   of  public   entertainment  in  each  room 
where  meals  are  served,  a  sign  bearing  the  words:  "Imi- 
tation milk  used  and  served  here,"  in  black-faced  letters 
and  not  less  than  four  inches"  in  length  upon  a  white 
ground. 

(e)  License  for  Manufacture  and  Sale  of  Imitation 
Milk. — No  person,  firm  or  corporation  shall  engage  in  the 
business  or  occupation  of  manufacturing,  selling,  dealing, 
or  in  furnishing  imitation  milk,  without  first  having  ap- 
plied for  and  obtained  a  license  so  to  do  as  hereinafter 
provided.    Any  person,  firm  or  corporation  dealing  in  or 
engaged  in  the  business  or  occupation  of  manufacturing, 
selling,  dealing  in  or  furnishing  to  his,  its  or  their  pa- 
trons, imitation  milk,  as  in  this  act  defined  shall  first  make 
application  each  year  to  the  state  dairy  bureau  for  a 
license,  and  upon  payment  of  license  fee  of  the  amount 
mentioned  herein  to  the  state  dairy  bureau,  said  bureau 
shall  issue  to  the  applicant  a  license.    All  such  licenses 
shall  contain  the  following  proviso:  provided,  that  this 
license  does  not  authorize  the  holder  thereof  to  manufac- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  9o 

ture,  sell,  deal  in  or  furnish  any  imitation  milk  and  simi- 
lar substances  that  may  be  used  as  a  substitute  for  milk 
or  condensed  or  evaporated  milk  which  resembles  in  ap- 
pearance pure  whole  cow's  milk,  or  the  condensed  or 
evaporated  product  made  therefrom.  All  such  licenses 
shall  expire  on  June  thirtieth  of  each  year,  and  may  be 
issued  in  periods  of  one  year  or  less  than  one  year,  on 
payment  of  a  proportionate  part  of  the  license  fee,  pro- 
vided that  no  license  shall  be  issued  for  a  period  of  less 
than  three  months.  The  fee  for  issuing  said  license  to 
said  manufacturers,  of  any  of  the  said  substances  within 
this  state  shall  be  one  hundred  dollars;  for  issuing  to 
wholesale  dealers  in,  or  importers  or  agents  for  im- 
porters, of  any  of  said  substances  the  fee  shall  be  fifty 
dollars;  for  issuing  to  retail  dealers  in  any  of  said  sub- 
stances the  fee  shall  be  five  dollars;  and  for  issuing  to 
the  keeper  of  any  hotel,  restaurant,  boarding  house,  and 
any  other  place  where  meals  are  served  and  payment  is 
received  therefor,  either  immediately  or  by  the  day,  week 
or  month,  the  fee  shall  be  two  dollars.  The  term  "whole- 
sale dealer"  as  used  in  this  section  includes  all  persons, 
firms  or  corporations  who  sell  any  of  said  substances  in 
quantities  of  one  full  case  or  more  at  a  time  or  in  the 
same  transaction.  The  term  "retail  dealer"  includes  all 
persons  who  sell  only  in  quantities  of  less  than  one  case. 
All  licenses  while  in  force  shall  be  kept  conspicuously  dis- 
played in  the  places  of  business  of  the  party  or  parties 
to  whom  they  have  been  issued. 

It  shall  be  unlawful  for  any  person,  firm  or  corpora- 
tion to  manufacture,  buy,  sell,  deal  in  or  furnish  to  his, 
its  or  their  patrons,  or  to  have  in  their  possession,  for 
any  purpose  whatsoever  other  than  for  consumption  in 
his  own  family,  or  for  transportation  in  case  of  a  boat 
or  railroad  company,  or  for  the  purpose  of  storage  in 
case  of  a  warehouse  or  cold  storage  company,  any  imita- 
tion milk  or  similar  substance  designed  to  be  used  as  a 
substitute  for  milk  or  for  condensed  or  evaporated  milk 
without  having  first  applied  for  and  obtained  from  the 


96  BUSINESS  LAW  FOR  BUSINESS  MEN. 

state  dairy  bureau  of  the  State  of  California  a  license 
herein  required. 

(f)  Penalty. — Any  person,  firm  or  corporation  found 

guilty  of  violating  any  of  the  provisions  of  this  act  shall 

be  punished  by  a  fine  of  not  less  than  fifty  dollars,  nor 

more  than  five  hundred  dollars,  or  by  imprisonment  in 

the  county  jail  for  not  less  than  thirty  days  nor  more 

than  six  months,  or  by  both  such  fine  and  imprisonment. 

Act  of  the  Legislature,  approved  April  15,  1919 ; 

in  effect  July  22,  1919. 

Section  51. — RULES  FOE  MAKKETING  DAIRY  PRODUCTS.— 
The  following  rules  and  standards  must  be  observed  by 
all  persons,  firms  or  corporations  engaged  in  the  prep- 
aration of  dairy  products  for  market  or  delivery  thereto : 

(1)  The  owner's  name,  or  other  identification  mark, 
the  nature  of  which  shall  be  made  known  to  the  dairy  in- 
spectors, shall  appear  permanently  and  in  a  conspicuous 
place  on  or  be  attached  to  every  milk  or  cream  bottle,  can 
or  container. 

(2)  All  milk,  cream  and  ice  cream  cans,  bottles  and 
containers  shall  be  kept  clean  and  shall  be  thoroughly 
washed  and  sterilized  after  each  using. 

(a)  Standards  for  Carriers. — All  carriers  of  dairy 
products,  whether  producer,  gratuitous  private  carrier 
other  than  the  producer,  private  carrier  for  hire,  or  com- 
mon carrier,  in  transporting  milk  and  cream  shipping 
containers  shall  observe  and  maintain  the  following 
standard : 

(1)  All  cars  or  other  vehicles,  while  hauling  milk  or 
cream,  shall  be  kept  clean  and  all  containers  shall  be  so 
covered  as  to  protect  the  milk  or  cream  at  all  times  from 
dust  and  from  the  rays  of  the  sun. 

(2)  All  milk  or  cream  cans  or  other  shipping  contain- 
ers, while  containing  milk,  cream,  or  other  dairy  products, 
shall  be  handled  carefully,  and  kept  right  end  up. 

(3)  Every  vehicle,  railway  car  or  boat  in  which  milk 
or  cream  is  transported  shall  be  kept  in  a  sanitary  con- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  97 

dition.  Every  vehicle  and  every  boat  transporting  milk 
or  cream  either  shall  be  enclosed  or  shall  provide  canvas 
covering  to  protect  the  milk  and  cream  at  all  times  from 
the  sun  or  from  the  outside  warm  air,  except  only  while 
taking  on  or  discharging  freight.  No  fowls,  fresh  meat 
or  other  contaminating  things  shall  be  kept  or  carried  on 
top  or  in  close  proximity  to  milk,  cream,  or  other  dairy 
products. 

(4)  No  milk  or  cream  and  no  empty  cans,  bottles  or 
other  containers  shall  be  hauled  in  any  vehicle  for  hauling 
manure  or  garbage  or  in  any  other  unclean  vehicle,  car 
or  boat. 

(5)  Nothing  herein  shall  be  construed  to  derogate 
from  any  powers  or  authority  of  the  railroad  commission 
of  the  State  of  California. 

(b)  Rules  for  Assembled  Dairy  Products. — Persons 
producing  or  marketing  assembled  dairy  products  must 
conform  to  the  following  rules :  All  the  ingredients  used 
in  the  process  of  assembling  must  conform  to  all  the 
standards  of  purity  set  for  such  ingredients  and  must 
have  been  produced  under  the  same  sanitary  conditions 
and  regulations  required  for  the  production  of  milk  and 
cream  where  such  products  are  sold,  and  such  products 
must  be  labeled  as  herein  provided  for  assembled  prod- 
ucts in  imitation  of  milk,  cream  and  ice  cream. 

All  assembled  dairy  products  to  which  has  been  added 
any  condensed  or  evaporated  milk,  or  any  condensed  or 
evaporated  skimmed  milk,  or  any  dry  milk  or  milk  pow- 
der or  any  skimmed  milk  or  skimmed  powder  or  any 
butter  or  sweet  butter  or  dairy  products  that  have  been 
produced  by  the  mechanical  assembling  of  any  of  the 
natural  ingredients  of  milk  or  cream,  shall  be  so  labeled 
on  each  container  thereof  with  the  words  "  Assembled 
from  milk,  butter,  milk  powder,  skim  milk  or  other  milk 
products,"  as  the  case  may  be,  correctly  naming  on  the 
label,  bill  of  sale,  invoice  and  bill  of  fare,  all  the  ingre- 
dients used  in  such  assembled  goods,  in  plain  letters  of 
the  English  language  at  least  one-eighth  of  an  inch  in 


98  BUSINESS  LAW  FOR  BUSINESS  MEN. 

height ;  and  no  other  names  or  prefixes  shall  be  used  than 
those  by  which  such  ingredients  are  separately  known  to 
the  commercial  trade. 

(c)  Penalties. — Any  person  who  violates  any  pro- 
vision of  this  act  or  who  directs  or  knowingly  permits  an 
employee  to  violate  any  of  said  provisions,  shall  be  guilty 
of  a  misdemeanor,  and  upon  conviction  shall  be  punished 
by  a  fine  of  not  less  than  twenty-five  dollars  nor  more 
than  two  hundred  dollars,  or  by  imprisonment  in  the 
county  jail  for  not  less  than  ten  days  nor  more  than  sixty 
days,  or  by  both  such  fine  and  imprisonment. 

Any  firm,  corporation,  society  or  association  which 
violates  any  of  said  provisions  shall  be  guilty  of  a  mis- 
demeanor and  upon  conviction  shall  be  fined  as  above 
provided. 

In  the  event  an  officer,  director,  manager  or  managing 
agent  of  any  firm,  corporation,  society,  or  association  vio- 
lates any  of  the  provisions  of  this  act,  or  directs  or  know- 
ingly permits  any  employee  to  violate  any  of  said  pro- 
visions, such  officer,  director^  manager  or  managing  agent 
shall  be  guilty  of  a  misdemeanor  and  upon  conviction 
thereof  shall  be  punished  by  fine  or  imprisonment  or  both 
as  above  provided ;  and,  in  such  a  case,  the  firm,  corpora- 
tion, society  or  association  shall  also  be  guilty  and  upon 
conviction  shall  be  fined  as  above  provided.  One-half  of 
all  such  fines  shall  be  paid  into  the  state  treasury  and 
placed  to  the  credit  of  the  general  fund. 

Statutes  of  1919 ;  in  effect  July  22,  1919. 

Section  52. — OLEOMARGARINE  AND  IMITATION  CHEESE.— 
Certain  manufactured  substances,  certain  extracts,  and 
certain  mixtures  and  compounds,  including  such  mix- 
tures and  compounds  with  butter,  milk  or  cream,  shall 
be  known  and  designated  as  ''oleomargarine,"  namely: 
All  substances  heretofore  known  as  oleomargarine,  oleo, 
oleomargarine-oil,  butterine,  lardine,  suine,  and  neutral; 
all  mixtures  and  compounds  of  oleomargarine,  oleo,  oleo- 
margarine-oil, butterine,  lardine,  suine  and  neutral;  all 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  99 

lard  extracts  and  tallow  extracts;  and  all  mixtures  and 
compounds  of  tallow,  beef-fat,  suet,  lard,  lard-oil,  cocoa- 
nut-oil,  peanut-oil,  intestinal  fat,  and  offal-fat  made  in 
imitation  or  semblance  of  butter,  or  when  so  made,  cal- 
culated or  intended  to  be  sold  as  butter  or  for  butter: 
or  butter  substitute ;  and  every  article,  substance,  or  com- 
pound, other  than  that  produced  from  pure  milk,  or  cream 
from  the  same,  made  in  semblance  of  cheese,  and  designed 
to  be  used  as  a  substitute  for  cheese  made  from  pure  milk 
or  cream,  is  hereby  declared  to  be  imitation  cheese ;  pro- 
vided, that  the  use  of  salt,  rennet,  and  harmless  coloring 
matter  for  coloring  the  product  of  pure  milk  or  cream, 
shall  not  be  construed  to  render  such  product  an  imita- 
tion ;  and  provided,  that  nothing  shall  prevent  the  use  of 
pure  skimmed  milk  in  the  manufacture  of  cheese. 
Statutes  of  1919,  in  effect  July  22.  1919. 

Section  53. — WEIGHING  AND  SAMPLING  MILK. — It  shall 
be  unlawful  for  any  hauler  of  milk,  or  cream,  or  any  per- 
son, firm  or  corporation  receiving  or  purchasing  milk  or 
cream  by  weight  or  test  or  both,  or  by  measure  or  test  or 
both,  to  fraudulently  manipulate  the  weight,  measure  or 
test  of  milk  or  cream  of  any  person  or  to  take  unfair  sam- 
ples thereof,  or  to  fraudulently  manipulate  such  samples. 
The  hauler  or  other  agent  shall  weigh  or  measure  the  milk 
or  cream  of  each  patron  accurately  and  correctly  and  shall 
report  such  weights  or  measurements  accurately  and  cor- 
rectly to  the  creamery  or  factory.  He  shall  thoroughly 
mix  the  milk  or  cream  of  each  patron  by  pouring  or  stir- 
ring until  such  milk  or  cream  is  uniform  and  homogene- 
ous in  richness,  before  the  sample  is  taken  from  such  milk 
or  cream.  When  the  weighing  or  sampling  is  done  at  the 
creamery,  shipping  station  or  factory,  the  same  rule  shall 
apply. 

Section  54. — TESTING  MILK. — It  shall  be  unlawful  for 
any  person,  firm  or  corporation,  by  himself  or  as  the 
agent,  servant,  employee  or  officer  of  any  person,  firm  or 
corporation  receiving  or  purchasing  milk  or  cream  on  the 


TOO  BUSINESS  LAW  FOE  BUSINESS  MEN. 

basis  of  the  amount  of  butter  fat  contained  therein,  to 
under-read,  over-read  or  otherwise  fraudulently  manipu- 
late the  Babcock  test  used  for  determining  the  per  cent  of 
butter  fat  in  milk  or  cream,  or  to  falsify  the  records  there- 
of or  to  read  the  test  at  any  other  temperature  than  the 
correct  one,  which  is  one  hundred  thirty  degrees  to  one 
hundred  forty  degrees  Fahrenheit,  or  to  pay  on  the  basis 
of  any  measurement  or  weight  except  the  true  measure- 
ment or  weight,  which  is  seventeen  and  six-tenths  cubic 
centimeters  for  milk  and  nine  grams  or  eighteen  grams 
for  cream ;  provided,  that  in  all  tests  for  cream  the  cream 
shall  be  weighed  into  the  test  bottle.  All  testing  of  milk 
or  cream  purchased  on  the  basis  of  the  amount  of  butter 
fat  contained  therein,  shall  be  done  by  a  licensed  tester 
who  shall  supervise  and  be  responsible  for  the  operation 
of  the  Babcock  test  of  milk  or  cream.  The  license  shall 
be  issued  to  such  person  by  the  state  dairy  bureau  whose 
duty  it  shall  be  to  examine  into  the  qualifications  of  all 
applicants  for  such  license,  and  every  such  applicant  shall 
satisfy  said  bureau  of  his  qualifications  and  comply  with 
the  provisions  herein  before  any  license  shall  be  issued  to 
him. 

Statutes  of  1919 ;  in  effect  July  22,  1919. 

Section  55. — LICENSE  TO  KECEIVE  MILK  ON  BASIS  OF 
BUTTER  FAT  CONTAINED. — Every  creamery,  shipping  sta- 
tion, milk  factory,  cheese  factory,  ice  cream  factory,  con- 
densory,  or  any  person,  firm  or  corporation  receiving  or 
purchasing  milk  or  cream  on  the  basis  of  butter  fat  con- 
tained therein,  shall  be  required  to  hold  a  license  so  to  do. 
The  license  shall  be  issued  to  such  creamery,  shipping 
station,  milk  factory,  condensory,  ice  cream  factory, 
cheese  factory,  or  person,  firm  or  corporation  by  the  state 
dairy  bureau  upon  complying  with  all  sanitary  laws,  rules 
and  regulations  of  the  State  of  California  and  upon  com- 
plying with  the  provisions  of  this  act  and  upon  payment 
of  a  license  fee  as  provided  for  in  this  section. 

All  licenses  required  herein  shall  expire  on  the  thirty- 


Section  56,  page  101,  "Business  Law  for  Business  Men" — THE  BAB- 
COCK  TEST — In  conducting  the  Babcock  test  the  fat  column  in  tests  on 
milk  in  milk  bottles  shall  be  read  from  the  extreme  bottom  of  the  fat  column 
to  the  top  of  the  top  meniscus;  the  fat  column  in  tests  on  cream  in  cream  test 
bottles  shall  be  read  from  the  extreme  bottom  of  the  fat  column  to  the  extreme 
bottom  of  the  top  meniscus  (when  such  meniscus  in  the  butterfat  is  not  de- 
stroyed by  use  of  a  foreign  liquid) ;  or  from  the  extreme  bottom  of  the  fat 
column  to  the  plane  of  separation  between  the  butterfat  column  and  the  over- 
lying foreign  liquid  (when  such  meniscus  in  the  butterfat  column  is  destroyed 
by  the  use  of  a  foreign  liquid). 

Act  of  the  Legislature  of  California,  approved  June  3,  1921;  in  effect 
August  3,  1921. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  101 

first  day  of  December  of  each  year  and  the  fee  for  issuing 
same  shall  be  one  dollar  for  a  full  year  or  twenty-five 
cents  for  each  remaining  quarter  or  fraction  thereof.  The 
licenses  may  be  revoked  by  the  state  dairy  bureau  if,  after 
due  notice,  the  licensee  fails  or  has  failed  to  comply  with 
the  laws,  rules,  and  regulations  under  which  the  license 
was  granted;  provided,  that  the  provisions  shall  not 
apply  to  individuals,  hotels,  restaurants,  or  boarding- 
houses  buying  milk  or  cream  for  private  use. 

Statutes  of  1919;  in  effect  July  22,  1919. 

Section  56. — SPECIFICATIONS  FOE  STANDARD  BABCOCK 
TESTING  GLASSWARE. — The  term  "standard  Babcock  test- 
ing glassware"  shall  apply  to  glassware  and  weights  com- 
plying to  the  following  specifications :  (a)  Graduation  for 
milk  test  bottles.  The  total  per  cent  graduation  shall  be 
eight.  The  graduated  portion  of  the  neck  shall  have  a 
length  of  not  less  than  sixty-three  and  five-tenths  milli- 
meters (two  and  one-half  inches)  and  the  graduation  shall 
represent  whole  per  cent,  five-tenths  per  cent,  and  tenths 
per  cent.  The  tenths  per  cent  graduation  shall  not  be 
less  than  three  millimeters  in  length ;  the  five-tenths  per 
cent  graduation  shall  be  one  millimeter  longer  than  the 
tenths  per  cent  graduations,  projecting  one  millimeter  to 
the  left;  the  whole  per  cent  graduations  shall  extend  at 
least  one-half  way  around  the  neck  to  the  right  and  pro- 
jecting two  millimeters  to  the  left  of  the  tenths  per  cent 
graduations.  Each  per  cent  graduation  shall  be  num- 
bered, the  number  being  placed  on  the  left  of  the  scale. 
The  error  at  any  point  of  the  scale  shall  not  exceed  one- 
tenth  per  cent. 

The  neck  shall  be  cylindrical  and  the  cylindrical  shape 
shall  extend  for  at  least  nine  millimeters  below  the  lowest 
and  above  the  highest  graduation  mark.  The  top  of  the 
neck  shall  be  flared  to  a  diameter  of  not  less  than  ten  milli- 
meters. 

The  capacity  of  the  bulb  up  to  the  junction  of  the  neck 
shall  not  be  less  than  forty-five  cubic  centimeters.  The 


102  BUSINESS  LAW  FOR  BUSINESS  MEN. 

shape  of  the  bulb  may  be  either  cylindrical  or  conical  with 
the  smallest  diameter  at  the  bottom.  If  cylindrical,  the 
outside  diameter  shall  be  between  thirty-four  and  thirty- 
six  millimeters;  if  conical,  the  outside  diameter  of  the 
base  shall  be  between  thirty-one  and  thirty-three  milli- 
meters, and  the  maximum  diameter  between  thirty-five 
and  thirty-seven  millimeters.  The  charge  of  the  bottle 
shall  be  eighteen  grams.  The  total  height  of  the  bottom 
shall  be  between  one  hundred  fifty  and  one  hundred  sixty- 
five  millimeters  (five  and  seven-eights  and  six  and  one- 
half  inches). 

Two  types  of  bottles  shall  be  accepted  as  standard 
cream  test  bottles,  a  fifty  per  cent  nine  gram  long-neck 
bottle,  and  a  fifty  per  cent  eighteen  gram  long-neck  bottle. 

Fifty  per  cent,  nine  gram,  long-neck  bottle:  Gradua- 
tion— The  total  per  cent  graduation  shall  be  fifty.  The 
graduated  portion  of  the  neck  shall  have  a  length  of  not 
less  than  one  hundred  twenty  millimeters  (four  and  three- 
quarters  inches).  The  graduation  shall  represent  five  per 
cent,  one  per  cent  and  five-tenths  per  cent.  The  five  per 
cent  graduations  shall  extend  at  least  half  way  around 
the  neck  (to  the  right).  The  five-tenths  per  cent  gradua- 
tions shall  be  at  least  three  millimeters  in  length  and  the 
one  per  cent  graduations  shall  have  a  length  intermediate 
between  the  five  per  cent  and  the  five-tenths  per  cent 
graduations.  Each  five  per  cent  graduation  shall  be 
numbered,  the  number  being  placed  on  the  left  of  the 
scale. 

Neck— The  neck  shall  be  cylindrical  and  of  uniform 
internal  diameter  throughout.  The  cylindrical  part  of 
the  neck  shall  extend  at  least  five  millimeters  below  the 
lowest  and  above  the  highest  graduation  mark.  The  top 
of  the  neck  shall  be  flared  to  a  diameter  of  not  less  than 
ten  millimeters. 

Bulb — The  capacity  of  the  bulb  up  to  the  junction  of 
the  neck  shall  not  be  less  than  forty-five  cubic  centimeters. 
The  shape  of  the  bulb  may  be  either  cylindrical  or  conical 
with  the  smallest  diameter  at  the  bottom.  If  cylindrical 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  103 

the  outside  diameter  shall  be  between  thirty-four  and 
thirty-six  millimeters ;  if  conical,  the  outside  diameter  of 
the  base  shall  be  between  thirty-one  and  thirty-three  milli- 
meters and  the  maximum  diameter  between  thirty-five 
and  thirty-seven  millimeters. 

The  charge  of  the  bottle  shall  be  nine  grams.  All 
bottles  shall  bear  on  top  of  the  neck  above  the  gradua- 
tions, in  plain  legible  characters,  a  mark  denning  the 
weight  of  the  charge  to  be  used  (9  grams). 

The  total  height  of  the  bottle  shall  be  two  hundred  ten 
to  two  hundred  thirty-five  millimeters  (eight  and  one- 
fourth  to  nine  and  one-quarter  inches)  and  the  maximum 
error  in  the  total  graduation  or  in  any  part  thereof  shall 
not  exceed  fifty  per  cent  of  the  volume  of  the  smaliesi 
unit  of  the  graduation. 

The  fifty  per  cent,  eighteen  gram,  long-neck  bottle. 
The  same  specifications  in  every  detail  as  specified  for  the 
fifty  per  cent,  nine  gram,  long-neck  bottle,  shall  apply, 
with  the  exception  that  the  charge  of  the  bottle  shall  be 
eighteen  grams,  and  the  mark  defining  the  weight  of  the 
charge  placed  at  the  top  of  the  neck  shall  be  eighteen. 

The  total  length  of  the  standard  Babcock  pipette  shall 
be  not  more  than  three  hundred  thirty  millimeters  (thir- 
teen and  one-fourth  inches).  Outside  diameter  of  suction 
tube,  six  to  eight  millimeters.  Length  of  suction  tube, 
one  hundred  thirty  millimeters.  Outside  diameter  of 
delivery  tube,  four  and  five-tenths  to  five  and  five-tenths 
millimeters.  The  length  of  delivery  tube,  one  hundred  to 
one  hundred  twenty  millimeters.  Distance  of  graduation 
mark  above  bulb,  thirty  to  sixty  millimeters.  Nozzle 
straight.  Delivery  seventeen  and  six-tenths  cubic  centi- 
meters of  water  at  twenty  degrees  centigrade  in  five  to 
eight  seconds. 

The  sensibility  of  all  scales  used  for  weighing  cream 
samples  into  the  test  bottles  shall  be  not  more  than  thirty 
milligrams  and  the  standard  weights  shall  be  nine  grams 
and  eighteen  grams. 

Tn  all  testing  of  milk  or  cream  wrhere  the  same  is  re- 


104  BUSINESS  LAW  FOR  BUSINESS  MEN. 

eeived  or  purchased  upon  the  basis  of  the  amount  of 
butter  fat  contained  therein  the  Babcock  tester  shall  be 
operated  at  the  proper  speed,  which  is  as  follows : 

For  tester  with  diameter  of  fourteen  inches  the  speed 
shall  be  between  eight  hundred  twenty-five  and  nine  hun- 
dred seventy-five  revolutions  per  minute. 

For  tester  with  diameter  of  sixteen  inches,  the  speed 
shall  be  between  seven  hundred  seventy-five  and  eight 
dred  seventy-five  revolutions  per  minute. 

For  tester  with  diameter  of  eighteen  inches,  the  speed 
shall  be  between  seven  hunderd  seventy-five  and  eight 
hundred  twenty-five  revolutions  per  minute. 

For  tester  with  diameter  of  twenty  inches,  the  speed 
shall  be  between  seven  hundred  twenty-five  and  seven 
hundred  seventy-five  revolutions  per  minute. 

For  tester  with  a  diameter  of  twenty-four  inches,  the 
speed  shall  be  between  five  hundred  seventy-five  and  six 
hundred  twenty-five  revolutions  per  minute. 

Statutes  of  1919 ;  in  effect  July  22,  1919. 

Section  57. — PASTEURIZED  MILK. — No  person,  firm  or 
corporation  shall  sell  or  exchange,  or  offer  or  expose  for 
sale  or  exchange,  as  and  for  grade  B  milk,  any  milk  that 
does  not  conform  to  the  following  requirements  as  a  mini- 
mum; it  must  be  obtained  from  cows  in  no  way  unfit  for 
the  production  of  milk  for  use  by  man,  as  determined  by 
physical  examination  at  least  once  in  six  months  by  a 
qualified  veterinarian  under  the  supervision  of  the  in- 
specting department.  Before  pasteurization  such  milk 
shall  contain  less  than  one  million  bacteria  per  cubic  centi- 
meter. After  pasteurization  it  shall  contain  less  than 
fifty  thousand  bacteria  per  cubic  centimeter. 

Milk  for  pasteurization  must  be  kept  at  a  temperature 
established  by  the  inspecting  department  up  to  the  time 
of  delivery  to  the  pasteurization  plant  and  rapidly  cooled 
after  pasteurization  to  a  temperature  of  fifty  degrees 
Fahrenheit  or  below  and  so  maintained  to  the  time  of 
delivery  of  the  same.  Pasteurization  shall  be  by  the  hold- 


Section  57,  page  104,  "Business  Law  for  Business  Men" — PASTEUR- 
IZED MILK— PROCESS  OF  PASTEURIZATION— The  process  of  pas- 
teurization, as  applied  to  milk,  skim  milk,  cream  and  milk  products,  hereby  is 
defined  to  be  a  process  for  the  elimination  therefrom  of  organisms  harmful 
to  human  beings,  which  process  shall  consist  of  uniformly  heating  such  milk, 
skim  milk  or  cream,  as  the  case  may  be,  to  a  temperature  of  not  less  than  one 
hundred  forty  degrees  Fahrenheit  and  of  holding  the  same  at  the  said  temper- 
ature for  a  period  of  not  less  than  twenty-five  minutes,  and  immediately 
thereafter  of  cooling  the  same  to  a  temperature  of  not  above  fifty  degrees 
Fahrenheit;  provided,  that  when  cream  is  pasteurized  to  be  used  and  is  used 
in  the  manufacture  of  butter,  or  when  milk  is  pasteurized  to  be  used  and  is 
used  in  the  manufacture  of  cheese,  and  where  the  process  of  ripening  or  start- 
ing in  each  case  is  to  be  commenced  immediately,  then  it  shall  not  be  required 
that  such  cream  or  milk  be  cooled  to  a  lower  degree  than  is  necessary  for  such 
ripening  or  starting.  Milk  for  drinking  purposes  shall  not  be  heated  for  more 
than  one  hour  nor  above  one  hundred  forty-five  degrees  Fahrenheit.  Cream 
that  is  to  be  manufactured  into  butter  may  be  pasteurized  by  heating  above 
one  hundred  forty-five  degrees  Fahrenheit,  and  when  the  same  is  uniformly 
heated  to  and  held  at  a  temperature  above  one  hundred  fifty-one  degrees  Fahr- 
enheit, the  time  for  holding  may  be  decreased  from  twenty-five  minutes  by 
one  minute  for  each  degree  of  temperature  over  one  hundred  fifty-one  degrees 
Fahrenheit. 

All  pasteurized  cream  or  milk  used  in  the  manufacture  of  pasteurized 
butter  and  cheese,  respectively,  shall  be  pasteurized  at  and  in  the  plant  where 
such  butter  or  cheese,  as  the  case  may  be,  is  manufactured  therefrom.  If 
milk  is  repasteurized  it  must  not  be  sold  for  human  consumption.  It  must 
be  heated  to  a  higher  temperature  than  necessary  for  pasteurization  and  de- 
livered in  a  distinctive  container,  plainly  marked  with  the  words  "not  suit- 
able for  human  consumption,"  in  letters  not  less  than  one-quarter  inch  in 
length  and  one-twelfth  inch  in  stroke. 

Act  of  the  Legislature  of  California,  approved  June  3,  1921;  in  effect 
August  3,  1921. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  105 

ing  method  at  a  temperature  not  less  than  one  hundred 
forty  degrees  Fahrenheit ;  provided,  that  milk  for  drink- 
ing purposes  shall  not  be  heated  above  one  hundred  forty- 
five  degrees  Fahrenheit. 

Such  pasteurization  plant  shall  be  equipped  with  a 
self-registering  device  for  record  of  the  time  and  tem- 
perature of  pasteurization.  Such  records  shall  be  kept 
for  two  months  and  be  available  for  inspection  by  any 
health  department,  the  state  veterinarian  or  any  of  his 
agents,  or  the  state  dairy  bureau.  P&steurized  milk  shall 
be  marked  with  the  day  of  the  week  of  pasteurization  and 
must  be  delivered  to  the  consumer  within  forty-eight 
hours  thereafter.  If  milk  is  repasteurized,  it  must  not  be 
sold  except  as  not  suitable  for  human  consumption;  pro- 
vided, however,  if  graded,  cream  of  any  grade  shall  con- 
form to  all  the  standards  set  for  milk  of  the  same  grade, 
except  that  the  maximum  bacteria  count  for  cream  shall 
be  not  more  than  three  times  as  great  as  that  of  the  cor- 
responding grade  of  milk. 

Statutes  of  1919 ;  in  effect  July  22,  1919. 

Section  58.— CHEESE  AND  CHEESE  BRANDS. — Every  per- 
son, firm  or  corporation,  who  shall  manufacture  cheese  in 
the  State  of  California,  shall  at  the  place  of  manufacture, 
brand  distinctly  and  durably  on  each  and  every  cheese 
manufactured,  and  upon  the  package  or  box,  when 
shipped,  the  grade  of  cheese  manufactured,  as  follows: 
"full-cream  cheese,"  or  "half -skim  cheese,"  or  "skim 
cheese." 

All  brands  for  branding  the  different  grades  of  cheese 
shall  be  procured  from  the  state  dairy  bureau,  and  said 
bureau  is  hereby  directed  and  authorized  to  issue  to  all 
persons,  firms  or  corporations,  upon  application  therefor, 
uniform  brands,  consecutively  numbered,  of  the  different 
grades  specified  in  this  section.  The  state  dairy  bureau 
shall  keep  a  record  of  each  and  every  brand  issued,  and 
the  name  and  location  of  the  manufacturer  receiving  the 
same.  No  manufacturer  of  cheese  in  the  State  of  Califor- 


106  BUSINESS  LAW  FOB  BUSINESS  MEN. 

nia  other  than  the  one  to  whom  such  brand  is  issued,  shall 
use  the  same,  and  in  case  of  a  change  of  location,  the 
party  shall  notify  the  bureau  of  such  change. 

The  different  grades  of  cheese  are  hereby  denned  as 
follows :  First :  Such  cheese  only  as  shall  have  been  manu- 
factured from  pure  milk,  and  from  which  no  portion  of 
the  butter  fat  has  been  removed  by  skimming  or  other- 
wise, and  having  not  less  than  fifty  per  cent  of  butter  fat 
in  its  water-free  substance,  which  shall  be  conspicuously 
branded  as  "full-cream  cheese."  Second:  Such  cheese 
only  as  shall  have  been  made  from  pure  milk,  and  having 
not  less  than  twenty-five  per  cent  of  butter  fat  in  its 
water-free  substance,  which  shall  be  conspicuously 
branded  as  "half-skim  cheese."  Third:  Such  cheese  only 
as  shall  have  been  made  from  pure  skim  milk,  which  shall 
be  conspicuously  branded  as  "skim  cheese. VJ 

No  person  or  persons,  firm,  association  or  corporation 
shall  sell  or  offer  for  sale  in  this  state  any  cheese  which 
is  not  branded  either  "full-cream  cheese,"  "half-skim 
cheese,"  or  "skim  cheese,"  in  accordance  with  its  butter 
fat  content. 

Statutes  of  1917;  in  effect  July  30,  1917. 

Section  59. — FALSE  ADVERTISEMENTS. — Any  person, 
firm,  corporation  or  association,  or  any  employee  thereof, 
who,  with  intent  to  sell,  furnish,  perform,  or  in  any  way 
dispose  of  real  or  personal  property,  choses  in  action, 
merchandise,  service,  professional  or  otherwise,  or  any- 
thing of  any  nature  whatsoever  offered  by  such  person, 
firm,  corporation  or  association,  or  any  employee  thereof, 
directly  or  indirectly,  to  the  public  for  sale  or  distribu- 
tion, or  to  induce  the  public,  in  any  manner,  to  enter  into 
any  obligation  relating  thereto,  or  to  acquire  title  thereto 
or  any  interest  therein,  shall  make,  publish,  disseminate, 
circulate,  or  cause  to  be  made,  published,  disseminated  or 
circulated,  or,  in  any  manner,  place,  or  cause  to  be  placed, 
before  the  public  in  the  State  of  California,  in  any  news- 
paper, magazine,  book,  pamphlet,  circular,  letter,  notice, 


Section  60,  page  107,  "Business  Law  for  Business  Men" — MATTRESSES 
— The  tag  must  show,  in  addition,  the  quantity  of  such  materials  used,  ex- 
pressed in  terms  of  avoirdupois  weight;  also  size  of  same,  expressed  in  linear 
measure,  clearly  indicating  the  length  and  breadth  thereof,  except  that  tags 
attached  to  comforters  need  state  only  the  percentage  of  new  material  and  (or) 
shoddy  material,  and  that  no  sizes  need  be  marked  on  same.  Whenever  the- 
word  "felt,"  as  applied  to  cotton,  is  used  in  the  said  statement  concerning 
.any  materials,  it  shall  be  indicated  in  said  statement  whether  said  felt  is  "felt- 
ed cotton"  or  "felted  linters."  This  shall  not  apply  to  comforters. 

Any  mattress  made  from  more  than  one  new  material  shall  have  stamped 
upon  the  tag  attached  thereto  the  percentage  of  each  material  so  used.  This 
section  shall  not  apply  to  comforters. 

No  provision  of  this  act  shall  apply  to  merchandise  manufactured  for  use 
and  sale  outside  of  the  State  of  California,  excepting  the  sterilization  of  sec- 
ond-hand or  shoddy  materials. 

Act  of  the  Legislature  of  California,  approved  May  31,  1921;  in  effect 
July  31,  1921. 

('a)  PILLOWS — No  person,  firm  or  corporation  shall  use  or  employ  in 
the  making,  remaking  or  renovating  of  any  pillow,  any  second-hand  material 
of  any  kind  unless  any  and  all  of  such  materials  have  been  thoroughly  steril- 
ized and  disinfected  by  a  reasonable  process,  approved  by  the  state  board  of 
health. 

No  person,  firm  or  corporation  shall  directly  or  indirectly,  at  wholesale 
or  retail,  or  otherwise  sell,  offer  or  expose  for  sale,  barter  or  trade,  deliver  or 
consign  or  have  in  possession  with  intent  to  sell,  deliver  or  consign,  any 
pillow  that  shall  not  have  plainly  and  indelibly  stamped  or  printed  upon 
the  face  of  a  muslin  or  linen  tag  not  smaller  than  three  inches  square  se- 
curely sewed  to  the  covering  thereof,  a  statement  in  the  English  language  set- 
ting forth  the  kind  or  kinds  of  materials  used  in  making  and  filling  said  pillow, 
and  whether  or  not  said  materials  are  in  whole  or  in  part  second-hand,  and 
the  name  and  address  of  the  manufacturer  or  vendor  or  both. 

Any  pillow  made  from  any  second-hand  material  shall  have  stamped  or 
printed  upon  aforesaid  tag  attached  thereto,  in  type  not  smaller  than  twenty- 
point,  the  words  "second-hand." 

Any  person,  firm  or  corporation  violating  any  of  the  provisions  of  this 
act  shall  be  guilty  of  a  misdemeanor,  and  upon  conviction  thereof  shall  be 
punished  by  a  fine  of  not  less  than  one  hundred  dollars  and  not  to  exceed  five 
hundred  dollars,  or  by  imprisonment  for  not  less  than  three  months  and  not 
exceeding  six  months  or  by  both  such  fine  and  imprisonment. 

Act  of  the  Legislature  of  California,  approved  May  12,  1921;  in  effect 
July  12,  1921. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  107 

hand-bill,  poster  or  other  publication,  or  on  any  billboard, 
sign,  card,  label,   or  other  advertising  medium,  or  by 
means  of  any  electric  sign,  window  sign,  show  case  or 
window  display,  or  by  any  other  advertising  device,  or  by 
public  outcry  or  proclamation,  or  in  any  other  manner  or 
means  whatever,  an  advertisement  of  any  sort  regarding 
-uch  real  or  personal  property,  choses  in  action,  mer- 
•handise,  service  or  anything  so  offered  to  the  public, 
••viiich  advertisement  shall  contain  any  statement,  repre- 
^entation  or  assertion  concerning  such  real  or  personal 
>roperty,  choses  in  action,  merchandise,  service  or  any- 
hing  so  offered  to  the  public,  or  concerning  any  circum- 
ance  or  matter  of  fact  connected  in  any  way,  directly  or 
idirectly,  with  the  proposed  sale,  performance  or  dis- 
:osition  thereof,  which  statement,  representation  or  as- 
ertion  is  false  or  untrue,  in  any  respect,  or  which  is  de- 
'eptive  or  misleading,  and  which  is  known,  or  which  by 
he  exercise  of  reasonable  care  should  be  known,  to  be 
alse  or  untrue,  deceptive  or  misleading,  by  the  person, 
arm,  corporation  or  association  making,  publishing,  dis- 
seminating, circulating  or  placing  before  the  public  said 
advertisement,  shall  be  guilty  of  a  misdemeanor;  pro- 
vided, however,  that  this  act  shall  not  apply  to  any  pub- 
lisher of  a  newspaper,  magazine,  or  other  publication, 
who  publishes  said  advertisement  in  good  faith,  without 
knowledge  of  its  false,  deceptive,  or  misleading  character. 
Statutes  of  1915 ;  Chapter  634. 

Section  60.- — MATERIALS  IN  MATTRESSES. — No  person  or 
corporation,  by  himself  or  his  agents,  servants  or  em- 
ployees, shall,  directly  or  indirectly,  at  wholesale  or  re- 
tail, or  otherwise,  sell,  offer  for  sale,  deliver  or  consign, 
or  have  in  his  possession  with  intent  to  sell,  deliver,  or 
consign,  any  mattress  that  shall  not  have  plainly  and  in- 
delibly stamped  or  printed  thereon,  or  upon  a  muslin  or 
linen  tag,  not  smaller  than  three  inches  square  securely 
sewed  to  the  covering  thereof,  a  statement  in  the  English 
language  setting  forth  the  kind  or  kinds  of  materials 


108  BUSINESS  LAW  FOB  BUSINESS  MEN. 

used  in  filling  the  said  mattress,  and  whether  the  same 
are  in  whole  or  in  part,  new  or  old,  or  second-hand,  or 
shoddy,  and  the  name  and  address  of  the  manufacturer 
or  vendor  thereof,  or  both. 

Any  mattress  made  from  more  than  one  new  material, 
shall  have  stamped  upon,  the  tag  attached  thereto  the  per- 
centage of  each  material  so  used. 

Any  mattress  made  from  any  material  of  which  prior 
"use  has  been  made  shall  have  stamped  or  printed  upon 
the  tag  attached  thereto  in  type  not  smaller  than  twenty- 
point  the  words  " second-hand  material." 

Any  mattress  made  from  material  known  as  "shod- 
dy" shall  have  stamped  or  printed  upon  the  tag  attached 
thereto  in  type  not  smaller  than  twenty-point  the  words 
1 '  shoddy  material. ' ' 

Any  person,  firm,  company,  organization  or  corpora- 
tion, who  shall  violate  any  of  the  provisions  of  this  act 
shall  be  punishable  by  a  fine  of  not  less  than  fifty  dollars 
nor  more  than  five  hundred  dollars,  or  by  imprisonment 
in  the  county  jail  for  a  period  of  not  more  than  six 
months,  or  by  both  such  fine  and  imprisonment. 
Statutes  of  1915 ;  Chapter  641. 

Section  61. — STORAGE  OF  EXPLOSIVES. — Magazines  in 
which  explosives  may  lawfully  be  stored  or  kept  shall  be 
two  classes,  as  follows : 

(a)  Magazines  of  the  first  class  shall  consist  of  those 
containing  explosives  exceeding  one  hundred  pounds,  and 
shall  be  constructed  wholly  of  brick,  wood  covered  with 
iron,  or  other  fireproof  material,  and  must  be  fireproof, 
and,  except  magazines  where  gunpowder  or  black  blasting 
powder  only  is  stored,  must  be  bullet  proof,  and  shall 
have  no  openings  except  for  ventilation  and  entrance. 
The  doors  of  such  magazines  must  be  fireproof  and  bullet 
proof,  and  at  all  times  kept  closed  and  locked,  except 
when  necessarily  opened  for  the  purpose  of  storing  or 
removing  explosives  therein  or  therefrom,  by  persons 
lawfully  entitled  to  enter  the  same.  Every  such  maga- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  100 

zine  shall  have  sufficient  openings  for  ventilation  thereof, 
which  must  be  screened  in  such  manner  as  to  prevent  the 
entrance  of  sparks  or  fire  through  the  same.  Upon  each 
side  of  such  magazine  there  shall  at  all  times  be  kept 
conspicuously  posted  a  sign,  with  the  words,  "magazine," 
"explosives,"  "dangerous,"  legibly  printed  thereon  in 
letters  not  less  than  six  inches  high.  No  matches,  fire  or 
lighting  device  of  any  kind  except  electric  light  shall  at 
any  time  be  permitted  in  any  such  magazines.  No  pack- 
age of  explosives  shall  at  any  time  be  opened  in  any 
magazine.  No  blasting  caps  or  other  detonating  or  ful- 
minating caps,  or  detonators,  or  electric  fuzees,  shall  be 
kept  or  stored  in  any  magazine  in  which  explosives  are 
kept  or  stored,  but  such  caps,  detonators  or  fuzees  may 
be  kept  or  stored  in  a  magazine  constructed  as  above  pro- 
vided which  must  be  located  at  least  one  hundred  feet 
from  any  magazine  in  which  explosives  are  kept  or 
stored.  Magazines  in  which  explosives  are  kept  or  stored 
must  be  detached  and  must  be  located  at  least  one  hun- 
dred feet  from  any  other  structure. 

On  and  after  January  1,  1010,  the  quantity  of  ex- 
plosives that  may  be  lawfully  had,  kept  or  stored  in  any 
magazine  shall  depend  upon  the  distance  that  such  maga- 
zine is  situated  from  buildings,  highways,  or  railroads, 
and  upon  the  protection  afforded  by  natural  or  efficient 
artificial  barricades  to  such  buildings,  highways  or  rail- 
roads. Whenever  any  of  the  quantities  given  in  column 
one  of  the  quantity  and  distance  table  hereinafter  set 
forth  is  had,  kept  or  stored  in  any  magazine  in  this  state, 
the  distance  that  any  quantity  given  in  column  one  of 
said  table  may  be  lawfully  had,  kept  or  stored  from  build- 
ings is  the  distance  set  opposite  said  quantity  in  column 
two  of  said  table,  and  the  distance  that  any  quantity  in 
column  one  of  said  table,  may  be  lawfully  had,  kept  or 
stored  from  railroads  is  the  distance  set  opposite  said 
quantity  in  column  three  of  said  table,  and  the  distance 
that  any  quantity  given  in  column  one  of  said  table  may 
be  lawfully  had,  kept  or  stored  from  highways  is  the  dis- 


110 


BUSINESS  LAW  FOR  BUSINESS  MEN. 


tance  set  opposite  said  quantity  in  column  four  of  said 
table.  The  quantity  and  distance  table  governing  the 
keeping  or  storing  of  explosives  is  as  follows: 


QUANTITY  AND  DISTANCE  TABLE. 


Column  1 
Quantity  that  may  be  lawfully  kept  or  stored 
from  nearest  building,   highway  or  railroad 

Column  2 

Distance 
from 
nearest 

Column  3 

Distance 
from 
nearest 

Column  4 

Distance 
from 
nearest 

Blasting  caps 

Other  explosives 

m      Number 

Number 

Pounds 

Pounds 

building, 

railroad, 

highway, 

over 

not  over 

over 

not  over 

feet 

feet 

feet 

1,000 

5,000 

30 

20 

10 

5,000 

10,000 

60 

40 

20 

10,000 

20,000 

120 

70 

35 

20,000 

25,000 

50 

145 

90 

45 

25,000 

50,000 

50 

100 

240 

140 

70 

50,000 

100,000 

100 

200 

360 

220 

110 

100,000 

150,000 

200 

.    300 

520 

310 

150 

150,000 

200,000 

300 

400 

640 

380 

190 

200,000 

250,000 

400 

500 

720 

430 

220 

250,000 

300,000 

500 

600 

800 

480 

240 

300,000 

350,000 

600 

700 

860 

520 

260 

350,000 

400,000 

700 

800 

920 

550 

280 

400,000 

450,000 

800 

900 

980 

590 

300 

450,000 

500,000 

900 

1,000 

1,020 

610 

310 

500,000 

750,000 

1,000 

1,500 

1,060 

640 

320 

750,000 

1,000,000 

1,500 

2,000 

1,200 

720 

360 

1,000,000 

1,500,000 

2,000 

3,000 

1,300 

780 

390 

1,500,000 

2,000,000 

3,000 

4,000 

1,420 

850 

420 

2,000,000 

2,500,000 

4,000 

5,000 

1,500 

900 

450 

5,000 

6,000 

1,560 

940 

470 

6,000 

7,000 

1,610 

970 

490 

7,000 

8,000 

1,660 

1,000 

500 

8,000 

9,000 

1,700 

1,020 

510 

9,000 

10,000 

1,740 

1,040 

520 

10,000 

20,000 

1,780 

1,070 

530 

20,000 

30,000 

2,110 

1,270 

630 

„ 

30,000 

40,000 

2,410 

1,450 

720 

40,000 

50,000 

2,680 

1,610 

800 

50,000 

60,000 

2,920 

1,750 

880 

60,000 

70,000 

3,130 

1,880 

940 

70,000 

80,000 

3,310 

1,990 

1,000 

80,000 

90,000 

3,460 

2,080 

1,040 

90,000 

100,000 

3,580 

2,150 

1,080 

100,000 

200,000 

3,800 

2,280 

1,140 

200,000 

300,000 

4,310 

2,590 

1,300 

Whenever  the  building,  railroad  or  highway  to  be  pro- 
tected is  effectually  screened  from  the  magazine,  where 
explosives  are  had,  kept  or  stored,  either  by  natural 
features  of  the  ground  or  by  an  efficient  artificial  barri- 
cade of  such  height  that  any  straight  line  drawn  from  the 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  Ill 

top  of  any  side  wall  of  the  magazine  to  any  part  of  the 
building-  to  be  protected,  will  pass  through  such  interven- 
ing natural  or  efficient  artificial  barricade,  and  any 
straight  line  drawn  from  the  top  of  any  side  wall  of  the 
magazine  to  any  point  twelve  feet  above  the  center  of  the 
railroad  or  highway  to  be  protected  will  pass  through 
such  intervening  natural  or  efficient  artificial  barricade, 
the  applicable  distances  given  in  column  two,  three  and 
four  of  the  quantity  and  distance  table  may  be  reduced 
one-half. 

Whenever  the  building,  railroad  or  highway  to  be  pro- 
tected is  effectually  screened  from  the  magazine,  where 
explosives  are  had,  kept  or  stored  by  a  natural  barrier 
which,  at  any  one  point  thereon,  is-  forty  feet  or  more  in 
height  above  a  straight  line  drawn  from  the  top  of  any 
side  wall  of  the  magazine  to  any  part  of  the  building  to 
be  protected  or  to  any  point  twelve  feet  above  the  center 
of  the  railroad  or  highway  to  be  protected,  which  natural 
barrier  has  a  natural  thickness  of  not  less  than  two  hun- 
dred feet  where  the  same  is  intersected  by  the  straight 
line  drawn  as  aforesaid,  then  the  quantity  and  distance 
table  shall  not  be  applicable  to  such  magazine. 

If  at  any  time  the  distances  from  a  magazine  to  a 
building,  highway  or  railroad  be  decreased  through  the 
construction  of  a  new  building,  highway  or  railroad  or  by 
any  other  means,  then  the  amounts  of  explosives  which 
may  be  lawfully  had,  kept  or  stored  in  said  magazine 
must  be  reduced  to  correspond  with  the  quantity  and  dis- 
tance table ;  provided,  in  the  case  of  a  new  building,  that 
the  same  is  constructed  in  good  faith  for  any  of  the  pur- 
poses specified  in  the  following  paragraph,  and  not  with 
intent  to  annoy,  harass,  oppress  or  hinder  the  owner  of 
said  magazine. 

The  term  "building"  when  used  in  the  foregoing 
table  shall  be  held  to  mean  and  include  only  any  building 
regularly  occupied  in  whole  or  in  part  as  a  habitation  for 
human  beings,  and  any  store,  church,  schoolhouse,  rail- 
way station  or  other  public  place  of  assembly. 


112  BUSINESS  LAW  FOR  BUSINESS  MEN. 

The  term  "highway"  when  used  in  the  foregoing 
table  shall  be  held  to  mean  public  streets  or  public  roads, 
and  shall  not  include  roads  constructed  and  maintained 
by  private  persons. 

The  term  "railroad"  when  used  in  the  foregoing 
table  shall  be  held  to  mean  and  include  any  steam,  electric 
or  other  railroad  that  carries  passengers  or  articles  of 
commerce  for  hire. 

The  term  "efficient  artificial  barricade"  when  used  in 
the  foregoing  shall  be  held  to  mean  an  artificial  mound 
or  properly  revetted  wall  of  earth  of  a  thickness  of  not 
less  than  three  feet.  The  provisions  of  this  section  shall 
not  apply  to  mining  or  quarrying  operations.  Nothing 
contained  in  this  subsection  shall  be  held  to  prohibit  the 
keeping  or  storing  of  explosives  at  any  explosive  manu- 
facturing plant  which  was  actually  used  in  manufacturing 
explosives  prior  to  the  fifteenth  day  of  April,  1917. 

Magazines  of  the  second  class  shall  consist  of  a  stout 
box,  and  not  more  than  one  hundred  pounds  of  explosives 
shall  at  any  time  be  kept  or  stored  therein,  and,  except 
when  necessarily  opened  for  use  by  authorized  persons, 
shall  at  all  times  be  kept  securely  locked.  Upon  each  such 
magazine  there  shall  at  all  times  be  kept  conspicuously 
posted  a  sign  with  the  words,  "magazine,"  "explosives," 
"dangerous,"  legibly  printed  thereon. 

Nothing  in  this  section  contained  shall  be  held  to  pro- 
hibit the  keeping  or  storing  of  explosives  in  any  tunnel, 
where  no  person  or  persons  are  employed;  provided, 
ohcays,  that  any  tunnel  so  used  for  the  storage  of  ex- 
plosives shall  have  fireproof  doors,  which  must  at  all 
times  be  kept  closed  and  locked,  except  when  necessarily 
opened  for  the  purpose  of  storing  or  removing  explosives 
therein  or  therefrom,  by  persons  lawfully  entitled  to  enter 
the  same.  The  door  of  such  tunnel  magazine  shall  at  all 
times  have  legibly  printed  thereon  the  words,  "maga- 
y.ine,"  "explosives,"  "dangerous." 

Act  of  the  Legislature,  approved  May  2,  1919 ; 
in  effect  July  22,  1919, 


Section  62,  page  113,  "Business  Law  for  Business  Men" — FRUITS  AND 
VEGETABLES — Some  changes  in  the  law  have  been  made  by  the  Legisla- 
ture of  1921,  as  follows: 

(a)  Page  115,  referring  to  "Virtually  uniform  in  size,"  should  now  read: 
"Virtually  uniform  in  size"  shall  mean  in  the  case  of  packed  fruits  a  difference 
in  size  of  the  various  fruits  as  follows:     Pears,  peaches  and  quinces,  a  varia- 
tion of  not  more  than  one-half  of  an  inch  when  measured   through  widest 
portion  of  cross-section;  apricots,  plums  and  prunes,  a  variation  of  not  more 
than  one-fourth  of  an  inch  when  measured  through  widest  portion  of  cross- 
section. 

(b)  The  standard  basket  for  strawberries  shall  be  the  dry  pint. 

(c)  The  standard  grape  drum  shall  contain  2,642  cu.  in. 

(d)  The  standard  grape  keg  shall  contain  2,642  cu.  in.  minimum. 

(e)  Peach   size   cherry   lug  depth   inside   4*/2   inches;   width   inside,    11^ 
inches;  length  outside,  11%  inches. 

(f)  Special  fruit  lug  depth  inside,  4  inches;  width  inside,  14  inches;  length 
outside,  \7l/2  inches. 

(g)  The  four  by  twelve  by  twenty-two  and  one-half  cantaloupe   crates 
may  be  packed  with  nine,  twelve  or  fifteen  cantaloupes;  the  four  and  one-half 
by  thirteen  and  one-half  by  twenty-two  and  one-half  may  be   packed   with 
nine,  twelve  or  fifteen  cantaloupes.     All  irregular  cantaloupe  packs  must  be 
marked  in  letters  not  less  than  one-half  inch  in  height,  "Irregular  Pack." 

(h)  Containers  in  which  the  fruit  in  the  top  layer  only  is  placed  in  reg- 
ular, compact  arrangement,  excepting  cherries,  berries,  and  grapes,  shall  be 
labeled  "face  and  fill"  in  lieu  of  the  approximate  number  of  fruits  or  net  weight. 

(i)  In  sub-division  (g)  page  118,  in  the  first  sentence  add  to  the  names 
of  grapes,  Burger,  and  Pierce  Isabella.  Act  of  the  Legislature  of  California, 
approved  June  3,  1921;  in  effect  August  3,  1921. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  113 

Section  62. — FKUITS  AND  VEGETABLES — STANDARDS  AND 
STANDARD  PACKAGES. — A  law  was  passed  in  1919  to  pro- 
mote the  fresh  fruit,  nut  and  vegetable  industry.  The 
new  law  is  as  follows: 

Section  1.  To  promote  the  development  of  the  Cali- 
fornia fresh  fruit,  nut  and  vegetable  industry  and  to  pre- 
vent deception  in  fruit  or  vegetable  packages  for  state 
or  inter-state  shipment,  there  are  hereby  created  and 
established  certain  standards  and  standard  packages  for 
apricots,  almonds,  walnuts,  berries,  cantaloupes,  cherries, 
grapes,  oranges,  peaches,  pears,  plums,  prunes,  quinces, 
tomatoes,  onions,  sweet  potatoes  and  potatoes. 

Sec.  2.     All  fresh  fruits,  nuts  and  vegetables  of  the 
ind  specified  in  section  one  of  this  act,  except  oranges 
vrhich  shall  be  governed  by  the  provisions  of  section  nine, 
md  except  such  fruits  and  vegetables  for  which  special 
rades  shall  be  established  under  section  three  of  this 
•et,    when   being   packed,    or    after   packing,    or    when 
hipped,  delivered  for  shipment,  offered  for  sale  or  sold, 
n  any  container  or  subcontainer,  shall  be  mature  but  not 
overripe,  well  colored  for  the  variety  and  locality,  vir- 
tually uniform  in  quality,  virtually  free  from  insect  and 
fungous  pests,  rots,  bruises,  frost  injury,  sunburn  and 
other  serious  defects,  and,  except  in  the  case  of  unpacked 
fruit  or  vegetables,  shall  be  virtually  uniform  in  size. 
When  packed  in  layers  there  shall  be  approximately  the 
same  numerical  count  in  each  layer  throughout  a  con- 
tainer or  subcontainer  having  straight  sides.    In  the  case 
of  sloping  side  containers  no  layer  below  the  top  layer 
shall  contain  a  greater  numerical  count  than  the  top 
layer. 

(a)  Enforcement  by  Commissioner  of  Horticulture.— 
Sec.  3.  The  state  commissioner  of  horticulture  is  hereby 
empowered,  through  his  deputies  and  the  inspectors  of 
fresh  fruit  and  vegetables  of  each  county  in  the  state,  to 
enforce  all  the  provisions  of  this  act,  and  to  establish 


114  BUSINESS  LAW  FOB  BUSINESS  MEN. 

and  enforce  such  grades  and  grading  rules  as  may  be 
deemed  necessary  after  a  thorough  investigation  has  been 
made  of  the  needs  of  the  particular  fruit  or  vegetable 
for  which  grades  are  contemplated.  Such  grades  and 
grading  rules  must,  before  they  become  effective,  be 
approved  in  one  or  more  public  meetings  attended  or 
represented  by  at  least  fifty  per  cent  of  the  growers  and 
shippers  of  that  locality  interested  in  the  industry 
affected.  Such  meetings  shall  be  widely  advertised  in 
a  newspaper  published  in  that  locality  for  at  least  two 
weeks  prior  to  the  meetings ;  said  meetings  shall  be  pre- 
sided over  by  the  state  commissioner  of  horticulture,  or 
any  of  his  deputies,  and  shall,  in  so  far  as  possible  and 
practicable,  be  conducted  at  places  that  can  be  con- 
veniently reached  by  representatives  of  the  affected  in- 
dustry. In  like  manner  the  state  commissioner  of  horti- 
culture may  provide  for  standard  packages  other  than 
those  provided  for  in  section  six  of  this  act.  Grades 
and  grading  rules  established  in  accordance  with  the 
provisions  of  this  section  shall  not  be  modified,  nor 
shall  standard  packages  which  have  been  established  be 
changed  during  the  current  shipping  season  of  the  fruits 
or  vegetables  for  which  such  grades  or  standard  pack- 
ages were  established. 

(b)  Exemptions. — Sec.  4.     All  fresh  fruits  or  vege- 
tables of  the  kind  specified  in  this  act  for  use  in  the 
manufacture  of  by-products,  shall  be  exempt  from  the 
provisions  of  this  act,  and  any  inspector  or  deputy  in- 
spector of  fresh  fruits  and  vegetables  may  require  from 
the  owner  or  shipper  of  such  fruits  or  vegetables  such 
proof  as  he  may  deem  necessary  that  they  will  be  used 
in  the  manufacture  of  by-products,  and  shall  hold  same 
until  satisfactory  proof  is  given. 

(c)  Definitions. — Sec.  5.    When  used  in  this  act  the 
words  herein  mentioned   shall   be   defined   as   follows : 
"Packages"  shall  mean  any  box,  basket,  barrel,  drum, 
or  crate  used  as  a  container  or  subcontainer  for  fruits 
or  vegetables.     "Pack,  packing  or  packed"  shall  mean 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  115 

the  regular  compact  arrangement  of  all  or  part  of  the 
fruit  or  vegetables  in  any  container  or  subcontainer  used 
for  the  purpose  of  sale  or  transportation  for  sale. 
"Deceptive  pack"  shall  mean  any  package  of  fruits  or 
vegetables,  which  has  in  the  outer  layer  or  the  exposed 
surface  fruit  or  vegetables  which  are  so  superior  in 
quality  or  condition  to  those  in  the  interior  of  the  pack- 
age, or  the  unexposed  portion,  as  to  materially  misrepre- 
sent the  entire  contents.  "Fresh  fruit  (except  oranges) 
or  fresh  vegetables"  shall  mean  the  fresh  product  of 
any  tree,  vine  or  plant  mentioned  in  this  act.  "Mature" 
shall  mean  a  degree  of  ripeness  fit  for  shipment.  "Vir- 
tually uniform  in  size"  shall  mean  in  the  case  of  packed 
fruits  a  difference  in  size  of  the  various  fruits  as  follows : 
pears,  peaches  and  quinces,  a  variation  of  not  more  than 
one-quarter  of  an  inch  when  measured  through  widest 
portion  of  cross  section;  apricots,  plums,  prunes,  cher- 
ries and  berries,  a  variation  of  not  more  than  one-eighth 
of  an  inch  when  measured  through  widest  portion  of 
cross  section.  "Virtually  free"  from  insect  and  fungous 
pests,  rots,  bruises,  frost  injury,  sunburn  and  other 
serious  defects,  shall  mean  that  the  total  defects  shall 
not  exceed  ten  per  cent  in  any  one  package  of  fruits  or 
vegetables,  and  excepting  grapes  that  there  shall  not  be 
more  than  three  per  cent  of  any  one  defect.  "By- 
product" shall  mean  any  product  manufactured  from 
fresh  fruits,  fresh  vegetables,  or  their  juices.  "County" 
shall  include  in  its  meaning  a  consolidated  city  and 
county.  ' '  Container ' '  shall  mean  any  box,  crate  or  other 
package  utilized  in  handling  fresh  fruit  or  vegetables. 
"Subcontainer"  shall  mean  any  basket  or  other  recep- 
tacle used  within  a  container.  "Substantially  colored" 
shall  mean  at  least  seventy  per  cent  color. 

(d)  Specifications  for  Standard  Containers. — Sec.  6. 
Standard  containers  are  hereby  established  as  follows: 

(1)  Standard  apricot,  plum  and  grape  basket,  ap- 
proximately eight  inches  square  on  top,  six  and  one-half 


116  BUSINESS  LAW  FOR  BUSINESS  MEN. 

inches  on  bottom  and  four  inches  deep,  inside  measure- 
ments. 

(2)  Standard  berry  baskets,  dry  pint  containing  an 
interior  capacity  of  approximately  thirty-three  and  six- 
tenths  cubic  inches  and  dry  one-half  pint  containing  in- 
terior capacity  of  approximately  sixteen  and  eight-tenths 
cubic  inches. 

(3) 

Depth          Width          Length 
inside          inside          outside 

Standard  pear  box 8y2"  Il.y2"  193/4" 

Half  pear  box 4y2"  Iiy2"  1934" 

Standard  peach  box 4=y±"  Iiy2"  19%" 

Standard  peach  box 4V2"  Iiy2"  193,4" 

Standard  peach  box 43/4"  Hi/2"  193/4" 

Standard  crates  41/4"  16     "  17y2" 

Standard  crates  4y2"  16    "  17ya" 

Standard  crates  4%"  16     "  17  y/' 

(4)  Standard  grape  crates 414"  16  .  "  17y2" 

with  heavy  cleat  11/16" 
by  11/16?"  * 

(5)  Standard  grape  drum 14    "      15^"      

containing   2923   cu.  in. 

(6)  Standard  grape  keg 

containing  2923  cu.   in. 

(7)  Standard  lug  box 53/4" 

(8)  Standard  cherry  lug 41/2" 

(Sy2)  Standard  cherry  lug 4y2" 

(9)  Standard  cherry  box 2*4" 

(10)  Standard  cantaloupe  crates,  twelve  inches  by 
twelve  inches  by  twenty-two  and  one-half  inches,  to  be 
packed  with  thirty-six  or  forty-five  cantaloupes;  four 
inches  by  twelve  inches  by  twenty- two  and  one-half 
inches,  to  be  packed  with  twelve  or  fifteen  cantaloupes ; 
eleven  inches  by  eleven  inches  by  twenty-two  and  one- 
half  inches,  to  be  packed  with  forty-five  or  fifty-four 
cantaloupes ;  thirteen  inches  by  thirteen  inches  by  twenty - 
two  and  one-half  inches,  to  be  packed  witli  thirty-six  or 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  117 

forty-five  cantaloupes ;  four  and  one-half  by  thirteen  and 
one-half  by  twenty- two  and  one-half  inches,  containing 
twelve  or  fifteen  cantaloupes. 

(e)  Labels  for  Fruit  Containers, — Sec.  7.  -  All  con- 
tainers of  fruit  of  a  kind  specified  in  this  act,  except  sub- 
containers,  when  packed  and  offered  for  sale,  shall  bear 
upon  them  in  plain  sight  and  in  plain  letters  on  the  out- 
side thereof  the  following:    Name  of  the  orchard  where 
the   same  was   produced,   with   the   post-office   address 
thereof,  or  the  name  and  post-office  address  of  the  per- 
son, firm,  company  or  corporation,  or  organization  who 
shall  have  first  packed  or  authorized  the  packing  of  the 
same,  or  the  name  under  which  such  packer  shall  be  en- 
gaged in  business,  together  with  the  post-office  address 
of  such  packer ;  name  of  variety  if  known,  and  when  not 
known   the   words    "unknown   variety;"   minimum   net 
weight  or  approximate  number  of  fruits  in  the  container 
or  subcontainer,  which  number  shall  be  within  four  of 
the  true  count,  and  no  container  or  subcontainer  shall 
have  less  than  the  minimum  stamped  thereon.     "When 
two  or  more  varieties  are  packed  or  placed  in  a  container, 
they  shall  be  labeled  "mixed  varieties;"  provided,  that 
pears  and  peaches,  when  packed,  shall  have  the  correct 
number  within  four  placed  on  the  container. 

Standard  or  other  containers  when  used  as  subcon- 
tainers  are  exempt  from  the  provisions  regarding  mark- 
ing, when  the  container  in  which  they  are  placed  is 
marked  in  compliance  with  the  terms  of  this  section. 
No  containers  or  subcontainers  of  fresh  fruits  or  vege- 
tables shall  bear  grade  or  other  designations  that  are  in 
any  way  false  or  misleading. 

(f)  Standard  Containers. — Sec.  8.    After  January  1, 
1920,  all  fresh  fruits  of  the  kinds  specified  in  'this  act, 
except  such  as  shall  be  used  in  the  manufacture  of  by- 
products, when  prepared  or  offered  for  sale  or  sold,  shall 
be  packed  or  placed  in  standard  containers,  which  are 
hereby  established,  and  shall  conform  to  all  provisions  of 
this  act;  provided,  that  other  sized  containers  may  bo 


118  BUSINESS  LAW  FOR  BUSINESS  MEN. 


used  if  conspicuously  marked  in  letters  not  less  than  one- 
quarter  inch  high,  "irregular  container." 

(g)  Standard  for  Grapes  and  Oranges. — Sec.  9.  In 
addition  to  the  standards  prescribed  in  section  two  of 
this  act,  table  grapes  shall  show  a  sugar  content  of  not 
less  than  seventeen  per  cent  Balling  scale,  except  Em- 
peror, Gros  Coleman  and  Cornichon,  which  shall  show 
not  less  than  sixteen  per  cent  Balling  scale.  Oranges 
shall  be  deemed  properly  matured  for  shipment  or  sale 
under  the  provisions  of  this  act  when  the  juice  contains 
soluble  solids  equal  to  or  in  excess  of  eight  parts  to  every 
part  of  acid  contained  in  the  juice,  the  acidity  of  the  juice 
to  be  calculated  as  citric  acid  without  water  of  crystalliza- 
tion; provided,  that  the  oranges  have  attained  at  least 
twenty-five  per  cent  yellow  or  orange  color  before  picking, 
and  oranges  which  are  substantially  or  at  least  seventy 
per  cent  colored  at  the  time  of  picking  shall  be  deemed 
properly  matured  for  shipment  or  sale,  irrespective  of 
analysis  of  the  juice.  When  packed,  shipped,  delivered  for 
shipment,  offered  for  sale  or  sold,  oranges  shall  be  vir- 
tually free  from  insect  and  fungous  diseases  and  other 
serious  defects.  Oranges  shall  be  considered  unfit  for 
shipment  when  frosted  to  the  extent  of  endangering  the 
reputation  of  the  citrus  industry,  if  shipped.  The  fore- 
going provisions  shall  not  apply  to  shipments  of  oranges 
to  foreign  countries  other  than  the  dominion,  of  Canada, 
during  any  season,  provided  such  shipments  are  made 
after  the  first  day  of  November. 

(h)  Inspectors  of  Fresh  Fruit  and  Vegetables.— 
Sec.  10.  The  office  of  "inspector  of  fresh  fruit  and  vege- 
tables" is  hereby  created  for  each  and  every  county  in 
the  state.  The  horticultural  commissioner  of  each  county, 
and  all  deputy  horticultural  commissioners  shall  be  ex 
officio  inspectors  of  fresh  fruits  and  vegetables  thereof, 
and  the  inspectors  under  each  county  horticultural  com- 
missioner are  ex  officio  "deputy  inspectors  of  fresh  fruits 
and  vegetables"  in  their  respective  counties.  The  county 
horticultural  commissioner  shall  appoint  as  many  deputy 
"inspectors  of  fresh  fruits"  as  are  necessary  to  carry 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  119 

out  the  provisions  of  this  act.  Their  term  of  office  shall 
be  for  such  time  as  is  deemed  necessary  by  said  board 
of  supervisors.  The  offices  of  "inspectbrs  in  chief  of 
fresh  fruits  and  vegetables"  are  hereby  created,  and  the 
state  commissioner  of  horticulture  and  his  chief  deputy, 
for  the  purposes  of  this  act,  are  hereby  made  ex  officio 
such  inspectors  in  chief.  It  shall  be  the  duty  of  the  "ex 
officio  inspectors  in  chief  of  fresh  fruits  and  vegetables" 
to  secure  strict  and  uniform  enforcement  of  the  pro- 
visions of  this  act  throughout  the  state,  and  for  that  pur- 
pose, immediately  after  this  act  becomes  a  law,  the  state 
commissioner  of  horticulture  shall  appoint  two  state  in- 
spectors of  fresh  fruits  and  vegetables,  each  of  whom 
shall  receive  a  salary  of  two  thousand  four  hundred  dol- 
lars per  annum  and  necessary  traveling  expenses  when 
engaged  in  the  duties  of  enforcing  this  act. 

(i)  Appointment  and  Compensation. — Sec.  11.  If  in 
any  county,  or  city  and  county,  of  this  state  there  is  no 
commissioner  of  horticulture,  it  shall  be  the  duty  of  the 
board  of  supervisors  thereof  to  appoint  an  inspector  of 
fresh  fruits  and  vegetables  and  such  deputy  inspectors  of 
fresh  fruits  and  vegetables  as  shall  be  deemed  necessary. 
Such  inspectors  and  deputy  inspectors  of  fresh  fruits 
and  vegetables  shall  be  appointed  to  serve  for  such  time 
during  each  year  as  fresh  fruits  and  vegetables  are  being 
packed  or  shipped  in  said  county,  or  city  and  county. 
Inspectors  of  fresh  fruits  and  vegetables  thus  appointed 
shall  receive  six  dollars  per  day  and  necessary  traveling 
expenses.  The  salary  of  a  deputy  inspector  of  fresh 
fruits  and  vegetables  shall  be  five  dollars  per  day  and 
necessary  traveling  expenses.  In  case  the  board  of 
supervisors  of  any  county,  or  city  and  county,  shall  fail 
or  neglect,  for  thirty  days  after  receipt  of  a  written  re- 
quest from  the  state  commissioner  of  horticulture,  to 
appoint  an  inspector  of  fresh  fruits  and  vegetables,  or 
necessary  deputy  inspectors  of  fresh  fruits  and  vege- 
tables for  such  county,  or  city  and  county,  then  the  said 
state  commissioner  of  horticulture  shall  forthwith  assign 


120  BUSINESS  LAW  FOR  BUSINESS  MEN. 

to  said  county,  or  city  and  county,  one  or  more  deputy 
state  commissioners  of  horticulture,  as  lie  shall  deem 
necessary,  and'such  deputy  or  deputies  shall  perform  all 
of  the  duties  within  the  said  county,  or  city  and  county, 
to  which  assigned,  as  are  provided  in  this  act  to  be  per- 
formed by  an  inspector  of  fresh  fruits  and  vegetables. 
The  actual  cost  of  services  rendered  by  an  inspector  or 
deputy  inspector,  as  the  case  may  be,  of  fresh  fruits  and 
vegetables,  assigned  to  any  county  in  pursuance  hereof, 
together  with  his  necessary  traveling  expenses,  shall  be 
a  county  charge  and  shall  be  paid  in  the  same  manner  in 
which  other  claims  against  the  county  are  paid. 

(j)  Powers  and  Duties  of  Inspector. — Sec.  12.  Every 
inspector  of  fresh  fruits  and  vegetables  and  every  deputy 
inspector  of  fresh  fruits  and  vegetables  shall  have  power 
to  enter  and  to  inspect  every  place  within  the  county  for 
which  he  has  been  appointed  where  any  fruit  or  vege- 
tables mentioned  in  this  act  are  produced,  stored,  packed, 
shipped,  delivered  for  shipment,  offered  for  sale  or  sold, 
and  to  inspect  such  places  and  'all  such  fruits  and  vege- 
tables and  the  containers  thereof  and  the  equipment 
found  in  any  such  places.  It  shall  be  the  duty  of  the 
inspectors  or  deputy  inspectors  of  fresh  fruit  or  vege- 
tables in  their  respective  districts  to  enforce  the  pro- 
visions of  this  act  and  to  cause  the  prosecution  of  any 
person,  firm,  corporation  or  organization,  whom  they 
know  or  have  reason  to  believe  to  be  guilty  of  the  viola- 
tion of  any  of  its  provisions.  Any  inspector  or  deputy 
inspector  of  fresh  fruits  and  vegetables  in  the  per- 
formance of  his  duties  shall  have  the  same  powers  pos- 
sessed by  peace  officers  of  the  city,  county,  or  state,  and 
shall  have  the  right  while  exercising  such  police  powers 
to  seize  and  hold  as  evidence  part  or  all  of  any  pack, 
load,  consignment  or  shipment  of  fresh  fruits  or  vege- 
tables packed  in  violation  of  this  act,  as  may  in  his  judg- 
ment be  necessary  to  secure  the  conviction  of  the  party 
he  knows  or  believes  has  violated  or  is  violating  any  of 
the  provisions  of  this  act.  He  may  start  proceedings  in 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  121 

any  court  of  the  county,  or  city  and  county,  within  his 
jurisdiction  to  secure  the  conviction  of  the  party  or 
parties  who  have  violated  any  of  the  provisions  of  the 
act.  It  shall  be  the  duty  of  the  district  attorney  of  said 
county,  or  city  and  county,  in  which  any  violation  of  this 
act  may  occur,  to  prosecute  the  person,  firm,  company, 
organization  or  corporation  accused  of  such  violation  and 
also,  at  the  request  of  the  state  commissioner  of  horti- 
culture, or  any  one  of  his  deputies,  to  institute  and  prose- 
cute such  action  for  condemnation  as  may  be  authorized 
under  the  provisions  of  this  act. 

(k)  Refusal  to  Ship. — Sec.  13.  It  shall  be  lawful  for 
any  fresh  fruit  or  vegetables  forwarding  person,  firm, 
corporation  or  organization  and  for  any  common  carrier 
to  decline  to  ship  or  transport  any  fresh  fruits  or  vege- 
tables, which  upon  inspection  are  found  to  be  packed  in 
violation  of  the  provisions  of  this  act,  and  any  such  fruit 
or  vegetables  forwarder  or  common  carrier  may  reserve 
the  right  in  any  receipt,  bill  of  lading  or  other  writing 
given  to  the  consignor  thereof,  to  reject  for  shipment  and 
to  return  to  such  consignor  or  hold  at  the  expense  and 
risk  of  the  latter  all  fresh  fruits  or  vegetables  which  upon 
inspection  are  found  to  be  packed  in  violation  of  the  pro- 
visions of  this  act. 

(1)  Penalty  for  Violation. — Sec.  14.  It  shall  be  un- 
lawful for  any  person,  firm,  company,  organization  or 
corporation,  to  pack  or  cause  to  be  packed  for  sale  or 
shipment,  import,  sell,  offer  for  sale,  or  deliver  for  ship- 
ment any  of  the  fresh  fruits  or  vegetables  specified  in 
this  act  that  do  not  conform  to  the  standards  herein  pro- 
vided. It  shall  also  be  unlawful  to  prepare,  sell  or  offer 
for  sale,  a  deceptive  pack  of  fresh  fruits,  fresh  vegetables 
or  dried  fruits  or  dried  vegetables  or  to  mislabel  any 
package  of  any  such  fruits  or  vegetables.  Any  person, 
firm,  corporation,  company  or  organization  who  shall  vio- 
late any  of  the  provisions  of  this  act  shall  be  deemed  to 
be  guilty  of  a  misdemeanor. 


122  BUSINESS  LAW  FOE  BUSINESS  MEN. 

Sec.  15.  All  laws  in  conflict  with  this  act  arc  hereby 
repealed. 

(m)  Constitutionality. — Sec.  1C.  If  any  section,  sub- 
section, sentence,  clause  or  phrase  of  this  act  is  for  any 
reason  held  to  be  unconstitutional,  such  decision  shall 
not  affect  the  validity  of  the  remaining  portions  of  this 
act.  The  legislature  hereby  declares  that  it  would  have 
passed  this  act,  and  each  section,  subsection,  sentence, 
clause,  or  phrase  thereof,  irrespective  of  the  fact  that 
any  one  or  more  sections,  subsections,  sentences,  clauses 
or  phrases  be  declared  unconstitutional. 

Act  of  the  Legislature,  approved  May  27,  1919; 
in  effect  July  27,  1919,  January  1,  1920. 

Section  63. — APPLES — STANDAKD  GRADES  AND  BOXES.— 
The  following  standard  grades  and  standard  box  are 
hereby  established  for  apples,  packed,  shipped,  delivered 
for  shipment,  offered  for  sale  or  sold,  in  the  State  of 
California : 

(a)  "California  Fancy."— The  "California  fancy" 
grade  shall  consist  of  apples  of  well-grown,  properly 
matured  specimens  of  one  variety,  hand  picked,  with 
stems  retained  therein,  either  in  whole  or  in  part,  well 
colored  and  normally  shaped  for  the  variety  and  locality 
where  produced,  uniform  in  size,  well  packed,  and  shall 
be  free  from  insect  pests,  diseases,  visible  rot,  visible  dry 
rot,  visible  Baldwin  spot,  insect  bites,  bruises  and  other 
defects,  except  such  bruises  and  defects  as  are  necessarily 
caused  in  the  operation  of  packing,  and  virtually  free 
from  dirt;  provided,  liowever,  that  a  variation  from  the 
said  standard,  as  to  insect  pests,  diseases,  dry  rot,  Bald- 
win spot,  insect  bites,  bruises  and  other  defects,  shall  be 
allowed,  not  to  exceed  ten  per  cent  total  of  such  defects 
in  any  one  package,  nor  to  exceed  three  per  cent  of  any 
one  such  defect ;  and  provided,  further,  that  a  variation 
in  size  of  the  apples  shall  be  allowed,  not  to  exceed  three- 
eighths  of  one  inch,  when  measured  through  widest  por- 
tion of  cross  section  thereof,  and  that  no  apples  less 


Section  63,  page  122— APPLES,  STANDARD  GRADES  AND  BOXES. 

(a)  Among  defects  which  the   "California   Fancy"   grades   must  be   free 
from  is  added  "skin  broken  at  stem,"  and  the  total  variation  in  any  one  pack- 
age shall  not  exceed  5%  of  any  one  defect. 

(b)  In  the  "B  Grade"  scab  spots  on  any  one  apple  not  larger  than  one- 
fourth  inch  in  diameter  in  the  aggregate  are  now  permitted;  and  a  variation 
from  the  standard  is  permitted  of  five  per  cent  in  any  one  defect. 

(c)  In  the  "C  Grade"  scab  spots  on  any  one  apple  not  larger  than  one- 
fourth  inch  in  diameter  in  the  aggregate  are  now  permitted;  and  a  variation 
of  not  to  exceed  five  per  cent  of  any  one  defect. 

(d)  On  each  container  of  apples  which  has  been  held  in  cold  storage  for 
more  than  fifteen  days  after  being  packed,  there  must  be  a  statement  showing 
the  fact  that  the  contents  have  been  held  in  cold  storage. 

(e)  The  term  "five  tiers"  shall  mean  an  apple  not  smaller  in  size  than 
one  and  seven-eighths  inches  nor  larger  than  two  and  one-fourth  inches. 

(f)  The  Director  of  Agriculture  of  California  is  charged  with  the  enforce- 
ment of  the  law  with  reference  to  apples. 

(g)  Infected  apples.     No  person,  firm,  company,  organization  or  corpo- 
ration shall  import  into  this  state  or  sell,  barter,  offer  for  sale,  or  have  in  his 
possession  for  sale  any  apples  infected  with  any  insect  pest  or  the  pupae  or 
larvae  thereof  or  any  disease;  provided,  however,  that  this  section  shall  not 
be  construed  to  prevent  a  grower  of  fruits  so  infected  in  the  State  of  Califor- 
nia from  selling  the  same  as  a  part  of  his  crop  in  bulk,  to  a  packer,  or  to  pre- 
vent a  grower  or  packer  from  manufacturing  the  same  into  an  apple  by-pro- 
duct or  from  selling  the  same  to  any  person  for  the  express  and  sole  purpose 
of  such  manufacture. 

(h)  Penalty.  Any  person,  firm,  company,  organization  or  corporation, 
who  shall  violate  any  of  the  provisions  of  this  act  shall  be  punishable  by  a 
fine  of  not  less  than  fifty  dollars  nor  more  than  five  hundred  dollars,  or  by 
imprisonment  in  the  county  jail  for  a  period  of  not  more  than  six  months,  or 
by  both  such  fine  and  imprisonment. 

(i)  Guaranty.  No  conviction  of  a  violation  of  the  law  can  be  had  if  a 
written  guaranty  is  shown,  signed  by  the  original  packer  or  re-packer.  The 
guaranty  must  be  in  the  following  form:  "The  undersigned  guarantees  that 
(this  box  or  other  package  of  apples  or  the  boxes  or  other  packages  of  apples 
mentioned  in  this  or  the  attached  invoice,  or  all  boxes  or  other  packages  of 
apples  packed  or  repacked  by  the  undersigned),  comply  in  all  respects  with 
the  California  standard  apple  act.  (Signature  of  the  packer,  with  statement 
as  to  whether  packer  is  firm,  company,  organization  or  corporation  and  busi- 
ness address.)" 

Where  the  guaranty  is  used  on  each  separate  box,  it  may  consist  of  the 
legend,  "guaranteed  by  the  packer,  under  the  California  standard  apple  act," 
printed,  stamped  or  written  on  the  labeled  or  branded  end  of  the  package.  Act 
of  the  Legislature  of  California,  approved  June  3,  1921;  in  effect  August  3 
1921. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  123 

than  two  arid  one-fourth  inches  when  measured  in  like 
manner,  shall  be  placed  in  "California  fancy"  grade  ex- 
cept Lady  and  Winesap  apples,  when  the  smallest  size 
shall  be  not  less  than  two  inches  when  measured  in  like 
manner. 

(b)  "B  Grade."— The  "B  grade"  shall  consist  of 
apples  of  well-grown,  properly  matured  specimens  of 
one  variety,  hand  picked,  uniform  in  size,  well  packed, 
free  from  insect  pests,  diseases,  visible  rot,  visible  dry 
rot,  visible  Baldwin  spot,  insect  bites,  sun  scald  and  frost 
bite  more  than  skin  deep,  and  bruises  resulting  in  the 
breaking  of  the  skin,  and  virtually  free  from  dirt;  pro- 
vided, however,  that  insect  bites  which  have  healed  in 
the  process  of  maturity  of  the  apple,  and  which  do  not 
cause  serious  deformity,  and  slightly  misshapen  apples, 
shall  be  permitted  in  this  grade,  that  a  variation  in  size 
of  the  apples  shall  be  allowed,  not  to  exceed  three-eighths 
of  one  inch  when  mea'sured  through  widest  portion  of 
cross  section  thereof,  and  that  a  variation  from  the  said 
standard,  as  to  insect  pests,  diseases,  dry  rot,  Baldwin 
spots,  bruises  and  other  defects,  shall  be  allowed,  not  to 
exceed  ten  per  cent  total  of  such  defects  in  any  one  pack- 
age, nor  to  exceed  three  per  cent  of  any  one  such  defect. 

(c)  "C  Grade."— Tine  "C   grade""  shall   consist  of 
apples  of  properly  matured  specimens  of  one  variety, 
free  from  insect  pests,  visible  rot,  visible  dry  rot,  visible 
Baldwin  spots  and  diseases*  provided,  however,  that  a 
variation  from  said  standard  as  to  insect  pests,  dry  rot, 
Baldwin   spots   and  diseases,   shall  be  allowed,  not  to 
exceed  ten  per  cent  total  of  such  defects  in  any  one  pack- 
age, nor  to  exceed,  three  per  cent  of  any  one  such  defect. 

(d)  Standard  Container. --The   standard   container 
shall  be  a  box  of  the  following  dimensions,  inside  meas- 
urements, w^hen  measured  without  distention  of  parts: 
Depth  of  end,  ten  and  one-half  inches;  width  of  end, 
eleven  and  one-half  inches ;  length  of  box,  eighteen  inches, 
jtnd  having  a  cubical  content  of  as  nearly  as  possible  two 
thousand  one  hundred  seventy-three  and  one-half  cubic 


124  BUSINESS  LAW  FOB  BUSINESS  MEN. 

inches. 

(e)  Use  After  July  1,  1920.— On  and  after  July  1, 
1920,  all  packed  apples,  when  shipped,  offered  for  sale 
or  sold,  shall  be  placed  in  the  standard  box  herein  de- 
scribed; provided,  however,  that  other  size  containers 
may  be  used  if  conspicuously  marked  in  letters  not  less 
than  one-half  inch  high  "irregular  container." 

(f)  Labelling  of  Container. — Every  packed  container 
of  apples  shipped,  delivered  for  shipment,  offered  for 
sale  or  sold,  in  the  State  of  California,  shall  bear  upon 
the  outside  thereof,  and  on  the  end,  in  plain  words  or 
figures  and  in  the  English  language,  the  following:    The 
grade  of  the  apples  therein  contained,  as  herein  defined, 
the  designation  of  grade,  when  the  stamps  hereinafter 
provided  for  are  not  used,  being  stated  in  letters  not 
smaller  than  thirty-six  point  type,  that  is,  not  less  than 
one-half  inch  in  height;  the  number  of  apples  contained 
in  the  package,  or  the  minimum  weight  of  the  apples  con- 
tained therein ;  the  variety  of  the  apples  contained  in  the 
package,  unless  the  variety  be  unknown  to  the  packer,  in 
which  case  the  variety  shall  be  stated  as  unknown;  the 
name  and  business  address  of  the  person,  firm,  company, 
organization  or  corporation  who  first  packed  or  caused 
the  same  to  be  packed,  and,  if  repacked,  the  name  and 
business  address  of  the  person,  firm,  company,  organiza- 
tion or  corporation  who  repacked  the  same  or  caused 
same  to  be  repacked;  the  date  when  such  apples  were 
first  packed,  or  if  repacked,  the  date  of  repacking;  pro- 
vided, however,  that  a  variation  of  five  apples,  more  or 
less  than  the  number  stated,  shall  be  allowed. 

(g)  Definitions. — The  term  "packed,"  whenever  used 
in  this  act,  shall  mean  the  regular,  compact  arrangement 
of  all  or  a  part  of  the  fruit  in  any  container. 

The  terms  "three  and  one-half  tier,"  "four  tier," 
and  "four  and  one-half  tier,"  whenever  used  as  the 
designation  of  the  size  of  apples  sold  or  offered  for  sale, 
shall  have  the  following  meanings,  respectively,  to-wit: 
The  term  "three  and  one-half  tier"  shall  mean  an  apple 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  125 

larger  in  size  than  three  and  one-eighth  inches,  when 
measured  through  the  widest  cross  section  thereof;  the 
term  "four  tier"  shall  mean  an  apple  larger  in  size  than 
two  and  five-eighth  inches  but  not  larger  than  three  and 
one-eighth  inches,  when  so  measured ;  and  the  term  "four 
and  one-half  tier"  shall  mean  an  apple  not  smaller  in 
size  than  two  and  one-fourth  inches  nor  larger  than  two 
and  five-eighth  inches,  when  so  measured. 

The  term  "cross-section,"  whenever  used  in  this  act, 
shall  mean  the  section  of  an  apple  taken  at  a  right  angle 
to  a  straight  line  drawn  from  the  stem  end  to  the  blos- 
som end  thereof. 

(h)  Powers  and  Duties  of  Inspectors. — Every  in- 
spector shall  have  power  to  enter  and  to  inspect  any 
place  within  this  state  where  any  apples  are  produced, 
packed,  shipped,  delivered  for  shipment,  offered  for  sale 
or  sold,  and  to  inspect  such  places  and  all  such  apples 
and  the  containers  thereof  and  the  equipment  found  in 
any  such  place.  It  shall  be  the  duty  of  the  inspectors  to 
enforce  the  provisions  of  this  act  and  to  cause  the  prose- 
cution of  any  person,  company,  firm,  corporation  or  or- 
ganization, whom  he  knows  or  has  reason  to  believe  to 
be  guilty  of  the  violation  of  any  of  its  provisions.  Every 
inspector,  in  the  performance  of  his  duties,  shall  have 
the  same  powers  possessed  by  peace  officers  under  the 
laws  of  the  State  of  California. 

(i)  Refusal  to  Receive  or  Ship. — It  shall  be  lawful 
for  any  person,  firm,  corporation  or  organization  and  for 
any  common  carrier  to  refuse  to  accept  for  shipment  or 
transportation  and  to  refuse  to  ship  or  transport  any 
apples  which  upon  inspection  are  found  to  be  or  to  be 
packed  in  violation  of  any  of  the  provisions  of  this  act, 
and  any  such  person,  firm,  corporation,  organization  or 
common  carrier  may  reserve  the  right  in  any  receipt,  bill 
of  lading  or  other  writing  given  to  the  consignor  thereof, 
to  reject  for  shipment  and  to  return  to  such  consignor 
or  to  hold  at  the  expense  and  risk  of  the  latter  all  apples 
which  upon  inspection  are  found  to  be  or  to  be  packed 


126  BUSINESS  LAW  FOR  BUSINESS  MEN. 

in  violation  of  any  of  the  provisions  of  this  act. 

(j)  CpnstitutionaUty. — If  any  section,  subsection,  sen- 
tence, clause  or  phrase  of  this  act  is  for  any  reason  held 
to  be  unconstitutional  such  decision  shall  not  affect  the 
validity  of  the  remaining  portions  of  this  act.  The  legis- 
lature hereby  declares  that  it  would  have  passed  this  act, 
and  each  section,  subsection,  sentence,  clause  and  phrase 
thereof,  irrespective  of  the  fact  that  any  one  or  more 
other  sections,  subsections,  sentences,  clauses  or  phrases 
be  declared  unconstitutional. 

Act  of  the  Legislature,  approved  April  30,  1919 ; 
in  effect  July  22,  1919,  July  1,  1920. 

INSTALLMENT  SALES  OF  PERSONAL 
PROPERTY 

Section  64. — CONDITIONAL  SALES  OF  PERSONAL  PROP- 
EETY. — Where  personal  property  is  delivered,  under  a 
contract  for  payments  on  installments,  title  to  remain  in 
the  vendor  until  final  payment,  it  is  a  conditional  sale. 
The  title  to  the  property  does  not  pass  from  the  vendor, 
nor  vest  in  the  vendee,  until  the  contract  is  completed 
upon  the  payment  of  the  last  installment. 

Section  65. — LANGUAGE  OF  THE  CONTRACT. — It  makes 
no  difference  what  language  is  used  in  the  contract,  if  the 
intention  of  the  parties  is  to  be  seen,  that  the  vendor 
retains  the  title  until  the  money  is  paid.  The  paper  may 
be  called  a  ' '  deed, "  or  "  agreement, "  or  "  lease, ' '  and  the 
designation  will  not  affect  the  real  meaning  of  the  con- 
tract. It  is  only  a  conditional  sale,  no  more,  no  less, 
whatever  the  language  used  in  the  contract  may  be.  In 
the  case  of  Lundy  Furniture  Company  vs.  White,  our 
Supreme  Court  said,  "Where  goods  were  delivered  under 
a  contract,  designated  as  a  lease,  providing  for  a  monthly 
rental,  and  that  the  consent  of  the  seller  should  be  neces- 
sary for  the  removal  of  the  goods  from  the  purchaser's 
residence,  nnd  reserving  title  in  the  seller  until  full  pay- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  127 

iiient,  after  which  a  bill  of  sale  was  to  be  given,  the  trans- 
action was  a  conditional  sale,  and  the  title  remained  in 
the  seller.  The  name  by  which  the  parties  designate  their 
contract  is  not  determinative  of  its  nature.  The  calling 
of  this  agreement  a  'lease'  did  not  make  it  such.  The 
payments,  to  be  made  monthly  in  installments,  designated 
'rent,'  were  in  fact  nothing  but  partial  payments/' 
(Decided  by  the  Supreme  Court  of  California,  in  the  case 
of  Lundy  Furniture  Company  vs.  White,  which  decision 
is  printed  in  Volume  126  of  the  California  Eeports, 
page  170.) 

Section  66. — DEFAULT  IN  PAYMENTS. — It  is  the  duty  of 
the  vendee  to  make  payments  of  the  installments  when 
due.  He  has  no  right,  after  he  has  received  the  prop- 
erty, to  change  or  alter  in  any  way  the  terms  of  pay- 
ments. If  he  does  not  pay  when  due,  this  will  amount  to 
a  default  on  his  part,  and  a  breach  of  the  contract,  for 
which  the  vendor  may  take  immediate  action. 

Section  67. — SALE  BY  VENDEE  TO  ANOTHER  PERSON. — • 
The  party  receiving  the  property  has  no  right  to  sell  it 
until  the  purchase  price  is  paid.  If  the  vendee  sells  the 
property,  the  purchaser  from  him  obtains  no  title,  and 
the  original  vendor  may  recover  the  property.  The 
second  vendee  is  not  entitled  to  stand  in  any  better  situa- 
tion than  his  vendor  in  regard  to  the  title  of  the  prop- 
erty. And  where  the  owner  of  a  piano  sold  it  on  the 
installment  plan,  with  the  condition  that  the  titje  should 
remain  in  the  seller  until  final  payment,  and  the  vendee 
sold  the  piano  before  payment  of  the  final  installment, 
the  Supreme  Court  held  that  the  purchaser  from  him  got 
no  title,  and  the  true  owner  was  entitled  to  recover  his 
property.  (Decided  by  the  Supreme  Court  of  California 
in  the  case  of  Kohler  vs.  Hayes,  which  decision  is  printed 
in  Volume  41  of  the  California  Reports,  page  445.) 

Section  6S. — REMEDY  OF  SELLER  IN  CASE  OF  PUR- 
CHASER'S DEFAULT. — If  the  purchaser  fails  to  make  pay- 


128  BUSINESS  LAW  FOR  BUSINESS  MEN. 

ments  as  they  accrue,  and  lets  the  installments  or  any  of 
them  go  by  default,  the  seller  has  either  one  of  two 
remedies:  (1)  He  may,  upon  the  default  of  the  pur- 
chaser in  meeting  the  stipulated  payments,  or  any  of 
them,  treat  the  contract  as  no  sale,  and  take  the  property 
into  his  own  possession  again.  If  he  is  prevented  by  the 
purchaser  from  retaking  the  property,  he  may  go  into 
court  and  recover  it  in  a  suit  on  claim  and  delivery. 
(2)  Or,  the  seller  may  treat  the  sale  as  an  absolute  one, 
and  bring  a  suit  to  recover  each  installment  as  default 
is  made  in  payment;  in  which  case,  other  property  of 
the  buyer  (not  exempt  from  execution)  may  be  attached 
and  levied  upon  to  pay  the  judgment  obtained  against 
him.  (Decided  by  the  Supreme  Court,  in  the  case  of  Holt 
Manufacturing  Company  vs.  Ewing,  which  decision  is 
printed  in  Volume  109  of  the  California  Eeports,  page 
353.) 

Section  69. — MONEY  ALREADY  PAID. — It  is  lawful  for 
the  contract  to  provide  that  all  installments  paid  before 
default  shall  be  forfeited  as  damages  for  the  use  of  the 
property,  or  as  rent,  and  such  conditions,  if  fairly  en- 
tered into,  will  be  enforced  by  the  law  of  California. 
The  parties  to  a  conditional  installment  sale  have  the 
right  to  agree  upon  a  certain  sum  as  damages,  which  is 
called  "liquidated  damages,"  to  belong  to  the  seller  in 
case  of  default  on  the  part  of  the  purchaser. 
Civil  Code,  Section  1671. 

Section  70. — ABSOLUTE  SALE  ON  INSTALLMENTS. — A 
sale  of  personal  property,  the  purchase  price  to  be  paid 
in  installments,  may  be  made  without  any  other  con- 
ditions. In  this  case,  the  sale  is  absolute,  and  passes  the 
title  to  the  purchaser;  and  if  default  is  made,  the  seller 
has  no  right  to  retake  the  property ;  but  he  may  sue  and 
put  an  attachment  on  the  property  for  the  purchase  price. 

Section  71. — FORM  OF  CONDITIONAL  AGREEMENT. — The 
following  is  a  good  form  of  agreement  for  conditional 
sale  of  personal  property: 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  129 

San  Francisco,  California, ,  19 

I  promise  to  pay  to 

, Dollars,  at 

,  Cal.,  as  rent  for 


(Here  describe  property.) 


as  follows :  Dollars  before  delivery 

of  said  property  to  me,  and Dollars 

per  month  on  the day  of  each  and  every 

month  thereafter,  commencing  on  the 

day  of 19 ,  with  interest  on 

the  amount  unpaid  at  the  rate  of per  cent  per 

annum,  payable  monthly. 

I  acknowledge  the  receipt  of  said  property,  and  agree 
that  I  will  keep  the  same  in  good  order,  and  that  it  shall 

not  be  removed  from  No Street, 

in  the  City  of ,  without  the 

written  consent  of  said 

and  do  also  agree  that  until  the  sum  of 

Dollars  with  interest,  as  aforesaid, 

is  fully  paid,  said  property  is  the  property  of  said 

,  and  that  I  have  no 

right  to  dispose  thereof;  but  when  the  total  sum  of 

Dollars  and  interest  has  been  paid,  and 

not  until  then,  I  shall  receive  a  bill  of  sale  and  the  title  to 
said  property  shall  vest  in  me. 

I  also  agree  that  if  I  fail  to  pay  any  of  said  install- 
ments when  due,  or  perform  any  of  the  aforesaid  con- 
ditions, or  said  property  be  attached  or  levied  upon,  all 

of  said  sum  of Dollars  shall  in  any  of  said 

cases  immediately  become  due  and  payable,  and 

may  enforce  pay- 
ment of  the  entire  sum  then  unpaid  and  interest  thereon ; 
or  may,  if  he  so  elect,  rescind  this  executory  contract  and 
take  possession,  without  legal  process,  of  said  property, 
and  for  that  purpose  may  enter  any  premises  where  the 
same  may  be  (all  damages  for  said  entry  being  hereby 

expressly  waived) ;  and  thereupon,  if  said 

shall  elect  to  rescind,  and  shall  retake  said 

property,  he  shall  refund  the  money  paid  by  me,  if  any 


130  BUSINESS  LAW  FOR  BUSINESS  MEN. 

remains,  after  deducting  a  rental  for  use  of  said  prop- 
erty of. Dollars  per  month,  expenses  of 

taking  possession  and  removal,  and  twenty  per  cent  of 
total  sum  to  be  paid  for  liquidated  and  assessed  damages, 
which  rental,  expenses,  and  damages  I  promise  and  agree 

to  pay  said Said 

rental  dating  from  delivery  of  said  property  to  me. 

In  all  matters  herein  mentioned,  time  is  declared  to  be 
the  essence  of  this  contract. 

,  Vendee. 

I  agree  to  the  terms  of  the  foregoing  contract. 

,  Vendor. 

(a)  Form  of  Installment  Agreement  Where  Personal 
Property  Is  Attached  or  to  Be  Attached  to  a  Building.— 
Another  form  may  be  used,  if  it  is  for  the  conditional  sale 
of  property  attached  or  to  be  attached  to  a  building,  as 
follows : 

Los  Angeles,  Cal., ,  19 

I  promise  to  pay  to the  sum  of 

Dollars,  at 

as  rent  for 

(Here  describe  property.) 

as  follows : Dollars  before  delivery  of 

said  property  to  me,  and Dollars 

per  month  on  the day  of  each  and  every 

: month  thereafter,  commencing  on  the 

day  of ,  19 ,  with  interest  on 

the  amount  unpaid  at  the  rate  of per  cent  per 

annum,  payable  monthly. 

I  acknowledge  the  receipt  of  said  property,  and  agree 
that  I  will  keep  the  same  in  good  order,  and  that  it  shall 

not  be  removed  from  No Street, 

in  the  City  of ,  without  the 

written  consent  of  said 

The  said  property  is  to  be  attached  to  that  certain 
building  occupying  or  standing  on  the  following  described 
premises,  to-wit: 


BUSINESS  CONTBACTS  AND  LEGAL  OBLIGATIONS.  131 

(Here  describe  the  lot  or  tract  of  land;  if  in  a  city  or 
village,  describe  its  location  by  street  number,  if  known ; 
if  in  a  city  or  county  where  the  block  system  of  recording 
and  indexing  conveyances  is  in  use,  the  section  and  block 
within  which  it  is  located  must  be  given.) 

And  I  do  also  agree  that  until  the  sum  of 

Dollars  with  interest,  as  aforesaid,  is  fully  paid,  said 

property  is  the  property  of  said 

and  that  I  have  no  right  to  dispose  thereof ;  but  when  the 

total  sum  of 

Dollars  and  interest  has  been  paid,  and  not  until  then,  I 
shall  receive  a  bill  of  sale  and  the  title  to  said  property 
shall  vest  in  me. 

I  also  agree  that  if  I  fail  to  pay  any  of  said  install- 
ments when  due,  or  perform  any  of  the  aforesaid  condi- 
tions, or  said  property  be  attached  or  levied  upon,  all  of 

said  sum  of Dollars  shall  in  any 

of  said  cases  immediately  become  due  and  payable  and 

may  enforce  payment  of  the 

entire  sum  then  unpaid  and  interest  thereon;  or  may,  if 
he  so  elect,  rescind  this  executory  contract  and  take  pos- 
session, without  legal  process,  of  said  property,  and  for 
that  purpose  may  enter  any  premises  where  the  same  may 
be  (all  damages  for  said  entry  being  hereby  expressly 

waived) ;  and  thereupon,  if  said 

shall  elect  to  rescind,  and  shall  retake  said  property,  he 
shall  refund  the  money  paid  by  me,  if  any  remains  after 

deducting  a  rental  for  use  of  said  property  of 

Dollars  per  month,  expenses  of  taking  possession  and 
removal,  which  rental  and  expenses  I  promise  and  agree 

to  pay  said ,  said  rental  dating 

from  delivery  of  said  property  to  me. 

In  all  matters  herein  mentioned,  time  is  declared  to  be 
of  the  essence  of  this  contract. 

,  Vendee 

I  hereby  accept  the  above  contract  and  agree  to  its 
terms. " 

,  Vendor. 

(b)  Form  of  Installment  Agreement  for  Sale  of 
Machinery. — The  following  is  a  form  of  conditional  agree- 
ment for  the  sale  of  machinery : 


132  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Agreement  made  the day  of ,  19 , 

between ,  of ,  party  of 

the  first  part,  and ,  of , , 

party  of  the  second  part.     The  said  parties  mutually 
agree  as  follows : 

1.  In  consideration  of  payments  hereby  reserved,  and 
of  the  performance  of  the  conditions  and  stipulations 
hereinafter  contained,  and  on  the  part  of  the  said  party  of 
the  second  part  to  be  performed,  the  said  party  of  the  first 

part  will,  on  or  before  the day  of 

next,  erect  and  place  in  the  mill  of  the  said  party  of  the 

second  part  situated  at ,  in  the  County  of 

,  State  of 

the  machinery  particularly  described  in  the  schedule  here- 
to annexed,  and  hereafter  called  the  said  machinery. 

2.  The  said  party  of  the  second  part  shall  hold  and  be 
at  liberty  to  use  the  said  machinery  for  the  term  of 

years  from  the  said day  of. 

next,  at  the  rent  of dollars  per  annum,  payable 

half-yearly  on  the day  of ,  and  the 

day  of. ,  in  each  year  during 

the  continuance  of  the  said  term,  such  payments  making 

in  the  aggregate  the  sum  of dollars  (price  of 

the  machinery),  the  first  of  such  payments  to  be  made  in 
advance  on  the  said day  of ...next. 

3.  The  said  party  of  the  second  part  shall,  at  his  own 
expense,  from  time  to  time,  replace  and  repair  all  such 
parts  of  the  said  machinery  as  may  be  broken,  worn  out 
or  damaged,  and  keep  the  same  in  every  respect  in  good 
working  order;  and  he  will  not,  during  the  said  term, 
remove  any  part  of  the  said  machinery  from  the  building 
where  the  same  may  be  erected  without  the  consent  in 
writing  of  the  said  party  of  the  first  part,  and  will  not 
assign,  transfer,  underlet,  or  part  with  the  possession  of 
the  same,  either  directly  or  indirectly. 

4.  The  said  party  of  the  second  part  will  punctually 
pay  the  rents  hereby  reserved,  and  perform  all  the  condi- 
tions and  stipulations  herein  contained,  and  on  his  part  to 
be  performed ;  and  will  not  do  or  suffer  anything  whereby 
the  said  machinery  or  any  part  thereof  shall  or.  may  be 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  133 

seized,  taken  in  execution,  attached,  removed,  destroyed, 
or  injured. 

5.  The  said  party  of  the  second  part  shall  keep  said 
machinery  insured  against  damage  or  loss  by  fire  in  some 
office  to  be  approved  by  the  said  party  of  the  first  part 

for  at  least  the  sum  of dollars,  and  will 

pay  the  premiums  for  such  insurance,  and  will  forthwith 
deliver  to  the  said  party  of  the  first  part  the  policies  of 
such  insurance,  and  the  receipts  for  the  premiums  which 
shall  become  payable  therefor. 

6.  It  is  hereby  expressly  declared  that  the  property  in 
said  machinery  shall  remain  in  the  said  party  of  the  first 
party  to  all  intents  and  purposes ;  provided,  that  the  said 
machinery  shall  become  the  absolute  property  of  the  said 
party  of  the  second  part  on  the  expiration  of  the  said 
term,  and  payment  of  all  the  rent  hereby  covenanted  to 
be  paid,  and  all  costs,  charges,  and  expenses  provided  for 
under  this  agreement. 

7.  In  case  of  the  bankruptcy  of  the  said  party  of  the 
second  part,  or  in  case  he  shall  assign,  transfer,  or  mort- 
gage the  said  machinery,  or  any  part  thereof,  or  in  case 
he  shall  make  default  in  performing  and  observing  any 
of  the  covenants,  conditions,  or  agreements  herein  con- 
tained, the  said  aggregate  sum  of dollars 

shall  become  immediately  payable  to  the  said  party  of  the 
first  part,  and  he  may  at  his  option  enter  said  premises, 
and  every  building  in  which  any  part  of  the  said  machin- 
ery may  be,  and  take  possession  of  and  remove  the  said 
machinery. 

8.  The  said  machinery  is  to  be  attached  to  that  certain 
building  occupying  or  standing  on  the  following  described 
premises,  to-wit: 


(Here  describe  the  lot  or  tract  of  land  on  which  the 
mill  or  building  is  situated;  if  in  a  city  or  village,  de- 
scribe its  location  by  street  number,  if  known ;  if  in  a  city 
or  county  where  the  block  system  of  recording  and  index- 


134  BUSINESS  LAW  FOR  BUSINESS  MEN. 

ing  conveyances  is  in  use,  the  section  and  block  within 

which  it  is  located  must  be  given.) 

In  witness  whereof  the  parties  hereto  have  hereunto 

set  their  hands  and  seals  the  day  and  year  first  above 

written. 

(Seal.) 

( Seal. ) 

(c)  Assignment  of  Contract. — The  contract  may  be 
assigned,  if  there  is  nothing  in  its  terms  prohibiting  such 
assignment.    Under  the  contract  the  vendee  is  entitled  to 
the  possession  of  the  property,  and  to  become  the  abso- 
lute owner  thereof,  upon  complying  with  the  terms  of  the 
contract.    These  are  rights  of  which  he  cannot  be  divested 
by  any  act  of  the  vendor,  and  which  he  can  transfer  to 
another  in  the  absence  of  a  stipulation  in  the  contract  to 
the  contrary.  The  title  to  the  property  vests  in  the  vendee 
upon  the  performance  of  the  conditions  of  the  sale,  or  in 
his  assignee  in  the  event  that  he  has  transferred  his  inter- 
est therein.    He  cannot  sell  the  property  itself,  for  he  does 
not  own  it  until  final  payment.    But  he  can  assign  and 
transfer  to  another  his  interest  in  the  contract,  unless  the 
contract  itself  prohibits  such  transfer. 

(d)  Form  of  Assignment  of  Installment  Contract.— 
The  following  is  a  form  of  assignment  of  an  installment 
contract.    This  form  is  to  be  indorsed  on  the  contract,  or 
written  on  a  separate  paper  and  affixed  to  the  contract : 

Los  Angeles,  Cal., :..,  19 

For  value  received,  I  do  hereby  transfer,  assign  and 

convey  to ,  his  heirs  and  assigns 

forever,  all  my  right,  title,  and  interest  in,  to,  and  under 
the  within  instrument. 


STOPPAGE  IN  TRANSIT 

Section  72. — WHEN  SELLER  OR  CONSIGNOR  MAY  STOP 
GOODS  IN  TRANSIT. — A  seller  or  consignor  of  goods,  whose 
claim  for  its  price  has  not  been  paid,  may  stop  the  goods 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  135 

while  on  their  way  to  the  buyer  or  consignee,  and  may 
take  possession  of  the  goods.  He  may  do  this  whenever 
it  becomes  known  to  him,  after  parting  with  the  prop- 
erty, that  the  buyer  or  consignee  is  insolvent.  A  person 
is  insolvent,  in  the  meaning  of  the  law,  when  he  ceases  to 
pay  his  debts  in  the  manner  usual  with  persons  of  his 
business,  or  when  he  declares  his  inability  or  unwilling- 
ness to  pay  his  debts.  The  property  can  be  stopped  only 
by  notice  to  the  carrier  or  holder  of  the  goods,  or  by  tak- 
ing actual  possession  of  the  goods.  As  the  taking  of 
actual  possession  will  be  ordinarily  impossible,  where  the 
goods  are  on  the  way  to  the  buyer  or  consignee  on  board 
ears  or  vessels,  a  notice  to  the  carrier  not  to  deliver  the 
goods  will  be  sufficient  to  stop  them;  and  if  the  carrier, 
notwithstanding  such  notice,  delivers  the  goods  to  the 
buyer  or  consignee,  the  carrier  will  be  liable  to  the  seller 
or  consignor  in  damages.  The  property  can  only  be 
stopped  while  in  transit.  The  transit  of  property  is  at 
an  end  when  it  comes  into  the  possession  of  the  consignee, 
or  into  the  possession  of  his  agent  to  receive  it.  There- 
fore, if  the  seller,  after  shipping  the  goods,  discovers 
that  the  consignee  is  insolvent  (that  he  has  ceased  to  pay 
his  debts  in  the  usual  manner,  or  has  declared  his  inabil- 
ity or  unwillingness  to  pay  his  debts),  he  must  act 
promptly  in  order  to  stop  the  goods,  and  must  give  notice 
to  the  carrier  not  to  make  delivery.  The  sale  of  the  goods 
is  not  rescinded  by  stopping  them  in  transit.  The  seller 
simply  resumes  his  vendor's  lien  for  the  price  of  the 
goods,  and,  if  the  consignee  comes  forward  and  pays  the 
sum  due  on  the  purchase  price,  the  goods  must  be  released 
nnd  allowed  to  proceed  on  their  way.  The  seller,  by  stop- 
ping the  goods  in  transit,  does  not  become  again  the 
owner.  He  has  parted  with  the  title,  but  he  again  comes 
into  possession,  and  holds  the  goods  for  the  unpaid  price. 
The  carrier,  after  notice  to  stop,  must  deliver  the  goods 
to  the  vendor,  and  the  vendor  will  then  hold  the  property 
until  the  expiration  of  the  credit  given,  and  may  then  pro- 
ceed to  give  notice  and  sell  them  again. 


£,  i  V  \j     J_H_/UIV^     ClllVl      O^ll      tlICJ.il      "  .—  ' 


136  BUSINESS  LAW  FOR  BUSINESS  MEN. 

(a)  What  Will  Defeat  Vendor's  Right  to  Stop  Goods. 
The  right  of  stoppage  in  transit  belongs  only  to  one 
occupying  in  some  way  the  relation  of  vendor  toward 
the  consignee  of  the  goods.  And  where  the  goods 
are  transferred  by  the  vendee  to  a  bona  fide  purchaser 
for  value,  this  will  defeat  the  vendor's  right  to  stop  the 
goods.  Where  the  buyer  has  possession  of  the  bill  of 
lading,  with  the  consent  of  the  seller,  and  indorses  it  to 
a  bona  fide  purchaser  of  the  goods, — to  one  who  has  no 
notice  of  the  seller's  claim  or  the  buyer's  insolvency,  and 
who  pays  value  for  the  goods, — this  will  defeat  the  right 
to  stop  the  goods.  The  consignee  may  intercept  the 
goods  on  the  way,  and  take  possession  of  them,  at  a  dif- 
ferent station  or  place  from  that  of  their  destination,  and 
the  consignor's  right  of  stoppage  will  be  lost. 

WARRANTY  OF  PERSONAL  PROPERTY 

Section  73. — WAEEANTY  OF  TITLE. — A  warranty  is  an 
engagement  by  which  a  seller  assures  to  a  buyer  the 
existence  of  some  fact  affecting  the  transaction,  whether 
past,  present,  or  future.  A  warranty  of  the  character, 
condition,  or  quality  of  personal  property  arises  from 
contract,  either  express  or  implied.  The  parties  may 
expressly  state  the  warranty  they  agree  upon,  or  a  war- 
ranty may  arise  by  reason  of  some  obligation  which  the 
law  imposes  upon  the  parties  or  the  circumstances.  One 
who  sells  personal  property  as  his  own  thereby  warrants 
that  he  has  a  good  and  unencumbered  title  to  the  prop- 
erty. The  law  implies  this  warranty  from  the  fact 
of  sale. 

Civil  Code,  Section  1765. 

Section  74. — WARRANTY  ON  SALE  BY  SAMPLE. — One  who 
sells  or  agrees  to  sell  goods  'by  sample  thereby  warrants 
the  quality  of  the  bulk  to  be  equal  to  that  of  the  sample. 
Where  goods  are  sold  by  sample,  and  the  articles  are 
inferior  to  the  sample  shown,  the  purchaser  is  not  bound 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  137 

to  accept  the  goods,  for  that  would  be  to  force  upon  him 
goods  of  a  different  quality  from  that  which  he  bargained 
for.  In  a  sale  by  sample  the  law  implies  a  warranty  that 
the  bulk  of  the  property  sold  is  equal  to  the  sample  ex- 
hibited. This  warranty  constitutes  a  condition  of  the 
contract  of  sale,  and  in  such  case  the  delivery  of  the 
goods  to  the  carrier  for  transportation  to  the  buyer  does 
not  have  the  effect  of  passing  title  to  the  buyer.  In  order 
that  the  delivery  of  the  goods  to  the  carrier  shall  operate 
to  pass  the  title  to  the  consignee,  it  is  essential  that  the 
goods  so  delivered  shall  conform  in  quantity  and  quality 
with  the  order  given  for  them.  If,  therefore,  the  vendor 
sends  more  or  less  than  the  quantity  ordered,  or  of  a 
different  quality,  the  title  will  not  pass  unless  the  pur- 
chaser accepts  them.  (Decided  by  the  Supreme  Court  of 
California  in  the  case  of  Gardiner  vs.  McDonogh,  which 
decision  is  printed  in  Volume  28,  California  Decisions, 
page  776.) 

Civil  Code,  Section  1766. 

Section  75. — WARRANTY  ON  AGREEMENT  TO  SELL  MER- 
CHANDISE NOT  IN  EXISTENCE. — A  person  may  agree  to  sell 
merchandise  not  then  in  existence,  but  he  thereby  war- 
rants that  it  shall  be  sound  and  merchantable  at  the  place 
of  production  contemplated  by  the  parties ;  and  the  seller 
also  warrants  that  such  merchandise,  when  delivered, 
shall  be  as  nearly  sound  and  merchantable  at  the  place 
of  delivery  as  can  be  secured  by  reasonable  care. 
Civil  Code,  Section  1768. 

Section  76. — MANUFACTURER'S  WARRANTY  AGAINST  DE- 
FECTS.— One  who  sells  or  agrees  to  sell  an  article  of  his 
own  manufacture  thereby  warrants  it  to  be  free  from  any 
latent  defect,  not  disclosed  to  the  buyer,  arising  from  the 
process  of  manufacture ;  and  also  that  neither  he  nor  his 
agent  in  such  manufacture  has  knowingly  used  improper 
materials  therein;  and  one  who  manufactures  an  article, 
under  an  order  for  a  particular  purpose,  warrants  by 


138  BUSINESS  LAW  FOB  BUSINESS  MEN. 

the  sale  that  it  is  reasonably  fit  for  that  purpose;  so,  if 
it  turns  out  either  that  the  article  manufactured  is  de- 
fective, which  defect  was  not  apparent  or  disclosed  to 
the  buyer,  or  that  the  article  is  not  reasonably  fit  for  the 
purpose  for  which  it  was  ordered,  the  buyer  has  the  right 
to  rescind  the  sale,  by  returning  or  offering  to  return  the 
article  to  the  manufacturer. 

Civil  Code,  Sections  1769,  1770. 

Section  77. — WARRANTY  OF  SOUNDNESS. — One  who  sells 
or  agrees  to  sell  merchandise  not  open  to  the  examination 
of  the  buyer  thereby  warrants  that  such  merchandise  is 
sound  and  merchantable. 

Section  78. — WARRANTY  BY  TRADE-MARKS  AND  OTHER 
MARKS. — One  who  sells  any  article  to  which  there  is 
affixed  a  trn  de-mark  thereby  warrants  it  to  be  genuine 
and  lawfully  used.  And  one  who  sells  any  article  with  a 
statement  or  mark  on  it,  or  attached  to  it,  expressing  the 
quantity  or  quality  of  the  article,  or  stating  the  place 
where  it  wras  manufactured,  thereby  warrants  the  truth  of 
such  representations. 

Civil  Code,  Sections  1772,  1773. 

(a)  "Trade-Mark"  Defined. — The  phrase  "trade- 
mark," as  used  in  Section  40,  includes  every  description 
of  word,  letter,  device,  emblem,  stamp,  imprint,  brand, 
printed  ticket,  label,  or  wrapper,  usually  affixed  by  any 
mechanic,  manufacturer,  druggist,  merchant,  or  trades- 
man, to  denote  any  article  to  be  goods  imported,  manu- 
factured, produced,  compounded,  or  sold  by  him;  and 
also  any  name  or  names,  marks  or  devices,  branded, 
stamped,  engraved,  etched,  blown,  or  otherwise  attached 
or  produced  upon  any  cask,  keg,  bottle,  vessel,  siphon, 
can,  case,  or  package,  used  by  any  mechanic,  manufac- 
turer, druggist,  merchant,  or  tradesman,  to  hold,  contain 
or  enclose  the  goods  so  imported,  manufactured,  pro- 
duced, compounded,  or  sold  by  him. 
Political  Code,  Section  3196. 


Section  78,  page  139,  Sub-Division  (b),  "Business  Law  for  Business  Men" 
—RECORDING  TRADE-MARK— A  trade-mark  or  name  must  be  filed 
with  the  Secretary  of  State  and  also  in  the  office  of  the  County  Clerk;  and 
must  be  published  weekly  in  a  newspaper  for  three  successive  weeks.  Act  of 
the  Legislature  of  California,  approved  May  26,  1921;  in  effect  July  26,  1921. 

Section  82,  page  141 — The  act  of  1911  concerning  bottles,  boxes,  siphons 
and  kegs  is  repealed.  Act  of  the  Legislature  of  California,  approved  May  26, 
1921;  in  effect  July  26,  1921. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  139 

(b)  Record  in  fj  Trade-Marks. — Any   person  may  re- 
cord any  trade-mark  or  name  by  filing  with  the  secretary 
of  state  his  claim  to  the  same,  and  a  copy  or  description 
of  such  trade-mark  or  name,  with  his  affidavit  Attached 
thereto,  setting  forth  that  he  (or  the  firm  or  corporation 
of  which  he  is  a  member)  is  the  exclusive  owner,  or  agent 
of  the  owner,  of  such  trade-mark  or  name.    The  secretary 
of  state  must  keep  for  public  examination  a  record  of  all 
trade-marks  or  names  filed  in  his  office,  with  the  date 
when  filed  and  name  of  claimant. 

Political  Code,  Sections  3197,  3198. 

(c)  Assignment   of   Trade-Mark. — Any  person   who 
has  first  adopted  and  used  a  trade-mark  or  name,  whether 
within  or  beyond  the  limits  of  this  state,  is  its  original 
owner.    Such  ownership  may  be  transferred  and  assigned 
in  the  same  manner  as  personal  property,  by  bill  of  sale. 

Political  Code,  Section  3199. 

(d)  Protection  of  Trade-Marks. — The  law  will  protect 
the  owner  of  a  trade-mark  in  his  exclusive  use  of  the 
same.     The  superior  court  will  restrain,  by  injunction, 
any  use  of  trade-marks,  or  names,  which  have  been  ro 
corded  with  the  secretary  of  state  by  the  owner,  where 
such  trade-marks  or  names  are  used  by  any  person  not 
entitled  thereto.     The  secretary  of  state  must  issue  to 
the  claimant,  at  the  time  the  claim  is  filed,  a  certificate 
of  filing  under  the  great  seal  of  the  state,  and  must  then 
collect  from  the  claimant  a  fee  of  five  dollars.    The  secre- 
tary of  state  must,  however,  refuse  to  file  any  trade-mark 
or  name  identical  with,  or  so  similar  to  any  trade-mark 
or  name  already  filed  as  to  be  calculated  or  liable  to 
deceive. 

Political  Code,  Section  3199 ;  Act  of  the  Legisla- 
ture, approved  March  6,  1909. 

Any  person  who  has  first  adopted  and  used  a  trade- 
mark or  name,  whether  within  or  beyond  the  limits  of 


140  BUSINESS  LAW  FOR  BUSINESS  MEN. 

this  state,  is  its  original  owner.  Such  ownership  may  be 
transferred  in  the  same  manner  as  personal  property, 
and  is  entitled  to  the  same  protection  by  suits  at  law ;  and 
any  court  of  competent  jurisdiction  may  restrain,  by 
injunction,  any  use  of  trade-marks  or  names  in  violation 
of  this  chapter. 

Act  of  the  Legislature,  approved  March  21, 1911. 

Section  79. — WARRANTY  OF  PROVISIONS  FOR  DOMESTIC 
USE. — By  a  sale  of  provisions  for  domestic  use,  for  im- 
mediate consumption,  there  is  a  warranty  that  the  pro- 
visions are  sound  and  wholesome. 
Civil  Code,  Section  1775. 

Section  80. — WARRANTY  ON  SALE  OF  GOOD  WILL  OF 
BUSINESS. — One  who  sells  the  good  will  of  a  business 
thereby  warrants  that  he  will  not  endeavor  to  draw  off 
any  of  the  customers. 

Civil  Code,  Section  1776. 

Section  81. — DAMAGES  ALLOWED  ON  BREACH  OF  WAR- 
RANTY.— The  general  rule  is,  damages  in.  case  of  a  breach 
of  warranty  of  quality,  of  personal  property  sold,  are  to. 
be  estimated  with  reference  to  values  at  the  time  and 
place  of  delivery.  But  where  personal  property  is  sold 
on  a  warranty,  to  be  used  at  some  place  other  than  the 
place  of  sale  and  delivery,  and  it  is  known  to  the  seller 
that  the  property  is  bought  for  use  at  another  place, 
the  damages  for  breach  of  the  warranty  may  be  esti*- 
mated  with  reference  to  values  at  the  place  where  the 
property  is  to  be  used.  P.  F.  Dundon  sold  two  boilers 
at  San  Francisco  to  be  used  in  Siberia,  and  warranted 
that  they  would  develop  a  certain  horsepower.  The  boil- 
ers were  constructed  at  San  Francisco  under  a  contract 
which  required  them  to  be  delivered  at  the  wharf  in  San 
Francisco,  but  it  was  understood  by  both  parties  that 
the  boilers  were  to  be  sent  to  and  used  on  the  Amoor 
river  in  Siberia,  13,000  miles  from  San  Francisco.  When 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  141 

they  were  set  up  and  used  in  Siberia  they  were  found 
to  fall  short  of  the  warranty,  and  could  not  develop  suffi- 
cient power  for  the  purpose  for  which  they  were  bought. 
The  purchaser  sued  for  damages,  and  the  Superior  Court 
of  San  Francisco  gave  him  a  judgment  against  Dundon 
for  $7,200,  the  price  paid  for  the  boilers,  which  would 
have  been  their  value  in  Siberia  if  constructed  so  as  to 
do  the  warranted  work.  The  Court  of  Appeals  affirmed 
the  judgment. 

(Decided  by  the  California  District  Court  of  Appeals, 
in  the  case  of  Krasilnikoff  vs.  Dundon,  which  decision  is 
printed  in  Appellate  Decisions,  Volume  VII,  page  7.) 

Section  82. — BOTTLES,  BOXES,  SIPHONS  AND  KEGS.— 
Any  and  all  persons  engaged  in  manufacturing,  bottling, 
or  selling  olives,  olive  oil,  salad  oil,  soda  waters,  mineral 
or  aerated  waters,  porter,  ale,  beer,  cider,  ginger  ale, 
milk,  cream,  small  beer,  lager  beer,  weiss  beer,  white 
beer,  or  other  beverages  or  Worcestershire  or  other 
sauce  or  sauces  in  bottles,  siphons,  or  kegs,  with  his,  her, 
its  or  their  name  or  names,  or  other  marks  or  devices, 
branded,  stamped,  engraved,  etched,  and  blown,  im- 
pressed, or  otherwise  produced  upon  such  bottles,  si- 
phons, or  kegs,  or  the  boxes  used  by  him,  her,  it  of  them, 
may  file  in  the  office  of  the  clerk  of  the  county  in  which 
his,  her,  its,  or  their  principal  place  of  business  is  situ- 
ated, and  also  in  the  office  of  the  secretary  of  state,  a 
description  of  the  name  or  names,  marks,  or  devices,  so 
used  by  him,  her,  it  or  them,  respectively,  and  cause  such 
description  to  be  printed  once  in  each  week  for  three 
weeks  successively,  in  a  newspaper  published  in  the 
county  in  which  said  notice  may  have  been  filed  as 
aforesaid. 

It  is  hereby  declared  to  be  unlawful  for  any  person  or 
persons,  corporation  or  corporations,  to  fill  with  olive  oil, 
salad  oil,  or  any  substitution  for,  or  similar  to  olive  oil, 
ripe  or  green  olives,  soda  waters,  mineral  or  aerated 
waters,  port,  ale,  cider,  ginger  ale,  milk,  cream,  beer, 


142  BUSINESS  LAW  FOR  BUSINESS  MEN. 

small  beer,  lager  beer,  weiss  beer,  white  beer,  or  other 
beverages,  or  Worcestershire  or  other  sauce  or  sauces, 
or  with  medicine,  compounds,  or  mixtures,  any  bottle, 
box,  siphon  or  keg,  so  marked  or  distinguished  as  afore- 
said, with  or  by  any  name,  mark  or  device,  of  which  a 
description  shall  have  been  filed  and  published,  as  pro- 
vided in  this  act,  or  deface,  erase,  obliterate,  cover  up, 
or  otherwise  remove  or  conceal  any  such  name,  mark 
or  device  thereon,  or  to  sell,  buy,  give,  take  or  otherwise 
dispose  of  or  traffic  in  the  same,  without  the  written  con- 
sent of,  or  unless  the  same  shall  have  been  purchased 
from  the  person  or  persons,  corporation  or  corporations, 
whose  mark  or  device  shall  be  or  shall  have  been  in  or 
upon  the  bottle,  box,  siphon,  or  keg  so  filled,  trafficked  in, 
used,  or  handled  as  aforesaid.  It  is  hereby  declared  to 
be  unlawful  for  any  person,  firm,  or  corporation  engaged 
in  the  manufacture,  preparation  or  selling  of  drugs  or 
food  products  to  use  bottles,  in  bottling  or  packing  their 
products,  that  have  been  previously  used  for  other 
purposes. 

1.  Penalty. — Any  person  or  persons  or  corporation 
offending  against  the  provisions  of  this  section  shall  be 
deemed  guilty  of  a  misdemeanor,  and  shall  be  punished 
for  the  first  offense  by  imprisonment  of  not  less  than  ten 
days  nor  more  than  six  months  or  by  a  fine  of  fifty  cents 
for  each  and  every  such  bottle,  box,  siphon  or  keg  so 
filled,  sold,  used,  disposed  of,  bought,  or  trafficked  in,  or 
by  both  such  fine  and  imprisonment;  and  for  each  sub- 
sequent offense  by  imprisonment  not  less  than  twenty 
days,  nor  more  than  one  year,  or  by  a  fine  of  not  less 
than  one  dollar  nor  more  than  five  dollars  for  each  and 
every  bottle,  box,  siphon,  and  keg  so  filled,  sold,  used, 
disposed  of,  bought  or  trafficked  in,  or  by  both  such  fine 
and  imprisonment,  in  the  discretion  of  the  magistrate 
before  whom  the  offense  shall  be  tried. 

2.  Search   Warrants. — Whenever   any  person,  per- 
sons, or  corporation,  mentioned  in  section  one  of  this  act, 
or  his,  her,  its  or  their  agent,  shall  make  oath  before 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  143 

any  magistrate  that  he,  she  or  it  has  reason  to  believe, 
and  does  believe,  that  any  of  his,  her,  or  their  bottles, 
boxes,  siphons,  or  kegs,  a  description  of  the  names,  marks 
or  devices,  whereon  has  been  so  filed  and  published,  as 
aforesaid,  are  being  unlawfully  used  or  filled,  or  had  by 
any  person  or  corporation  manufacturing  or  selling 
olives,  olive  oil,  salad  oil,  soda,  mineral,  or  aerated 
waters,  porter,  ale,  cider,  ginger  ale,  milk,  cream,  small 
beer,  lager  beer,  weiss  beer,  white  beer,  and  other  bev- 
erages, or  Worcestershire  or  other  sauce  or  sauces,  or 
that  any  junk  dealer,  or  dealer  in  second  hand  articles, 
vendor  of  bottles,  or  any  other  person  or  corporation,  has 
any  such  bottles,  boxes,  siphons,  or  kegs,  in  his,  her,  or 
its  possession,  or  secreted  in  any  place,  the  said  magis- 
trate must  thereupon  issue  a  search  warrant  to  discover 
and  obtain  the  same,  and  may  also  cause  to  be  brought 
before  him  the  person  in  whose  possession  such  bottles, 
boxes,  siphons,  or  kegs  may  be  found,  and  then  inquire 
into  the  circumstances  of  such  possession,  and  if  said 
magistrate  finds  that  such  person  has  been  guilty  of  a 
violation  of  this  act,  he  must  impose  the  punishment 
therein  prescribed,  and  he  shall  also  award  possession  of 
the  property  taken  upon  such  search  warrant  to  the 
owner  thereof. 

3.  Accepting  Deposits. — The  requiring,  taking,  or  ac- 
cepting of  any  deposit  for  any  purpose,  upon  any  bottle, 
box,  siphon,  or  keg,  shall  not  be  deemed  or  constitute  a 
sale  of  such  property,  either  optional  or  otherwise,  in 
any  proceeding  under  this  act. 

4.  Sale  of  Rights. — Any  person  or  persons,  corpora- 
tion or  corporations  that  has  or  have  heretofore  filed  a 
description  of  the  name  or  names,  marks,  or  devices, 
upon  his,  her,  their  or  its  property,  and  has  caused  the 
same  to  be  published  according  to  the  laws  existing  at 
the  time  of  such  filing  and  publications,  shall  not  be  re- 
quired to  again  file  and  publish  such  description  to  bo 
entitled  to  the  benefits  of  this  act;  and  any  person  or 
persons,  corporation  or  corporations,  having  complied 


144  BUSINESS  LAW  FOB  BUSINESS  MEN. 

with  the  provisions  of  this  act,  may  as  a  part  of  the  sale, 
assignment  or  transfer  of  all  his,  her,  their,  or  its  said 
bottles,  boxes,  siphons,  or  kegs,  used  as  aforesaid,  with 
his,  her,  their  or  its  name  or  names  or  other  marks  or 
devices,  branded,  stamped,  engraved,  etched,  and  blown, 
impressed  or  otherwise  produced  upon  such  bottles, 
boxes,  siphons,  and  kegs,  to  any  other  person  or  persons, 
corporation  or  corporations,  engaged  in  manufacturing, 
bottling  or  selling  of  olives,  olive  oil,  salad  oil,  soda 
waters,  mineral  waters,  porter,  ale,  beer,  cider,  ginger 
ale,  milk,  cream,  small  beer,  lager  beer,  weiss  beer,  white 
beer,  or  other  beverages,  or  Worcestershire  or  other 
sauce  or  sauces,  sell,  assign,  and  transfer  the  sole  and 
exclusive  right  of  using  said  name  or  names,  mark  or 
devices  in  said  business.  And  in  the  event  of  such  sale, 
transfer  or  assignment  as  aforesaid,  or  invthe  event  of 
the  transfer  by  operation  of  law  or  by  sale  under  order 
of  any  court  of  the  entire  business  of  such  person  or 
persons,  corporation  or  corporations,  of  the  entire  stock 
of  bottles,  boxes,  siphons  or  kegs,  belonging  to  them,  him, 
her  or  it,  to  any  person  or  persons,  corporation  or  cor- 
porations, engaged  in  the  manufacturing,  bottling,  or  sell- 
ing olives,  olive  oil,  salad  oil,  soda  waters,  mineral  or 
aerated  waters,  porter,  ale,  beer,  cider,  ginger  ale,  milk, 
cream,  small  beer,  lager  beer,  weiss  beer,  white  beer  or 
other  beverages,  such  person  or  persons,  corporation  or 
corporations,  shall  not  be  again  required  to  file  and  pub- 
lish a  description  of  said  name  or  names,  marks,  or  de- 
vices, hereunder,  but  shall  be  entitled  to  all  the  benefits 
of  this  act  immediately  upon  acquiring  such  bottles, 
boxes,  siphons  or  kegs,  or  such  business  as  aforesaid. 

Act  of  the  Legislature,  approved  March  21, 1911. 

Section  83. — EXAMINATION  OF  PROPERTY  BY  PURCHASER. 
The  law  will  not  give  redress  to  a  purchaser  who 
claims  to  have  been  deceived,  if  it  appears  that  he  had 
ample  opportunity  to  examine  the  property,  and  that  he 
had  sufficient  knowledge  of  the  subject  to  know  and  under- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  145 

stand  any  defects  which  might  have  been  apparent  by 
such  examination.  But  this  position  may  be  materially 
changed  by  representations  which  the  seller  himself 
makes  about  the  property.  Where  the  purchaser  may 
know  the  truth  by  looking,  or  where  the  truth  is  shown 
him,  he  is  not  misled ;  but  where  he  relies  upon  the  state- 
ments of  the  seller,  and  has  no  knowledge  that  such  state- 
ments are  false,  he  can,  when  they  are  false,  and  when  he 
himself  has  been  reasonably  prudent,  recover  damages.  If 
no  knowledge  of  their  falseness  is  presented  to  him,  the 
purchaser  may  rely  implicitly  upon  the  statements  of  the 
vendor,  if  such  statements  are  not  so  openly  false  as  to 
be  apparent  to  an  ordinarily  prudent  person. 

AUCTION  SALES 

Section  84. — AUTHORITY  OF  AUCTIONEER. — A  sale  by 
auction  is  a  sale  by  public  outcry  to  the  highest  bidder  on 
the  spot.  Laws  have  been  passed  by  the  Legislature  of 
California  to  regulate  the  authority  of  auctioneers,  and 
the  rights  of  bidders,  and  the  manner  of  conducting  auc- 
tion sales.  An  auctioneer,  by  the  law  of  California,  with- 
out special  authorization,  has  authority  from  the  seller 
only  to  the  extent  that  he  may  sell  by  public  auction  to 
the  highest  bidder;  to  sell  for  cash  only,  except  such 
articles  as  are  usually  sold  on  credit  at  auction;  to  war- 
rant the  title  of  his  principal  to  personal  property  sold  by 
him,  and  the  quality  and  quantity  of  the  property;  to  pre- 
scribe reasonable  rules  and  terms  of  sale;  to  deliver  the 
things  sold  upon  payment  of  the  price;  to  collect  the 
price ;  and  to  do  whatever  else  is  necessary,  or  proper  and 
usual  in  the  ordinary  course  of  business,  for  effecting 
these  purposes.  An  auctioneer  will  be  deemed  to  have 
authority  from  a  bidder  at  the  auction,  as  well  as  from 
the  seller,  to  bind  both  seller  and  bidder  by  a  memoran- 
dum of  the  contract,  whenever  by  law  the  sale  must  be 
evidenced  by  a  memorandum  in  writing. 

Civil  Code,  Sections  1792,  2362,  2363. 


146  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Section  85. — WHEN  AUCTION  SALE  Is  COMPLETE. — A 
sale  by  auction  is  not  complete  until  the  auctioneer  pub- 
licly announces,  by  the  fall  of  his  hammer,  or  in  some 
other  customary  manner,  that  the  thing  is  sold. 
Civil  Code,  Section  1793. 

Section  86. — WITHDRAWAL  OF  BIDS. — Until  the  public 
announcement  necessary  to  complete  the  sale  is  made  by 
the  auctioneer,  any  bidder  may  withdraw  his  bid.  The 
only  thing  necessary  to  do  in  withdrawing  a  bid  is  to 
notify  the  auctioneer  that  the  bid  is  withdrawn,  before 
the  final  announcement  of  the  sale. 
Civil  Code,  Section  1794. 

Section  87. — AUCTION  SALE  UNDER  WRITTEN  CONDI- 
TIONS.— Whenever  an  auction  sale  is  made  under  written 
or  printed  conditions,  the  auctioneer  must  follow  such 
conditions,  and  has  no  power  to  change  them  by  any  oral 
declaration,  except  that  he  may  modify  a  condition 
intended  for  his  own  benefit. 

Civil  Code,  Section  1795. 

Section  88. — AUCTION  SALE  WITHOUT  RESERVE. — Pub- 
lic policy  requires  that  auction  sales  shall  be  conducted 
with  the  highest  good  faith,  and  that  neither  the  auc- 
tioneer nor  his  principal  shall  be  allowed  to  deceive  or 
impose  upon  the  persons  who  gather  at  an  auction  for 
the  purpose  of  making  bids.  It  is  therefore  provided  by 
the  law,  for  the  protection  of  the  bidder,  that  at  a  sale  by 
auction,  announced  to  be  without  reserve,  the  highest  bid- 
der in  good  faith  has  an  absolute  right  to  the  completion 
of  the  sale  to  him.  Upon  such  a  sale  bids  by  the  seller,  or 
bids  by  any  agent  for  him,  are  absolutely  void.  The  pub- 
lic is  interested  in  securing  the  advantages  of  fair  and 
just  competition  among  bidders,  and  in  the  prevention  of 
favoritism  or  fraud  in  any  form.  The  highest  bidder  in 
good  faith,  at  a  sale  without  reserve,  is  entitled  to  the 
property;  and,  if  it  should  appear  that  the  property  was 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  147 

in  reality  knocked  down  by  the  auctioneer  upon  a  higher 
but  fraudulent  bid  in  the  interest  of  the  seller,  a  suit  can 
be  maintained  in  the  Superior  Court  to  compel  the  recog- 
nition of  the  rights  of  the  bidder  in  good  faith,  and  the 
delivery  of  the  property  to  him  upon  payment  of  the 
amount  of  his  bid. 

Civil  Code,  Section  1796. 

Section  89. — FRAUDS  UPON  THE  BUYER. — Sometimes 
the  seller,  for  the  purpose  of  increasing  the  price  of  the 
property  sold  at  auction,  will  employ  puffers  to  bid  up 
the  property,  thus  giving  it  a  fictitious  value,  and  often 
inducing  credulous  bidders  to  increase  their  bids  beyond 
what  they  had  any  idea  of  offering.  The  law  provides, 
without  any  qualification,  that  the  employment  of  puffers 
at  an  auction  sale  by  the  seller,  without  the  knowledge 
of  the  buyer,  is  a  fraud  upon  the  buyer,  which  entitles 
him  to  rescind  his  purchase. 

Civil  Code,  Section  1797. 

Section  90. — AUCTIONEER'S  MEMORANDUM  OF  SALE 
BINDS  BOTH  PARTIES. — When  property  is  sold  by  auction, 
an  entry  made  by  the  auctioneer  in  his  sale  book,  at  the 
time  of  the  sale,  giving  the  names  of  the  person  for  whom 
he  sells  and  the  buyer,  and  describing  the  thing  sold,  the 
price,  and  the  terms  of  sale,  binds  both  the  seller  and  the 
buyer,  in  the  same  manner  as  though  the  memorandum 
had  been  made  by  themselves. 

Civil  Code,  Section  1798. 

WAREHOUSE  LAW 

Section  91. — WAREHOUSE  RECEIPTS. — The  most  com- 
mon form  of  storage  known  to  business  is  that  where  the 
owner  of  a  warehouse  receives  property  on  storage  for  a 
stated  compensation.  The  warehouseman,  upon  receiving 
the  property,  must  give  a  receipt  for  it,  which  receipt 
must  show  on  its  face  that  a  contract  for  storage  has  been 
entered  into  between  the  owner  of  the  goods  and  the 


148  BUSINESS  LAW  FOB  BUSINESS  MEN. 

warehouseman,  the  latter  to  store  the  goods,  and  the 
former  to  pay  for  that  service.  A  warehouseman  cannot 
issue  any  valid  receipt  for  any  merchandise,  grain,  or 
other  product  or  thing  of  value,  unless  the  property  has 
actually  been  received  by  him  and  is  in  the  warehouse  or 
under  his  control  at  the  time;  and  no  second  warehouse 
receipt  can  be  issued,  so  long  as  a  former  receipt  is  out- 
standing and  uncanceled  in  whole  or  in  part.  A  ware- 
house receipt  is  a  negotiable  instrument,  and  may  be 
transferred  by  indorsement,  and  a  transfer  of  the  receipt 
is  a  good  delivery  of  the  goods  represented  by  it.  But  it 
is  only  persons  who  pursue  the  calling  of  warehousemen 
— that  is,  receive  and  store  goods  in  a  warehouse  as  a 
business  for  profit — that  have  power  to  issue  a  technical 
warehouse  receipt,  the  transfer  of  which  will  be  consid- 
ered by  the  law  a  good  delivery  of  the  property  repre- 
sented by  the  receipt.  Therefore,  such  a  receipt  issued 
by  one  who  is  not  in  that  business  for  profit,  sven  though 
he  receives  the  goods,  will  not  have  given  to  it  by  law 
the  character  of  a  negotiable  instrument.  In  every  case 
where  a  warehouseman  receives  property  in  a  warehouse 
as  a  business  for  profit,  the  warehouse  receipt  is  nego- 
tiable, and  a  transfer  of  the  receipt  in  good  faith,  by 
indorsement  to  another,  passes  the  title  to  the  goods 
covered  by  the  receipt. 

"Warehouse  receipts  need  not  be  in  any  particular 
form,  but  every  such  receipt  must  embody  within  its 
written  or  printed  terms— 

(a)  The  location  of  the  warehouse  where  the  goods 
are  stored, 

(b)  The  date  of  issue  of  the  receipt, 

(c)  The  consecutive  number  of  the  receipt, 

(d)  A  statement  whether  the  goods  received  will  be 
delivered  to  the  bearer,  to  a  specified  person,  or  to  a 
specified  person  or  his  order, 

(e)  The  rate  of  storage  charges, 

(f)  A  description  of  the  goods  or  of  the  packages 
containing  them. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  149 

(g)  The  signature  of  the  warehouseman,  which  may 
be  made  by  his  authorized  agent, 

(h)  If  the  receipt  is  issued  for  goods  of  which  the 
warehouseman  is  owner,  either  solely  or  jointly  or  in 
common  with  others,  the  fact  of  such  ownership,  and 

(i)  A  statement  of  the  amount  of  advances  made  and 
of  liabilities  incurred  for  which  the  warehouseman  claims 
a  lien.  If  the  precise  amount  of  such  advances  made  or  of 
such  liabilities  incurred  is,  at  the  time  of  the  issue  of  the 
receipt,  unknown  to  the  warehouseman  or  to  his  agent 
who  issues  it,  a  statement  of  the  fact  that  advances  have 
been  made  or  liabilities  incurred  and  the  purpose  thereof 
is  sufficient. 

Act  of  the  Legislature,  approved  March  19th, 
1909. 

Section  92. — NEGOTIABILITY  OF  WAREHOUSE  RECEIPT. — 
A  receipt  in  which  it  is  stated  that  the  goods  received  will 
be  delivered  to  the  depositor,  or  to  any  other  specified 
person,  is  a  non-negotiable  receipt. 

A  receipt  in  which  it  is  stated  that  the  goods  received 
will  be  delivered  to  the  bearer,  or  to  the  order  of  any 
person  named  in  such  receipt,  is  a  negotiable  receipt. 

When  more  than  one  negotiable  receipt  is  issued  for 
the  same  goods,  the  word  "duplicate"  shall  be  plainly 
placed  upon  the  face  of  every  such  receipt,  except  the  one 
first  issued.  A  warehouseman  shall  be  liable  for  all  dam- 
age caused  by  his  failure  so  to  do  to  anyone  who  pur- 
chased the  subsequent  receipt  for  value  supposing  it  to 
be  an  original,  even  though  the  purchase  be  after  the 
delivery  of  the  goods  by  the  warehouseman  to  the  holder 
of  the  original  receipt. 

A  non-negotiable  receipt  shall  have  plainly  placed 
upon  its  face  by  the  warehouseman  issuing  it,  "non- 
negotiable,"  or  "not  negotiable."  In  case  of  the  ware- 
houseman's failure  so  to  do,  a  holder  of  the  receipt  who 
purchased  it  for  value  supposing  it  to  be  negotiable,  may 
at  his  option,  treat  such  receipt  as  imposing  upon  the 


150  BUSINESS  LAW  FOR  BUSINESS  MEN. 

warehouseman  the  same  liabilities  he  would  have  in- 
curred had  the  receipt  been  negotiable. 

Act  of  the  Legislature,  approved  March  19th, 
1909. 

Section  93. — EEMOVAL  OF  PROPERTY  BY  WAREHOUSEMAN. 
— No  warehouseman  can  sell  or  encumber,  or  ship  or 
remove  beyond  his  control,  any  property  for  which  a 
receipt  has  been  given  by  him,  without  the  consent  in 
writing  of  the  holder  of  the  receipt,  and  the  consent  of 
the  holder  must  be  plainly  indorsed  on  the  receipt. 

Act  of  the  Legislature,  approved  March  19th, 
1909. 

Section  94. — DELIVERY  OF  PROPERTY  BY  WAREHOUSE- 
MAN.— A  warehouseman,  in  the  absence  of  some  lawful 
excuse  provided  by  this  act,  is  bound  to  deliver  the  goods 
upon  a  demand  made  either  by  the  holder  of  a  receipt 
for  the  goods  or  by  the  depositor,  if  such  demand  is 
accompanied  with — 

An  offer  to  satisfy  the  warehouseman's  lien; 

An  offer  to  surrender  the  receipt  if  negotiable,  with 
such  endorsements  as  would  be  necessary  for  the  nego- 
tiation of  the  receipt;  and 

A  readiness  and  willingness  to  sign,  when  the  goods 
are  delivered,  an  acknowledgment  that  they  have  been 
delivered,  if  such  signature  is  requested  by  the  ware- 
houseman. 

In  case  the  warehouseman  refuses  or  fails  to  deliver 
the  goods  in  compliance  with  a  demand  by  the  holder  or 
depositor  so  accompanied,  the  burden  is  upon  the  ware- 
houseman to  establish  the  existence  of  a  lawful  excuse 
for  such  refusal. 

A  warehouseman  is  justified  in  delivering  the  goods, 
subject  to  the  above  provisions,  to  one  who  is— 

The  person  lawfully  entitled  to  the  possession  of  the 
goods,  or  his  agent; 

A  person  who  is  either  himself  entitled  to  delivery  by 
the  terms  of  a  non-negotiable  receipt  issued  for  the 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  151 

goods,  or  who  lias  written  authority  from  the  person  so 
entitled  either  indorsed  upon  the  receipt  or  written  upon 
another  paper;  or 

A  person  in  possession  of  a  negotiable  receipt  by  the 
terms  of  which  the  goods  are  deliverable  to  him  or  order 
or  to  bearer,  or  which  has  been  indorsed  to  him  or  in 
blank  by  the  person  to  whom  delivery  was  promised  by 
the  terms  of  the  receipt  or  by  his  mediate  or  immediate 
indorsee. 

Where  a  warehouseman  delivers  the  goods  to  one  who 
is  not  in  fact  lawfully  entitled  to  the  possession  of  them, 
the  warehouseman  will  be  liable  as  for  conversion  to  all 
having  a  right  of  property  or  possession  in  the  goods  if 
he  delivered  the  goods  otherwise  than  as  authorized  by 
law ;  and  though  he  delivered  the  goods  as  authorized  by 
law,  he  will  still  be  liable  if  prior  to  such  delivery  he  had 
either  been  requested,  by  or  on  behalf  of  the  person  law- 
fully entitled  to  a  right  of  property  or  possession  in  the 
goods,  not  to  make  such  delivery,  or  had  information 
that  the  delivery  about  to  be  made  was  to  one  not  law- 
fully entitled  to  the  possession  of  the  goods. 

Where  a  warehouseman  delivers  goods  for  which  he 
had  issued  a  negotiable  receipt,  the  negotiation  of  which 
would  transfer  the  right  to  the  possession  of  the  goods, 
and  fails  to  take  up  and  cancel  the  receipt,  he  will  be 
liable  to  any  one  who  purchases  for  value  in  good  faith 
such  receipt,  for  failure  to  deliver  the  goods  to  him, 
whether  such  purchaser  acquired  title  to  the  receipt  be- 
fore or  after  the  delivery  of  the  goods  by  the  warehouse- 
man; and. 

Where  a  warehouseman  delivers  part  of  the  goods  for 
which  he  had  issued  a  negotiable  receipt  and  fails  either 
to  take  up  and  cancel  such  receipt,  or  to  place  plainly 
upon  it  a  statement  of  what  goods  or  packages  have  been 
delivered,  he  will  be  liable,  to  any  one  who  purchases  for 
value  in  good  faith  such  receipt,  for  failure  to  deliver  all 
the  goods  specified  in  the  receipt,  whether  such  purchaser 
acquired  title  to  the  receipt  before  or  after  the  delivery 


152  BUSINESS  LAW  FOB  BUSINESS  MEN. 

of  any  portion  of  the  goods  by  the  warehouseman ;  unless 
the  goods  have  been  lawfully  sold  to  satisfy  a  warehouse- 
man's lien,  or  have  been  lawfully  sold  or  disposed  of 
because  of  their  perishable  or  hazardous  nature. 

Material  and  fraudulent  alteration  of  a  receipt  will 
not  excuse  the  warehouseman  who  issued  it  from  liability 
to  deliver,  according  to  the  terms  of  the  receipt  as  origi- 
nally issued,  the  goods  for  which  it  was  issued,  but  will 
excuse  him  from  any  other  liability  to  the  person  who 
made  the  alteration,  and  to  any  person  who  took  with 
notice  of  the  alteration.  Any  purchaser  of  the  receipt 
for  value  without  notice  of  the  alteration  will  acquire  the 
same  rights  against  the  warehouseman  which  such  pur- 
chaser would  have  acquired  if  the  receipt  had  not  been 
altered  at  the  time  of  the  purchase. 

Where  a  negotiable  receipt  has  been  lost  or  destroyed, 
a  court  of  competent  jurisdiction  may  order  the  delivery 
of  the  goods  upon  satisfactory  proof  of  such  loss  or 
destruction  and  upon  the  giving  of  a  bond  with  sufficient 
sureties  to  be  approved  by  the  court  to  protect  the  ware- 
houseman from  any  liability  or  expense,  which  he  or  any 
person  injured  by  such  delivery  may  incur  by  reason  of 
the  original  receipt  remaining  outstanding.  The  court 
may  also  in  its  discretion  order  the  payment  of  the  ware- 
houseman's reasonable  costs  and  counsel  fees. 

The  delivery  of  the  goods  under  an  order  of  the  court 
will  not  relieve  the  warehouseman  from  liabilities  to  a 
person  to  whom  the  negotiable  receipt  has  been  negoti- 
ated for  value  without  notice  of  the  proceedings  or  of  the 
delivery  of  the  goods. 

A  receipt  upon  the  face  of  which  the  word  " duplicate" 
is  plainly  placed  is  a  representation  and  warranty  by  the 
warehouseman  that  such  receipt  is  an  accurate  copy  of  an 
original  receipt  properly  issued  and  uncanceled  at  the 
date  of  the  issue  of  the  duplicate,  but  imposes  upon  him 
no  other  liability. 

Act  of  the  Legislature^  approved  March  19th, 
1909. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  153 

Section  95. — LIABILITY  OF  WAREHOUSEMAN. — If  some 
one  other  than  the  depositor  or  person  claiming  under 
him  has  a  claim  to  the  title  or  possession  of  the  goods, 
and  the  warehouseman  has  information  of  such  claim,  the 
warehouseman  will  be  excused  from  liability  for  refusing 
to  deliver  the  goods,  either  to  the  depositor  or  person 
claiming  under  him  or  to  the  adverse  claimant,  until  the 
warehouseman  has  had  a  reasonable  time  to  ascertain  the 
validity  of  the  adverse  claim  or  to  bring  legal  proceedings 
to  compel  all  claimants  to  interplead.  If  an  adverse 
claimant  does  not  bring  suit  and  serve  summons  on  the 
warehouseman  within  forty-eight  hours  after  the  service 
of  notice  of  his  adverse  claim,  such  failure  will  act  as  a 
complete  abandonment  of  such  adverse  claim. 

A  warehouseman  will  be  liable  to  the  holder  of  a 
receipt  for  damages  caused  by  the  non-existence  of  the 
goods  or  by  failure  of  the  goods  to  correspond  with  the 
description  thereof  in  the  receipt  at  the  time  of  its  issue. 
If,  however,  the  goods  are  described  in  a  receipt  merely 
by  a  statement  of  marks  or  labels  upon  them,  or  upon 
packages  containing  them,  or  by  a  statement  that  the 
goods  are  said  to  be  goods  of  a  certain  kind,  or  that 
packages  containing  the  goods  are  said  to  contain  goods 
of  a  certain  kind,  or  by  words  of  like  purport,  such  state- 
ments, if  true,  will  not  make  liable  the  warehouseman 
issuing  the  receipt,  although  the  goods  are  not  of  the  kind 
which  the  marks  or  labels  upon  them  indicate,  or  of  the 
kind  they  were  said  to  be  by  the  depositor. 

A  warehouseman  shall  be  liable  for  any  loss  or  injury 
to  the  goods  caused  by  his  failure  to  exercise  such  care  in 
regard  to  them  as  a  reasonably  careful  owner  of  similar 
goods  would  exercise;  but  he  will  not  be  liable,  in  the 
absence  of  an  agreement  to  the  contrary,  for  any  loss  or 
injury  to  the  goods  which  could  not  have  been  avoided  by 
the  exercise  of  such  care. 

A  warehouseman  shall  keep  the  goods  so  far  separate 
from  goods  of  other  depositors,  and  from  other  goods  of 
the  same  depositor  for  which  a  separate  receipt  has  been 


154  BUSINESS  LAW  FOE  BUSINESS  MEN. 

issued,  as  to  permit  at  all.  times  the  identification  and  re- 
delivery  of  the  goods  deposited. 

If  authorized  by  agreement  or  by  custom,  a  ware- 
houseman may  mingle  fungible  goods  with  other  goods  of 
the  same  kind  and  grade.  In  such  case  the  various  de- 
positors of  mingled  goods  shall  own  the  entire  mass  in 
common,  and  each  depositor  shall  be  entitled  to  such  por- 
tion thereof  as  the  amount  deposited  by  him  bears  to  the 
whole.  The  warehouseman  will  be  severally  liable  to  each 
depositor  for  the  care  and  re-delivery  of  his  share  of  such 
mass  to  the  same  extent  and  under  the  same  circum- 
stances as  if  the  goods  had  been  kept  separate. 

If  goods  are  delivered  to  a  warehouseman  by  the 
owner  or  by  a  person  whose  act  in  conveying  the  title  to 
them  to  a  purchaser  in  good  faith  for  value  would  bind 
the  owner,  and  a  negotiable  receipt  is  issued  for  them, 
they  cannot  thereafter,  while  in  the  possession  of  the 
warehouseman,  be  attached  by  garnishment  or  otherwise, 
or  be  levied  upon  under  an  execution,  unless  the  receipt  bo 
first  surrendered  to  the  warehouseman,  or  its  negotiation 
enjoined.  The  warehouseman  will  in  no  case  be  compelled 
to  deliver  up  the  actual  possession  of  the  goods  until  the 
receipt  is  surrendered  to  him  or  impounded  by  the  court. 

Section  96. — WAKEHOUSEMAN  's  LIABILITY  FOR  DELIVER- 
ING PEOPEETY  TO  WRONG  PEESON. — A  warehouseman  must 
use  ordinary  care  and  diligence  to  ascertain  whether  an 
indorsement  is  genuine  before  delivering  the  property. 
And  if  he  delivers  the  property  to  a  person  who  has  no 
right  to  it,  when  he  might  have  ascertained  the  truth  by 
the  exercise  of  ordinary  care  and  diligence,  he  will  be 
liable  to  the  owner  of  the  goods. 

Section  97. — WAREHOUSEMAN'S  LIABILITY  FOR  Loss  BY 
FIRE. — No  warehouseman  is  responsible  for  any  loss  or 
damage  to  property  by  fire  while  in  his  custody,  if  he 
exercises  reasonable  care  and  diligence  for  its  protection 
and  preservation.  If  the  property  in  his  warehouse  is 
destroyed  by  fire,  in  order  to  make  him  liable  for  the  loss, 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  155 

it  must  be  shown  that  his  own  neglect  was  the  cause  of 
the  fire,  or  that,  a  fire  occurring,  he  had  the  opportunity 
to  save  the  property,  but  neglected  to  do  so,  with  the 
means  at  hand. 

Statutes  of  1877,  pp.  949,  950. 

Section  98. — SALE  OF  PROPERTY  FOR  STORAGE  CHARGES. 
A  warehouseman  has  a  lien  on  goods  deposited  or  on 
the  proceeds  thereof  in  his  hands,  for  all  lawful  charges 
for  storage  and  preservation  of  the  goods;  also  for  all 
lawful  claims  for  money  advanced,  interest,  insurance, 
transportation,  labor,  weighing,  coopering  and  other 
charges  and  expenses  in  relation  to  such  goods ;  also  for 
all  reasonable  charges  and  expenses  for  notice,  and  ad- 
vertisements of  sale,  and  for  sale  of  the  goods  where  de- 
fault has  been  made  in  satisfying  the  warehouseman's 
lien. 

A  warehouseman's  lien  may  be  enforced  against  all 
goods,  whenever  deposited,  belonging  to  the  person  who 
is  liable  as  debtor  for  the  claims  in  regard  to  which  the 
lien  is  asserted ;  and  against  all  goods  belonging  to  others 
which  have  been  deposited  at  any  time  by  the  person  who 
is  liable  as  debtor  for  the  claims  in  regard  to  which  the 
lien  is  asserted,  if  such  person  was  in  legal  possession  of 
the  goods  when  they  were  deposited. 
Statutes  of  1919,  Chapter  250. 

A  warehouseman  loses  his  lien  upon  goods,  by  sur- 
rendering possession  thereof,  or  by  refusing  to  deliver 
the  goods  when  a  demand  is  made  with  which  he  is  bound 
to  comply  under  the  provisions  of  this  act. 

If  a  negotiable  receipt  is  issued  for  goods,  the  ware- 
houseman shall  have  no  lien  thereon,  except  for  charges 
for  storage  of  those  goods  subsequent  to  the  date  of  the 
receipt,  unless  the  receipt  expressly  enumerates  other 
charges  for  which  a  lien  is  claimed. 

A  warehouseman  having  a  lien  valid  agamst  the  per- 
son demanding  the  goods  may  refuse  to  deliver  the  goods 
to  him  until  the  lien  is  satisfied . 


156  BUSINESS  LAW  FOE  BUSINESS  MEN. 

A  warehouseman's  lien  for  a  claim  which  has  become 
due  may  be  satisfied  as  follows :  The  warehouseman  must 
give  a  written  notice  to  the  person  on  whose  account  the 
goods  are  held,  and  to  any  other  person  known  by  the 
warehouseman  to  claim  an  interest  in  the  goods.  Such 
notice  must  be  given  by  delivery  in  person  or  by  regis- 
tered letter  addressed  to  the  last  known  place  of  business 
or  abode  of  the  person  to  be  notified.  The  notice  must 
contain— 

(a)  An  itemized  statement  of  the  warehouseman's 
claim,  showing  the  sum  due  at  the  time  of  the  notice  and 
the  date  or  dates  when  it  became  due, 

(b)  A  brief  description  of  the  goods  against  which  the 
lien  exists. 

(c)  A  demand  that  the  amount  of  the  claim  as  stated 
in  the  notice,  and  of  such  further  claim  as  shall  accrue 
shall  be  paid  on  or  before  the  day  mentioned,  not  less 
than  ten  days,  from  the  delivery  of  the  notice  if  it  is  per- 
sonally delivered,  or  from  the  time  when  the  notice  shoaild 
reach  its  destination,  according  to  the  due  course  of  post, 
if  the  notice  is  sent  by  mail,  and 

(d)  A  statement  that  unless  the  claim  is  paid  within 
the  time  specified  the  goods  will  be  advertised  for  sale 
and  sold  by  auction  at  a  specified  time  and  place. 

In  accordance  with  the  terms  of  a  notice  so  given,  a 
sale  of  the  goods  by  auction  may  be  had  to  satisfy  any 
valid  claim  of  the  warehouseman  for  which  he  has  a  lien 
on  the  goods.  The  sale  must  be  had  in  the  place  where 
the  lien  was  acquired,  or,  if  such  place  is  manifestly  un- 
suitable for  the  purpose,  at  the  nearest  suitable  place. 
After  the  time  for  the  payment  of  the  claim  specified  in 
the  notice  to  the  depositor  has  elapsed,  an  advertisement 
of  the  sale,  describing  the  goods  to  be  sold,  and  stating 
the  name  of  the  owner  or  person  on  whose  account  the 
goods  are  held,  and  the  time  and  place  of  the  sale,  must 
be  published  once  a  week  for  two  consecutive  weeks  in  a 
newspaper  published  in  the  place  where  such  sale  is  to 
l)e  held.  The  sale  must  not  be  less  than  fifteen  days  from 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  157 

the  time  of  the  first  publication.  If  there  is  no  newspaper 
published  in  such  place,  the  advertisement  must  be  posted 
at  least  ten  days  before  such  sale  in  not  less  than  six  con- 
spicuous places  therein. 

Prom  the  proceeds  of  such  sale  the  warehouseman 
must  satisfy  his  lien,  including  the  reasonable  charges  of 
notice,  advertisement,  and  sale.  The  balance,  if  any,  of 
such  proceeds  must  be  held  by  the  warehouseman,  and 
delivered  on  demand  to  the  person  to  whom  he  would 
have  been  bound  to  deliver  or  justified  in  delivering  the 
goods. 

At  any  time  before  the  goods  are  sold  any  person 
claiming  a  right  of  property  or  possession  therein  may 
pay  the  warehouseman  the  amount  necessary  to  satisfy 
his  lien  and  pay  the  reasonable  expenses  and  liabilities 
incurred  in  serving  notices  and  advertising  and  prepar- 
ing for  the  sale  up  to  the  time  of  such  payment.  The 
warehouseman  must  deliver  the  goods  to  the  person  mak- 
ing such  payment,  if  he  is  a  person  entitled  to  the  pos- 
session of  the  goods,  on  payment  of  charges  thereon. 
Otherwise  the  warehouseman  must  retain  possession  of 
the  goods  according  to  the  terms  of  the  original  contract 
of  deposit. 

If  the  goods  are  of  a  perishable  nature,  or  by  keeping 
will  deteriorate  greatly  in  value,  or  by  their  odor,  leak- 
age, inflammability,  or  explosive  nature,  will  be  liable  to 
injure  other  property,  the  warehouseman  may  give  such 
notice  to  the  owner,  or  to  the  person  in  whose  name  the 
goods  are  stored,  as  is  reasonable  and  possible  under  the 
circumstances,  to  satisfy  the  lien  upon  sucb  goods,  and 
to  remove  them  from  the  warehouse,  and  in  the  event  of 
the  failure  of  such  person  to  satisfy  the  lien  and  to  re- 
move the  goods  within  the  time  specified,  the  warehouse- 
man may  sell  the  goods  at  public  or  private  sale  without 
advertising.  If  the  warehouseman  after  a  reasonable 
effort  i?  unable  to  sell  such  goods,  he  may  dispose  of  them 
in  any  lawful  manner,  and  will  incur  no  liability  by  reason 
thereof. 


158  BUSINESS  LAW  FOR  BUSINESS  MEN. 

After  goods  have  been  lawfully  sold  to  satisfy  a  ware- 
houseman's lien,  or  have  been  lawfully  sold  or  disposed 
of  because  of  their  perishable  or  hazardous  nature,  the 
warehouseman  will  not  thereafter  be  liable  for  failure  to 
deliver  the  goods  to  the  depositor,  or  owner  of  the  goods, 
or  to  a  holder  of  the  receipt  given  for  the  goods  when  they 
were  deposited,  even  if  such  receipt  be  negotiable. 

Section  99. — NEGOTIATION  OP  WAREHOUSE  RECEIPT. — A 
negotiable  receipt  may  be  negotiated  by  delivery  where, 
by  the  terms  of  the  receipt,  the  warehouseman  undertakes 
to  deliver  the  goods  to  the  bearer ;  or  where,  by  the  terms 
of  the  receipt,  the  warehouseman  undertakes  to  deliver 
the  goods  to  the  order  of  a  specified  person,  and  such  per- 
son or  a  subsequent  indorsee  of  the  receipt  has  indorsed 
it  in  blank  or  to  bearer. 

Where,  by  the  terms  of  a  negotiable  receipt,  the  goods 
are  deliverable  to  bearer,  or  where  a  negotiable  receipt 
has  been  indorsed  in  blank  or  to  bearer,  any  holder  may 
indorse  the  same  to  himself  or  to  any  other  specified  per- 
son, and  in  such  case  the  receipt  must  thereafter  be  nego- 
tiated only  by  the  indorsement  of  such  indorsee. 

A  negotiable  receipt  may  be  negotiated  by  the  indorse- 
ment of  the  person  to  whose  order  the  goods  are,  by  the 
terms  of  the  receipt,  deliverable.  Such  indorsement  may 
be  in  blank,  to  bearer,  or  to  a  specified  person.  If  in- 
dorsed to  a  specified  person,  it  may  be  again  negotiated 
by  the  indorsement  of  such  person  in  blank,  to  bearer,  or 
to  another  specified  person.  Subsequent  negotiation  may 
be  made  in  like  manner. 

A  receipt  which  is  not  in  such  form  that  it  can  be 
negotiated  by  delivery  may  be  transferred  by  the  holder 
by  delivery  to  a  purchaser  or  donee. 

A  non-negotiable  receipt  cannot  be  negotiated,  and  the 
indorsement  of  such  a  receipt  gives  the  transferee  no 
additional  right. 

A  negotiable  receipt  may  be  negotiated  by  the  owner 
thereof;  or  by  any  person  to  whom  the  possession  or 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  159 

custody  of  the  receipt  has  been  entrusted  by  the  owner, 
if,  by  the  terms  of  the  receipt,  the  warehouseman  under- 
takes to  deliver  the  goods  to  the  order  of  the  person  to 
whom  the  possession  or  custody  of  the  receipt  has  been 
entrusted,  or  if  at  the  time  of  such  entrusting  the  receipt 
is  in  such  form  that  it  may  be  negotiated  by  delivery. 

A  person  to  whom  a  negotiable  receipt  has  been  duly 
negotiated  acquires  thereby  such  title  to  the  goods  as  the 
person  negotiating  the  receipt  to  him  had,  or  had  ability 
to  convey  to  a  purchaser  in  good  faith  for  value,  and  also 
such  title  to  the  goods  as  the  depositor  or  person  to  whose 
order  the  goods  were  to  be  delivered  by  the  terms  of  the 
receipt  had,  or  had  ability  to  convey  to  a  purchaser  in 
good  faith  for  value;  and  he  also  acquires  the  direct  obli- 
gation of  the  warehouseman  to  hold  possession  of  the 
goods  for  him  according  to  the  terms  of  the  receipt  as 
fully  as  if  the  warehouseman  had  contracted  directly  witli 
him. 

A  person  to  whom  a  receipt  has  been  transferred  but 
not  negotiated,  acquires  thereby,  as  against  the  trans- 
feror, the  title  to  the  goods,  subject  to  the  terms  of  any 
agreement  with  the  transferor. 

If  the  receipt  is  non-negotiable  such  person  also  ac- 
quires the  right  to  notify  the  warehouseman  of  the  trans- 
fer to  him  of  such  receipt,  and  thereby  to  acquire  the 
direct  obligation  of  the  warehouseman  to  hold  possession 
of  the  goods  for  him  according  to  the  terms  of  the  receipt. 

Prior  to  the  notification  of  the  warehouseman  by  the 
transferor  or  transferee  of  a  non-negotiable  receipt,  the 
title  of  the  transferee  to  the  goods  and  the  right  to 
acquire  the  obligation  of  the  warehouseman  may  be  de- 
feated by  the  levy  of  an  attachment  or  execution  upon  the 
goods  by  a  creditor  of  the  transferor,  or  by  a  notification 
to  the  warehouseman  by  the  transferor,  or  a  subsequent 
purchaser  from  the  transferor,  of  a  subsequent  sale  of 
the  goods. 

Where  a  negotiable  receipt  is  transferred  for  value  by 
deliverv,  and  the  indorsement  of  the  transferor  is  essen- 


160  BUSINESS  LAW  FOR  BUSINESS  MEN. 

tial  for  negotiation,  the  transferee  acquires  a  right 
against  the  transferor  to  compel  him  to  indorse  the  re- 
ceipt, unless  a  contrary  intention  appears.  The  negotia- 
tion will  take  effect  as  of  the  time  when  the  indorsement 
is  actually  made. 

A  person  who  for  value  negotiates  or  transfers  a 
receipt  by  indorsement  or  delivery,  including  one  who 
assigns  for  value  a  claim  secured  by  a  receipt,  unless  a 
contrary  intention  appears,  warrants,  that  the  receipt  is 
genuine ;  that  ho  has  a  legal  right  to  negotiate  or  transfer 
it ;  that  he  has  knowledge  of  no  fact  which  would  impair 
the  validity  or  worth  of  the  receipt;  and  that  he  has  a 
right  to  transfer  the  title  to  the  goods,  and  that  the  goods 
are  merchantable  or  fit  for  a  particular  purpose,  when- 
ever such  warranties  would  have  been  implied,  if  the  con- 
tract of  the  parties  had  been  to  transfer  without  a  receipt 
the  goods  represented  thereby. 

The  indorsement  of  a  receipt  will  not  make  the 
indorser  liable  for  any  failure  on  the  part  of  the  ware- 
houseman or  previous  indorsers  of  the  receipt  to  fulfill 
their  respective  obligations. 

A  mortgagee,  pledgee  or  holder  for  security  of  a 
receipt  who  in  good  faith  demands  or  receives  payment 
of  the  debt  for  which  such  receipt  is  security,  whether 
from  a  party  to  a  draft  drawn  for  such  debt  or  from  any 
other  person,  will  not  by  so  doing  be  deemed  to  represent 
or  to  warrant  the  genuineness  of  such  receipt  or  the 
quantity  or  quality  of  the  goods  therein  described. 

The  validity  of  the  negotiation  of  a  receipt  is  not 
impaired  by  the  fact  that  such  negotiation  was  a  breach 
of  duty  on  the  part  of  the  person  making  the  negotiation, 
or  by  the  fact  that  the  owner  of  the  receipt  was  induced 
by  fraud,  mistake,  or  duress  to  entrust  the  possession  or 
custody  of  the  receipt  to  such  p.ers.on,  if  the  person  to 
whom  the  receipt  was  negotiated,  or  a  person  to  whom 
the  receipt  was  subsequently  negotiated,  paid  value  there- 
for, without  notice  of  the  breach  of  duty,  or  fraud,  mis- 
take, or  duress. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  161 

Where  a  person  having  sold,  mortgaged,  or  pledged 
goods  which  are  in  a  warehouse  and  for  which  a  nego- 
tiable receipt  has  been  issued,  or  having  sold,  mortgaged, 
or  pledged  the  negotiable  receipt  representing  such 
goods,  continues  in  possession  of  the  negotiable  receipt, 
the  subsequent  negotiation  thereof  by  that  person  under 
any  sale,  or  other  disposition  thereof,  to  any  person 
receiving  the  same  in  good  faith,  for  value  and  without 
notice  of  the  previous  sale,  mortgage  or  pledge,  will  have 
the  same  effect  as  if  the  first  purchaser  of  the  goods  or 
receipt  had  expressly  authorized  the  subsequent  negotia- 
tion. 

Where  a  negotiable  receipt  has  been  issued  for  goods, 
no  seller's  lien  or  right  of  stoppage  in  transitu  will  defeat 
the  rights  of  any  purchaser  for  value  in  good  faith  to 
whom  such  receipt  has  been  negotiated,  whether  such 
negotiation  be  prior  or  subsequent  to  the  notification  to 
the  warehouseman  who  issued  such  receipt  of  the  seller's 
claim  to  a  lien  or  right  of  stoppage  in  transitu. 

Section  100. — FRAUD  BY  WAREHOUSEMAN. — A  ware- 
houseman, or  any  officer,  agent,  or  servant  of  a  ware- 
houseman, who  issues  or  aids  in  issuing  a  receipt  knowing 
that  the  goods  for  which  such  receipt  is  issued  have  not 
been  actually  received  by  such  warehouseman,  or  are  not 
under  his  control  at  the  time  of  issuing  such  receipt,  will 
be  guilty  of  a  crime,  and  upon  conviction  will  be  punished 
for  each  offense  by  imprisonment  not  exceeding  five 
years,  or  by  a  fine  not  exceeding  five  thousand  dollars, 
or  by  both. 

A  warehouseman,  or  any  officer,  agent,  or  servant  of  a 
warehouseman,  who  fraudulently  issues  or  aids  in  fraudu- 
lently issuing  a  receipt  for  goods,  knowing  that  it  con- 
tains any  false  statement,  will  be  guilty  of  a  crime,  and 
upon  conviction  will  be  punished  for  each  offense  by 
imprisonment  not  exceeding  one  year,  or  by  a  fine  not 
exceeding  one  thousand  dollars,  or  by  both. 


162  BUSINESS  LAW  FOR  BUSINESS  MEN. 

A  warehouseman,  or  any  officer,  agent,  or  servant  of  a 
warehouseman,  who  issues  or  aids  in  issuing  a  duplicate 
or  additional  negotiable  receipt  for  goods,  knowing  that  a 
former  negotiable  receipt  for  the  same  goods  or  any  part 
of  them  is  outstanding  and  uncancelled,  without  plainly 
placing  upon  the  face  thereof  the  word  "duplicate," 
except  in  the  case  of  a  lost  or  destroyed  receipt,  will  be 
guilty  of  a  crime,  and  upon  conviction  may  be  punished 
for  each  offense  by  imprisonment  not  exceeding  five 
years,  or  by  a  fine  not  exceeding  five  thousand  dollars, 
or  by  both. 

Where  there  are  deposited  with  or  held  by  a  ware- 
houseman goods  of  which  he  is  owner,  either  solely  or 
jointly  or  in  common  with  others,  such  warehouseman,  or 
any  of  his  officers,  agents,  or  servants  who,  knowing  this 
ownership,  issues  or  aids  in  issuing  a  negotiable  receipt 
for  such  goods  which  does  not  state  such  ownership,  will 
be  guilty  of  a  crime,  and  upon  conviction  may  be  punished 
for  each  offense  by  imprisonment  not  exceeding  one  year, 
or  by  a  fine  not  exceeding  one  thousand  dollars,  or  by 
both.' 

A  warehouseman,  or  any  officer,  agent,  or  servant  of  a 
warehouseman,  who  delivers  goods  out  of  the  possession 
of  such  warehouseman,  knowing  that  a  negotiable  receipt 
the  negotiation  of  which  would  transfer  the  right  to  the 
possession  of  such  goods  is  outstanding  and  uncancelled, 
without  obtaining  the  possession  of  such  receipt  at  or 
before  the  time  of  such  delivery,  will  be  guilty  of  a  crime, 
and  upon  conviction  may  be  punished  for  each  offense  by 
imprisonment  not  exceeding  one  year,  or  by  a  fine  not 
exceeding  one  thousand  dollars,  or  by  both. 

Any  person  who  deposits  goods  to  which  he  has  not 
title,  or  upon  which  there  is  a  lien  or  mortgage,  and  who 
takes  for  such  goods  a  negotiable  receipt  which  he  after- 
wards negotiates  for  value  with  intent  to  deceive  and 
without  disclosing  his  want  of  title  or  the  existence  of  the 
lien  or  mortgage,  will  be  guilty  of  a  crime,  and  upon  con- 
viction may  be  punished  for  each  offense  by  imprison- 


Section  103,  page  163,  "Business  Law  for  Business  Men" — AGRICUL- 
TURAL WAREHOUSES — The  licensing  of  warehouses  where  agricultural 
products  are  stored  is  provided  for  by  a  new  law.  The  Director  of  the  State 
Department  of  Agriculture  is  given  the  regulation  and  control  of  agricultural 
warehouses  and  the  license  is  to  be  granted  by  him  upon  the  giving  of  a  bond 
to  the  State  of  California  by  the  warehouse  man.  Every  warehouseman  con- 
ducting a  warehouse  licensed  under  this  act  shall  receive  for  storage  therein, 
so  far  as  its  capacity  permits,  any  agricultural  product  of  the  kind  customarily 
stored  therein  by  him  which  may  be  tendered  to  him  in  a  suitable  condition 
for  warehousing,  in  the  usual  manner  in  the  ordinary  and  usual  course  of 
business,  without  making  any  discrimination  between  persons  desiring  to 
avail  themselves  of  warehouse  facilities. 

Every  warehouseman  conducting  a  warehouse  licensed  under  this  act 
shall  keep  the  agricultural  products  therein  of  one  depositor  so  far  separate 
from  agricultural  products  of  other  depositors,  and  from  other  agricultural 
products  of  same  depositor  for  which  a  separate  receipt  has  been  issued,  as 
to  permit  at  all  times  the  identification  and  redelivery  of  the  agricultural  pro- 
ducts deposited;  but  if  authorized  by  agreement  or  by  custom,  a  warehouse- 
man may  mingle  fungible  agricultural  products  with  other  agricultural  pro- 
ducts of  the  same  kind  and  grade,  and  shall  be  severally  liable  to  each  de- 
positor for  the  care  and  redelivery  of  his  share  of  such  mass,  to  the  same  ex- 
tent and  under  the  same  circumstances  as  if  the  agricultural  products  had  been 
kept  separate,  but  he  shall  at  no  time  while  they  are  in  his  custody  mix 
fungible  agricultural  products  of  different  grades. 

For  all  agricultural  products  stored  for  state,  interstate  or  foreign  com- 
merce, in  a  warehouse  licensed  under  this  act  original  receipts  shall  be  issued 
by  the  warehouseman  conducting  the  same,  but  no  receipts  shall  be  issued 
except  for  agricultural  products  actually  stored  in  the  warehouse  at  the  time 
of  the  issuance  thereof.  Act  of  the  Legislature  of  California,  approved  June  3, 
1921;  in  effect  August  3,  1921. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  l.fio 

ineut  not  exceeding  one  year,  or  by  a  fine  not  exceeding 
one  thousand  dollars,  or  by  both. 

Act  of  the  Legislature,  approved  March  19, 1909. 

Section  101. — INSURANCE  ON  STORED  PROPERTY. — Both 
the  owner  of  the  goods  and  the  warehouseman  have  an 
insurable  interest  in  the  property,  and  if  the  owner  does 
not  insure  against  loss  by  fire  the  warehouseman  can 
insure  for  his  benefit. 

Section  102. — LIABILITY  FOR  Loss  BY  REASON  OF  DEFEC- 
TIVE BUILDING. — A  warehouseman' is  bound  in  the  exercise 
of  reasonable  care  to  make  reasonable  inspection  from 
lime  to  time  to  see  that  his  building  remains  safe  and  in 
proper  condition.  When  a  warehouseman  receives  goods 
in  his  warehouse  for  storage,  he  must  be  deemed  to  have 
held  out  to  the  public  his  building  as  a  proper  and  fit 
building  in  which  to  store  goods.  Buildings  of  this  char- 
acter are  liable  to  deteriorate.  They  may  be  weakened 
by  storms  and  winds,  and,  when  constructed  upon  piles 
over  waters  or  low  lands,  the  piles  may  decay  and  the 
foundation  become  weak,  endangering  the  structure.  A 
warehouseman,  therefore,  in  the  exercise  of  reasonable 
care,  owes  a  duty  to  his  patrons  of  making  reasonable 
inspection  from  time  to  time  to  see  that  the  building 
remains  safe  and  in  a  proper  condition. 

Section  103. — FOOD  WAREHOUSES.— The  Legislature  of 
1919  passed  a  law  regulating  the  business  of  food  ware- 
housemen, which  is  as  follows : 

Sec.  1.  This  act  shall  be  known  as  the  "food  ware- 
housemen act,"  and  shall  apply  to  the  public  utilities 
herein  described.  The  term  "food  commodities"  as  used 
in  this  act  shall  be  construed  to  mean  all  products,  stuffs, 
preparations,  substances,  or  articles  which  are  customary 
or  proper  for  food  for  human  beings,  and  shall  include 
meat  and  meat  products,  fruit,  vegetables,  fresh  fish, 
shellfish,  game,  poultry,  eggs,  butter,  cheese  and  milk. 


164  BUSINESS  LAW  FOR  BUSINESS  MEN. 

(a)  Definitions. — Sec.  2.  The  term  "commission" 
when  used  in  this  act  means  the  railroad  commission  of 
the  State  of  California.  The  term  "commissioner"  when 
used  in  this  act  means  one  of  the  members  of  the  com- 
mission. The  term  "corporation"  when  used  in  this  act, 
includes  a  corporation,  a  company,  an  association  and  a 
joint  stock  association.  The  term  "person"  when  used 
in  this  act,  includes  an  individual,  a  firm  and  a  co-partner- 
ship. The  term  "food  warehouseman"  as  used  in  this  act 
shall  be  construed  to  mean  and  shall  include  every  per- 
son, or  corporation,  their  lessees,  trustees,  receivers  or 
trustees  appointed  by  any  court  whatsoever  owning,  con- 
trolling, operating,  or  managing  any  building,  structure, 
warehouse,  elevator  or  plant  in  which  commodities,  regu- 
larly received  from  the  public  generally,  are  stored  for 
compensation,  including  cold  storage  plants  and  refriger- 
ating plants,  but  not  including  private  homes,  hotels, 
restaurants  or  exclusively  retail  establishments  or  others 
not  storing  articles  of  food  for  other  persons  for  com- 
pensation. Every  person,  or  corporation  controlling, 
operating,  or  managing  any  building,  structure,  ware- 
house, elevator,  or  plant  as  aforesaid,  shall  be  deemed  to 
he  engaged  in  the  storage  of  food  commodities  within  the 
meaning  of  this  act. 

(b)  Food  Warehouses  Declared  Public  Utilities.— 
Sec.  3.    Every  food  warehouseman  doing  business  in  the 
State  of  California  is  hereby  declared  to  be  a  public  util- 
ity, and  subject  to  the  jurisdiction,  control  and  regulation 
of  the  railroad  commission  of  the  State  of  California  as 
hereinafter  in  this  act  provided. 

No  food  warehousemen  shall  engage  in  the  storage  of 
food  commodities  in  the  State  of  California,  except  in 
accordance  with  the  provisions  of  this  act. 

(c)  Discrimination  by   Warehousemen  Unlawful.— 
Sec.  4.    It  shall  be  unlawful  for  any  food  warehouseman, 
doing  business  in  the  State  of  California,  to  discriminate, 
or  attempt  to  discriminate  between  persons,  firms  or  cor- 
porations offering  food  commodities  for  storage  or  desir- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  165 

ing  to  avail  themselves  of  the  warehousing  or  storage 
facilities  afforded  by  such  food  warehouseman;  or  to 
accept  food  commodities  from  any  person,  firm  or  cor- 
poration at  rates  or  charges  in  excess  of  rates  c«r  charges 
exacted  or  received  from  other  persons,  firms  or  corpora- 
tions for  the  same  or  substantially  similar  warehousing 
or  storage  service ;  or  to  grant,  allow,  or  deduct  from  the 
rates  or  charges  exacted  or  received  for  warehousing  or 
storage  service  from  any  person,  firm,  or  corporation  any 
rebate,  discount,  deduction,  concession,  refund,  or  remit- 
tance not  granted  and  allowed  to  all  other  persons,  firms, 
or  corporations  under  the  same  or  substantially  similar 
circumstances  and  conditions ;  or  to  make  or  give,  or  at- 
tempt to  make  or  give,  any  preference  or  advantage  to 
any  person,  firm  or  corporation  not  made  or  given  to 
every  other  person,  firm  or  corporation ;  or  by  any  scheme 
of  rebates,  discounts,  deductions,  concessions,  refunds, 
remittances,  collateral  contracts,  discriminating  charges, 
discriminating  rates,  or  in  the  service  or  facilities  afford- 
ed, or  by  any  other  device  whatsoever,  discriminate  or 
show  preference,  or  attempt  to  discriminate  or  show 
preference,  between  persons,  firms,  or  corporations  offer- 
ing food  commodities  for  storage;  or  by  any  of  the  prac- 
tices or  devices  aforesaid  to  monopolize  or  attempt  to 
monopolize,  or  combine,  or  conspire  with  others  to  mo- 
nopolize in  any  locality  the  business  of  storing  food  com- 
modities; and  it  shall  likewise  be  unlawful  for  any  per- 
son, firm  or  corporation  to  solicit,  accept,"  receive  or  at- 
tempt to  obtain  from  any  food  warehouseman  any  rebate, 
discount,  deduction,  concession,  refund,  or  remittance, 
or  to  solicit,  accept,  receive,  or  attempt  to  obtain  from 
any  food  warehouseman,  any  preference,  or  advantage, 
cither  in  rates  or  charges,  or  in  service  or  facilities 
afforded. 

The  railroad  commission  shall  have  full  power  to  de- 
termine any  fact  or  question  arising  under  this  section 
and  is  empowered  after  hearing  by  appropriate  order  to 
enforce  the  provisions  thereof,  and  may  by  rule  or  order 


166  BUSINESS  LAW   FOR  BUSINESS   MEN. 

establish  from  time  to  time  such  exceptions  from  the 
operation  of  the  prohibitions  of  this  section  as  it  may  con- 
sider just  and  reasonable. 

(d)  Schedule  of  Rates  to  Be  Filed. — Sec.  5.  Every. 
food  warehouseman  doing  business  in  the  State  of  Cali- 
fornia shall  file  with  the  railroad  commission  within  such 
time  and  in  such  form  as  the  commission  may  designate 
and  shall  also  print  and  keep  open  to  public  inspection  at 
each  and  every  building,  structure,  warehouse,  elevator, 
or  plant  for  the  storing  or  warehousing  of  food  commodi- 
ties maintained  by  him  in  said  state,  schedules  showing 
all  rates  and  charges,  which  are  in  force  for  warehousing 
and  storage  services  of  every  description,  including  sort- 
ing, handling,  weighing,  elevating,  and  packing  charges, 
and  all  charges  directly  or  indirectly  connected  with  such 
services,  together  with  all  rules  and  regulations  which  in 
any  manner  affect  or  relate  to  rates  or  charges,  and  show- 
ing plainly  when  the  same  became  effective,  such  rates 
to  be  uniform  in  their  operation  and  to  apply  with  equal 
force  and  effect  to  all  persons,  firms  or  corporations  deal- 
ing with  said  food  warehouseman.  The  railroad  commis- 
sion shall  have  power  after  hearing  to  fix  and  determine 
any  such  rate,  charge,  rule  or  regulation,  and  prescribe 
by  order  such  changes  in  the  form  of  the  schedules  re- 
ferred to  in  this  section  as  it  may  find  to  be  just  and  rea- 
sonable. Unless  the  commission  otherwise  orders,  no 
changes  shall  be  made  by  any  food  warehouseman  in  any 
rate  or  charge,  or  in  any  rules  or  regulations,  affecting- 
rates  or  charges,  except  by  permission  of  the  railroad 
commission  after  thirty  days'  notice  to  the  commission 
and  to  the  public  as  herein  provided.  Such  notice  shall 
be  given  by  filing  with  the  commission  and  keeping  open 
to  public  inspection,  as  aforesaid,  new  schedules  stating 
plainly  the  change  or  changes  to  be  made  in  the  schedule 
or  schedules  then  in  force,  and  the  time  when  the  change 
or  changes  go  into  effect.  The  commission,  for  good 
cause  shown,  may  allow  changes  without  requiring  the 
thirty  days'  notice  herein  provided  for,  by  an  order  speci- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  167 

fying  the  changes  so  to  be  made  and  the  time  when  they 
shall  take  effect,  and  the  manner  in  which  they  shall  be 
filed  and  published.  No  food  warehouseman  shall  engage 
in  the  business  of  storing  food  commodities  unless  the 
rates  and  charges  upon  which  the  same  are  stored  are 
filed  and  open  to  public  inspection  as  aforesaid.  No  food 
warehouseman  shall  refund  or  remit  in  any  manner  or 
by  any  device,  any  portion  of  the  rates  or  charges  filed 
and  open  to  public  inspection  as  aforesaid,  or  demand, 
collect,  or  receive,  directly  or  indirectly  from  any  person, 
firm  or  corporation,  any  different  sum  for  warehousing  or 
storage  services  than  the  rates  and  charges  filed  and  open 
to  public  inspection  as  aforesaid,  or  directly  or  indirectly 
make  any  charge  for  such  services  not  shown  by  the 
schedule  aforesaid ;  nor  shall  any  person,  firm,  or  corpora- 
tion solicit,  accept,  receive,  or  attempt  to  obtain  from  any 
food  warehouseman  any  rate  or  charge  not  filed  and  open 
to  public  inspection  as  aforesaid. 

The  railroad  commission  shall  have  full  power  and 
jurisdiction  to  determine  any  fact  or  question  arising 
under  this  section  and  is  hereby  empowered  after  hearing 
by  appropriate  order  to  enforce  the  provisions  thereof 
and  may  by  rule  or  order  establish  from  time  to  time  such 
exceptions  from  the  operation  of  the  prohibitions  afore- 
said as  it  may  consider  just  and  reasonable. 

(e)  Contracts  in   Violation   Void. — Sec.   6.     Every 
contract,  expressed  or  implied,  made  by  any  person,  firm 
or  corporation  in  violation  of  the  provisions  of  section 
four  or  section  five  of  this  act,  is  declared  to  be  illegal 
and  to  be  utterly  void  and  no  recovery  thereon  shall  be 
had. 

(f )  Procedure  «.s  Specified  in  Public  Utilities  Act.— 
Sec.  7.    In  all  respects  in  which  the  railroad  commission 
has  power  and  authority  under  the  provisions  of  section 
four  or  section  five  of  this  act,  applications  and  com- 
plaints to  the  commissions  on  motion  or  otherwise  may 
be  made  and  filed  with  the  railroad  commission,  process 
issued,  hearings  held,  opinions,  orders  and  decisions  made 


168  BUSINESS  LAW  FOB  BUSINESS  MEN. 

and  filed,  petitions  for  rehearing  filed  and  acted  upon,  and 
petitions  for  writs  of  review  or  mandate  filed  with  the 
supreme  court  of  the  State  of  California,  considered  and 
disposed  of  by  said  court,  in  the  manner,  under  the  con- 
ditions and  subject  to  the  limitations  and  with  the  effect 
specified  in  the  public  utilities  act. 

(g)  Action  ~by  Attorney  General  to  Collect  Rebates, 
Etc. — Sec.  8.  The  attorney  general  of  the  State  of  Cali- 
fornia is  authorized  and  directed,  whenever  he  has  rea- 
sonable grounds  to  believe  that  any  person,  firm  or  cor- 
poration has  knowingly  accepted  or  received  from  any 
food  warehouseman,  directly  or  indirectly,  any  rebate, 
discount,  deduction,  concession,  refund  or  remittance 
from  the  rates  or  charges  filed  and  open  to  public  inspec- 
tion as  in  section  five  of  this  act  required,  to  prosecute  a 
civil  action  in  the  name  of  the  people  of  the  State  of  Cali- 
fornia in  the  proper  court  to  collect  three  times  the  total 
sum  of  such  rebates,  discounts,  deductions,  concessions, 
refunds,  or  remittances  so  accepted  or  received  within 
three  years  prior  to  the  commencement  of  such  action. 

(h)  Action  to  Enjoin  Violations. — Sec.  9.  Any  per- 
son, firm  or  corporation  may  maintain  an  action  to 
enjoin  a  continuance  of  any  act  or  acts  in  violation  of 
section  four  or  section  five  of  this  act,  or  of  any  order, 
rule  or  regulation  to  the  railroad  commission  made  or 
enacted  by  said  commission  pursuant  to  the  power  and 
authority  vested  in  said  commission  by  said  sections  of 
this  act,  and,  if  injured  thereby,  for  the  recovery  of  dam- 
ages in  an  amount  equal  to  three  times  the  amount  of 
actual  damages  sustained.  If  in  such  action,  the  court 
shall  find  that  the  defendant  is  violating  section  four  or 
section  five  of  this  act,  or  any  order,  rule,  or  regulation 
of  the  railroad  commission,  made  or  enacted  by  said  com- 
mission, pursuant  to  the  power  and  authority  vested  in 
said  commission  by  said  sections  of  this  act,  it  shall  enjoin 
the  defendant  from  a  continuance  of  such  violation,  and  it 
shall  not  be  necessary  to  allege  or  prove  actual  damage 
to  plaintiff  in  addition  thereto. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  169 

(i)  Penalty, — Sec.  10.  Any  person  or  persons,  or 
corporation,  who,  or  which  shall  violate  section  four  or 
section  five  of  this  act,  or  any  order,  rule,  or  regulation 
of  the  railroad  commission  made  or  enacted  by  said  com- 
mission pursuant  to  the  power  and  authority  vested  in 
said  commission  by  said  sections  of  this  act,  or  who  shall 
procure,  aid  or  abet  any  person,  firm  or  corporation  in 
any  such  violation,  shall  be  guilty  of  a  misdemeanor,  and 
upon  conviction  thereof,  shall,  if  a  person,  be  punished 
by  a  fine  of  not  exceeding  one  thousand  dollars,  or  by 
imprisonment  in  a  county  jail  not  exceeding  six  months 
or  by  both  such  fine  and  imprisonment,  and,  if  a  corpora- 
tion, by  a  fine  not  exceeding  three  thousand  dollars.  In 
construing  and  enforcing  the  provisions  of  this  act,  the 
act,  omission,  or  failure  of  any  director,  agent,  employee, 
or  other  person  acting  for  or  employed  by  any  person, 
firm  or  corporation,  acting  within  the  scope  of  his  em- 
ployment, shall  in  every  case  be  also  deemed  to  be  the 
act,  omission  or  failure  of  such  person,  firm,  or  corpora- 
tion as  well  as  that  of  such  director,  officer,  agent,  em- 
ployee, or  person. 

(j)  Constitutionality. — Sec.  11.  If  any  section,  sen- 
tence, clause  or  phrase  of  this  act  is  for  any  reason  held 
to  be  unconstitutional,  such  decision  shall  not  affect  the 
validity  of  the  remaining  portions  of  this  act.  The  legis- 
lature hereby  declares  that  it  would  have  passed  this  act, 
and  each  section,  sentence,  clause  and  phrase  thereof, 
irrespective  of  the  fact  that  any  one  or  more  other  sec- 
tions, sentences,  clauses,  or  phrases  be  declared  uncon- 
stitutional. 

(k)  Purpose  of  Act. — Sec.  12.  The  legislature  here- 
by declares  that  the  purpose  of  this  act  is  to  safeguard 
the  public  against  the  creation  and  perpetuation  of  mo- 
nopolies, and  to  foster  and  encourage  competition,  by 
prohibiting  unfair  and  discriminating  practices  by  which 
fair  and  honest  competition  is  destroyed.  The  legislature 
hereby  further  declares  that  food  warehousemen,  as  de- 
fined in  section  two  of  this  act,  are  engaged  in  a  business, 


170  BUSINESS  LAW  FOE  BUSINESS  MEN.  I 

tending  to  monopoly,  and  that  by  reason  of  such  monop- 
olistic tendency  and  by  reason  of  its  vital  connection  with 
the  distribution  of  public  necessities,  such  business  is 
clothed  with  a  public  interest  and  subject  to  public  regula- 
tion and  control  for  the  public  welfare  as  a  public  utility, 
as  in  this  act  provided.  This  act  shall  be  liberally  con- 
strued that  its  beneficial  purpose  may  be  subserved.  The 
remedies  herein  prescribed  are  cumulative.  If  any  con- 
flict shall  arise  between  this  act  and  the  public  utilities 
act,  the  latter  shall  prevail. 

Act  of  the  Legislature,  approved  May  5,  1919; 
in  effect  July  22,  1919. 

Section  104. — COLD  STORAGE  WAREHOUSES. — Any  per- 
son, firm  or  corporation  desiring  to  operate  a  cold  storage 
or  refrigerating  warehouse  wherein  shall  be  stored  '  *  arti- 
cles of  food"  for  a  period  exceeding  thirty  days,  shall 
make  application  in  writing  to  the  state  board  of  health 
for  that  purpose,  stating  the  location  of  its  plant  or 
plants.  On  receipt  of  the  application  the  state  board  of 
health  shall  cause  an  examination  to  be  made  into  the 
sanitary  condition  of  said  plant  or  plants  and  if  found 
to  be  in  a  sanitary  condition  and  otherwise  properly 
equipped  for  the  business  of  cold  storage,  the  state  board 
of  health  shall  cause  a  license  to  be  issued  authorizing  the 
applicant  to  operate  a  cold  storage  or  refrigerating  ware- 
house for  and  during  a  period  of  one  year.  The  license 
shall  be  issued  upon  payment  by  the  applicant  of  a  license 
fee  to  the  state  board  of  health  for  each  and  every  ware- 
house or  plant  operated  by  applicant  under  the  pro- 
visions of  this  act  for  all  cold  storage  or  refrigerating 
warehouses  or  plants  having  a  capacity  of  ten  thousand 
cubic  feet,  or  less,  a  fee  of  fifteen  dollars.  For  all  cold 
storage  or  refrigerating  warehouses  or  plants  having  a 
capacity  of  more  than  ten  thousand  cubic  feet  and  less 
than  fifty  thousand  cubic  feet,  a  fee  of  thirty  dollars.  For 
all  cold  storage  or  refrigerating  warehouses  or  plants 
having  a  capacity  of  more  than  fifty  thousand  cubic  f.eet 


Section  105,  page  171,  "Business  Law  for  Business  Men" — LIABILITY 
OF  HOTEL  KEEPERS— On  page  172,  after  the  word  "contents"  in  the 
second  line  from  the  bottom  of  the  page,  insert  "and  all  other  miscellaneous 
effects,  including  wearing  apparel  and  personal  belongings,  $250." 

(a)  Suits  to  recover  personal  property.  All  civil  actions  for  the  recover} 
of  personal  property,  wearing  apparel,  trunks,  valises  or  baggage  alleged  to 
have  been  left  at  a  hotel,  boarding  house,  lodging  house  or  apartment  house, 
shall  be  begun  within  ninety  days  from  and  after  the  date  of  departure  of 
the  owner  of  said  personal  property,  wearing  apparel,  trunks,  valises  or  bag- 
gage from  said  hotel,  boarding  house,  lodging  house  or  furnished  apart- 
ment house.  Act  of  the  Legislature  of  California,  approved  Mayi  14,  1921; 
in  effect  July  14,  1921. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  171 

and  less  than  one  hundred  thousand  cubic  feet,  a  fee  of 
forty  dollars.  For  all  cold  storage  or  refrigerating  ware- 
houses or  plants  having  a  capacity  of  one  hundred  thou- 
sand cubic  feet  or  more,  a  fee  of  fifty  dollars. 

The  secretary  of  the  state  board  of  health  shall  keep 
a  full  and  correct  account  of  all  fees  received  under  the 
provisions  of  this  act,  and  shall,  at  least  once  each  month, 
deposit  all  such  fees  collected  with  the  state  treasurer  and 
make  a  detailed  report  covering  same  to  the  state  con- 
troller, and  such  money  shall  be  credited  to  the  appro- 
priation for  the  support  of  the  pure  food  and  drug  labora- 
tory; provided,  hoivever,  that  nothing  in  this  act  con- 
tained shall  apply  to  cold  storage  or  cold  storage  or 
refrigerating  plants  or  warehouses  as  herein  defined 
which  are  maintained  or  operated  by  restaurants,  hotels, 
or  exclusively  retail  establishments  not  storing  articles 
of  food  for  other  persons. 

All  articles  of  food  when  deposited  in  cold  storage 
shall  be  marked  plainly  on  the  containers  in  which  they 
are  packed  or  on  the  individual  article  with  the  da,te  of 
receipt,  in  accordince  with  such  rules  and  forms  as  may 
be  prescribed  by  the  state  board  of  health,  and  when 
removed  from  cold  storage  shall  be  marked  in  like  man- 
ner with  the  date  of  withdrawal. 

Statutes  of  1917,  Chapter  110. 

HOTEL  KEEPERS  AND  LODGING-HOUSE 
KEEPERS 

Section  105. — LIABILITY  OF  HOTEL  KEEPERS  AND  LODG- 
ING-HOUSE KEEPERS. — Hotel  keepers  (including  boarding- 
house  keepers)  and  lodging-house  keepers  have  certain 
rights  and  liabilities  fixed  by  the  law.  The  language  of 
the  California  statute  referring  to  hotels  is,  "Inn  keep- 
ers, hotel  keepers,  boarding  and  lodging-house  keepers." 
There  is  no  difference  in  the  law  between  an  inn  and 
hotel.  Both  words  mean  the  same  thing.  An  inn  is  a 


172  BUSINESS  LAW  FOR  BUSINESS  MEN. 

house  which  is  held  out  to  the  public  as  a  place  where 
all  transient  persons  who  come  will  be  received  and 
entertained  as  guests,  for  compensation — a  hotel.  There 
is  a  difference  between  a  hotel  and  a  boarding-house, 
which  is  this :  A  hotel  is  a  house  where  a  keeper  holds 
himself  out  as  ready  to  receive  all  who  may  choose  to 
come  there  and  pay  an  adequate  price  for  the  entertain- 
ment ;  while  the  keeper  of  a  boarding-house  reserves  the 
choice  of  comers  and  the  terms  of  accommodation,  con- 
tracting specially  with  each  customer,  and  most  commonly 
arranging  for  long  periods  and  a  definite  abode.  There 
is  no  difference  in  the  law  between  the  liability  of  hotel 
keepers,  boarding-house  keepers,  and  lodging-house  keep- 
ers. The  law  puts  them  all  in  the  same  class  with  refer- 
ence to  their  liability  for  the  property  of  their  guests, 
boarders  or  lodgers.  Hotel  keepers,  boarding-house 
keepers,  and  lodging-house  keepers  in  California  are 
bound  to  use  ordinary  care  and  diligence  in  the  protec- 
tion and  preservation  of  the  personal  property,  other 
than  money,  of  their  guests,  boarders,  or  lodgers  com- 
ing into  their  houses,  and  they  are  liable  for  losses  of  or 
injuries  to  such  property,  if  occasioned  by  their  lack  of 
ordinary  care  and  diligence.  The  law  passed  by  the  Leg- 
islature in  1895  limited  the  liability  of  hotel  keepers, 
boarding  and  lodging-house  keepers,  to  losses  occasioned 
by  their  lack  of  ordinary  care  and  diligence,  but  does  not 
include  money  within  its  terms;  consequently  it  seems 
that  the  greater  and  more  exacting  care  must  be  taken  of 
the  money  of  a  guest,  boarder,  or  lodger  than  is  required 
to  be  exercised  with  reference  to  other  kinds  of  personal 
property.  The  law  provides,  however,  that  in  no  case  of 
loss  of  or  injury  to  personal  property,  other  than  money, 
shall  the  liability  of  the  hotel  keeper,  boarding-house 
keeper,  or  lodging-house  keeper  exceed  the  sum  of  $100 
for  each  trunk  and  its  contents,  $50  for  each  valise  and 
traveling  bag  and  contents,  and  $10  for  each  box,  bundle 
or  package  and  contents,  placed  under  his  care,  unless  he 
has  consented  in  writing  with  the  owner  to  assume  a 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  173 

greater  liability.  It  is  customary  to  give  receipts  in  writ- 
ing for  money  left  or  deposited  by  guests,  and  in  such 
case  the  liability  would  be  for  the  amount  shown  by  the 
receipt,  in  case  of  loss. 

Civil  Code,  Section  1859. 

Section  106. — EXEMPTION  FROM  LIABILITY  IN  CERTAIN 
CASES. — If  a  hotel  keeper,  or  boarding-house  or  lodging- 
house  keeper,  keeps  a  fireproof  safe,  and  gives  notice  to 
his  guest,  boarder,  or  lodger  that  he  keeps  such  a  safe, 
and  will  not  be  liable  for  money,  jewelry,  documents,  or 
other  articles  of  unusual  value  and  small  compass,  unless 
such  articles  are  placed  in  the  safe,  he  will  not  be  liable 
for  any  loss  or  damage  to  such  articles  if  not  deposited 
with  him  to  be  placed  in  his  safe,  provided,  that  he  does 
not  by  his  own  acts  contribute  to  the  loss  of  the  property. 
In  any  case,  the  hotel  keeper,  boarding-house  keeper,  or 
lodging-house  keeper  shall  not  be  liable  for  more  than 
$250  for  loss  of  any  money,  jewelry,  or  documents,  or 
other  articles  of  unusual  value  and  small  compass,  be- 
longing to  any  guest,  boarder,  or  lodger,  unless  he  shall 
have  given  a  receipt  in  writing  for  such  property.  Just 
what  the  law  means  by  a  " receipt  in  writing,"  and  how 
that  fact  alone  should  make  the  liability  greater,  is  dif- 
ficult to  understand;  but  it  is  probable  that  the  Legisla- 
ture meant  to  provide,  by  this  language,  that  where  a 
receipt  is  given  acknowledging  a  greater  value,  then  the 
liability  for  the  loss  shall  be  equal  to  the  admitted  value 
of  the  property,  and  that  where  no  receipt  is  given,  no 
value  in  excess  of  $250  shall  be  left  to  be  determined  by 
the  conflicting  testimony  of  witnesses.  The  notice  pro- 
vided for  by  law  need  not  be  in  any  particular  form,  and 
it  may  be  given  personally  to  the  guest,  boarder,  or 
lodger,  or  it  may  be  given  by  putting  up  a  printed  notice 
in  a  prominent  place  in  the  office  or  in  the  rooms  of  the 
house. 

Civil  Code,  Section  1860. 


174  BUSINESS  LAW   FOR  BUSINESS  MEN. 

Section  107. — WHAT  PROPERTY  MUST  BE  DEPOSITED  IN 
THE  SAFE. — Under  the  notice  provided  for  by  law  to  be 
given  by  the  hotel  keeper,  boarding-house  keeper,  or  lodg- 
ing-house keeper,  he  cannot  demand  that  his  guest  put 
every  article  of  small  compass  and  peculiar  value,  or  all 
his  money  or  jewelry,  in  the  safe.  The  law  does  not  apply 
to  such  articles  as  the  guest  needs  to  have  about  him,  for 
constant  and  daily  use,  even  though  for  personal  adorn- 
ment. Jewelry  worn  by  a  woman  daily  need  not,  when 
not  actually  upon  her  person,  be  deposited  in  the  safe,  in 
order  to  make  the  hotel  keeper  or  boarding  and  lodging- 
house  keeper  responsible  for  its  loss  in  his  house.  If 
worn  daily,  the  jewelry  does  not  cease  to  be  needed  for 
present  personal  use  when  its  possessor  lays  it  aside  upon 
retiring  for  the  night.  Nor  is  it  necessary,  in  order  to 
render  the  hotel  keeper  liable,  that  the  property  should 
have  been  delivered  into  his  exclusive  personal  posses- 
sion. The  guest  may  retain  personal  possession  of  his 
goods  within  the  house — as  of  his  trunk  and  its  contents, 
his  wearing  apparel,  and  other  articles  in  his  room,  and 
any  jewelry  or  valuables  carried  or  worn  around  his  per- 
son— without  discharging  the  keeper  of  the  house  from 
responsibility. 

Section  108. — LIABILITY  OF  HOTEL,  BOARDING-HOUSE, 
AND  LODGING-HOUSE  KEEPERS  FOR  Loss  BY  FIRE. — In  some 
of  the  states  of  the  Union  the  keeper  of  a  hotel  is  held 
to  be  an  insurer  against  loss  by  fire,  and  is  bound  to  pay 
for  property  lost  by  a  fire,  no  matter  from  what  cause 
occurring.  But  this  extreme  view  is  not  the  law  of  Cali- 
fornia. In  this  state,  when  a  fire  occurs,  and  destroys  or 
injures  the  property  of  a  guest,  boarder,  or  lodger,  the 
keeper  of  the  house  is  not  liable  to  pay  the  damage  if  he 
can  show  that  the  fire  was  purely  accidental,  and  that 
neither  his  negligence  nor  the  negligence  of  his  servants 
or  employees  contributed  to  the  loss.  But  if  the  fire  oc- 
curs through  the  negligence  of  the  proprietor,  or  by  the 
neglect  of  any  of  his  servants  or  employees,  he  will  be 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  175 

liable  for  damage  to  the  property  of  his  guests.  Thus, 
if  a  cook  or  fireman  negligently  leaves  coals  or  ashes  con- 
taining fire  in  a  position  which  ignites  and  destroys  the 
house,  or  if  a  chambermaid  negligently  sets  fire  to  the 
furniture  of  a  room,  or  if  a  porter  or  bellboy  sent  to  build 
a  fire  in  the  room  of  a  guest  sets  fire  to  the  house,  or  if 
a  sufficient  watch  is  not  kept,  or  reasonable  protection  and 
guard  against  fire  is  not  maintained,  the  keeper  of  a  hotel, 
boarding-house,  or  lodging-house  will  be  liable  in  this 
state  for  loss  by  fire.  But  where  the  keeper  of  the  house 
has  done  all  that  a  reasonable  man  can  do  to  guard 
against  the  danger  from  fire,  and  a  fire  occurs,  without 
any  negligence  on  his  own  part  or  on  the  part  of  any  of 
his  servants  or  employees,  he  will  not  be  liable.  Thus,  if 
a  fire  starts  in  an  adjoining  building,  or  in  some  other 
quarter  of  the  town,  and  reaches  and  sweeps  away  his  own 
house;  or  if  a  fire  occurs  by  reason  of  lightning,  earth- 
quake, or  floods,  he  will  not  be  liable  for  losses  to  his 
g-uests,  boarders,  or  lodgers.  Indeed,  it  may  be  said  that 
it  is  the  law  of  this  state  that  in  no  case  of  loss  by  fire 
is  the  keeper  of  a  hotel,  boarding-house,  or  lodging-house 
liable  for  the  property  of  guests  where  the  fire  was  purely 
accidental,  and  was  not  occasioned  by  anything  which  rea- 
sonable care  and  prudence  on  the  part  of  himself  or  his 
servants  and  employees  might  have  avoided  or  prevented. 

Section  109. — LIABILITY  OF  HOTEL,  BOARDING-HOUSE, 
AND  LODGING-HOUSE  KEEPERS  FOR  Loss  BY  THEFT. — The 
liability  of  the  keeper  of  a  hotel,  bodrding-house,  or  lodg- 
ing-house for  losses  of  the  property  of  his  guests,  board- 
ers, or  lodgers,  by  theft,  depends  upon  whether  the 
thieves  come  from  within  the  house.  If  the  property  is 
stolen  by  some  one  employed  in  the  house,  in  any  capac- 
ity, or  even  by  a  guest,  boarder  or  lodger,  without  the 
fault  of  the  person  from  whom  the  property  is  taken,  the 
keeper  of  the  house  will  be  liable  for  its  loss.  But  if 
burglars  or  rioters  break  into  the  house  and  steal,  this 
will  constitute  an  act  which  the  keeper  of  the  house  could 


176  BUSINESS  LAW  FOE  BUSINESS  MEN. 

not  very  well  have  had  any  control  over,  and  hence  he 
will  not  be  liable,  if  he  kept  his  house  secured  in  a  reason- 
able manner. 

Section  110. — LIABILITY  OF  HOTEL,  BOAEDING-HOUSE, 
AND  LODGING-HOUSE  KEEPEES  FOE  Loss  OF  BAGGAGE. — The 
liability  for  loss  of  baggage  begins  at  the  moment  the 
hotel,  boarding-house,  or  lodging-house  keeper  takes 
charge  of  the  baggage,  whether  at  the  house  or  elsewhere. 
Therefore,  if  a  porter  solicits  a  guest  at  a  railroad  train, 
or  ferry,  or  depot,  and  receives  the  traveler's  check,  and 
indicates  the  conveyance  which  the  traveler  shall  take  to 
the  house,  the  keeper  is  responsible  from  that  moment  for 
the  safe  delivery  of  the  baggage  at  the  guest's  room,  and, 
if  it  is  lost  on  the  way,  the  keeper  of  the  house  is  liable. 
After  the  baggage  has  reached  the  house,  the  keeper  is 
responsible  for  its  safety,  and  will  be  liable  for  its  loss, 
if  the  owner  of  the  baggage  is  not  guilty  -of  any  neg- 
ligence which  contributes  to  the  loss.  After  the  baggage 
leaves  the  house,  to  be  taken  to  a  depot,  train,  or  ferry 
by  the  employees  of  the  keeper  of  the  house,  his  liability 
continues  until  the  baggage  safely  reaches  its  destination 
there. 

Section  111. — STATEMENT  OF  CHAEGES,  ETC.,  TO  BE 
POSTED  BY  HOTEL,  BOAEDING-HOUSE,  AND  LODGING-HOUSE 
KEEPEES. — A  statement  of  charges  is  required  by  the  law 
io  be  posted  in  every  hotel,  boarding-house,  and  lodging- 
house  in  this  state.  Every  keeper  of  a  hotel,  inn,  board- 
ing oi1  lodging-house  shall  post,  in  a  conspicuous  place,  in 
the  office  or  public  room,  and  in  every  bedroom  of  said 
hotel,  boarding-house,  inn,  or  lodging-house,  a  printed 
copy  of  this  section,  and  a  statement  of  charges,  or  rate 
of  charges,  by  the  day,  and  for  meals  or  items  furnished, 
and  for  lodging.  No  charge  or  sum  shall  be  collected  or 
received  by  any  such  person  for  any  service  not  actually 
rendered,  or  for  any  item  not  actually  delivered,  or  for 
any  greater  or  other  sum  than  he  is  entitled  to  by  the 
general  rules  and  regulations  of  said  hotel,  inn,  boarding 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  177 

or  lodging-house.     For  any  violation  of  this  section,  or 
any  provision  herein  contained,  the  offender  shall  forfeit 
to  the  injured  party  three  times  the  amount  of  the  sum 
charged  in  excess  of  what  he  is  entitled  to. 
Civil  Code,  Section  1863. 

Section  112. — LIEN  ON  BAGGAGE  AND  OTHER  PROPERTY 
OF  GUESTS.  —  Hotel,  inn,  boarding-house  and  lodging- 
house  keepers  shall  have  a  lien  upon  the  baggage  and 
other  property  belonging  to  or  legally  under  the  control 
of  their  guests,  or  boarders,  or  lodgers  which  may  be  in 
such  hotel,  inn,  or  boarding  or  lodging-house  for  the 
proper  charges  due  from  such  guests,  or  boarders,  or 
lodgers,  for  their  accommodation,  board  and  lodging  and 
room  rent,  and  such  extras  as  are  furnished  at  their 
request,  and  for  all  money  paid  for  or  advanced  to  such 
guests,  or  boarders  or  lodgers,  and  for  the  costs  of  en- 
forcing such  lien,  with  the  right  to  the  possession  of  such 
baggage  and  other  property,  until  such  charges  and 
moneys  are  paid;  and  unless  such  charges  and  moneys 
shall  be  paid  within  sixty  days  from  the  time  when  the 
same  become  due,  said  hotel,  inn,  boarding-house  or  lodg- 
ing-house keeper  may  sell  said  baggage  and  property  at 
public  auction  to  the  highest  bidder,  after  giving  notice 
of  such  sale  by  publication  of  a  notice  containing  the 
name  of  the  debtor,  the  amount  due,  a  brief  description 
of  the  property  to  be  sold,  and  the  time  and  place  of  such 
sale,  once  every  week  for  four  successive  weeks  prior  to 
the  day  of  sale,  in  a  newspaper  of  general  circulation  in 
Ihe  county  in  which  said  hotel,  inn,  boarding-house  or 
lodging-house  is  situated,  and  also  by  mailing,  at  least  fif- 
teen days  before  such  sale,  a  copy  of  such  notice  addressed 
to  such  guest,  boarder  or  lodger  at  his  postoffice  address, 
if  known,  and  if  not  known,  such  notice  shall  be  ad- 
dressed to  such  guest,  boarder  or  lodger  at  the  place 
where  such  hotel,  inn,  boarding-house  or  lodging-house 
is  situated ;  and  after  satisfying  such  lien  out  of  the  pro- 
ceeds of  such  sale,  together  with  any  reasonable  costs  that 


178  BUSINESS  LAW  FOR  BUSINESS  MEN. 

may  have  been  incurred  in  enforcing  said  lien,  the  residue 
of  said  proceeds  of  sale,  if  any,  shall  upon  demand  made 
within  six  months  after  such  sale,  be  paid  by  said  hotel, 
inn,  boarding-house,  or  lodging-house  keeper  to  such 
guest,  boarder  or  lodger ;  and  if  not  demanded  within  six 
months  from  the  date  of  such  sale,  such  residue  shall  be 
paid  into  the  treasury  of  the  county  in  which  such  sale 
took  place ;  and  if  the  same  be  not  claimed  by  the  owner 
thereof,  or  his  legal  representatives,  within  one  year 
thereafter,  the  same  shall  be  paid  into  the  general  fund  of 
said  county ;  and  such  sale  shall  be  a  perpetual  bar  to  any 
action  against  said  hotel,  inn,  boarding-house  or  lodging- 
house  keeper  for  the  recovery  of  such  baggage  or  prop- 
erty or  of  the  value  thereof,  or  for  any  damages  growing 
out  of  the  failure  of  such  guest,  boarder  or  lodger  to  re- 
ceive such  baggage  or  property;  provided,  however,  that 
if  any  baggage  or  property  becoming  subject  to  the  lien 
herein  provided  for  does  not  belong  to  the  guest,  lodger 
or  boarder  who  incurred  the  charges  or  indebtedness  se- 
cured thereby,  at  the  time  when  such  charges  or  indebt- 
edness was  incurred,  and  if  the  hotel,  inn,  boarding  or 
lodging-house  keeper  entitled  to  such  lien  received  notice 
of  such  fact  at  any  time  before  the  sale  of  such  baggage 
or  property  hereunder,  then,  and  in  that  event,  such 
baggage  and  property  which  is  subject  to  said  lien  and 
did  not  belong  to  said  guest,  boarder  or  lodger  at  the 
time  when  such  charges  or  indebtedness  was  incurred 
shall  not  be  subject  to  sale  in  the  manner  hereinbefore 
provided,  but  such  baggage  and  property  may  be  sold  in 
the  manner  provided  by  the  Code  of  Civil  Procedure  for 
the  sale  of  property  under  a  writ  of  execution,  to  satisfy 
a  judgment  obtained  in  any  action  brought  to  recover  the 
said  charges  or  indebtedness. 

Statutes  of  1915,  Chapter  650. 

Section  113. — APARTMENT  HOUSE  LIEN  ON  BAGGAGE 
AND  OTHER  PROPERTY. — Keepers  of  furnished  apartment 
houses  shall  havo  a  lien  upon  the  baggage  and  other 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  179 

property  of  value  belonging  to  their  tenants  or  guests, 
which  may  be  in  such  furnished  apartment  house,  for  the 
proper  charges  due  from  such  tenants  or  guests,  for 
their  accommodation,  rent,  services,  meals,  and  such 
extras  as  are  furnished  at  their  request,  and  for  all 
moneys  expended  for  them,  at  their  request,  and  for  the 
costs  of  enforcing  such  lien,  with  the  right  to  the  pos- 
session of  such  baggage  and  other  property  of  value  until 
such  charges  are  paid,  and  such  moneys  are  repaid ;  and 
unless  such  charges  shall  be  paid  and  unless  such  moneys 
shall  be  repaid  within  sixty  days  from  the  time  when 
such  charges  and  moneys,  respectively,  become  due,  said 
keeper  of  a  furnished  apartment  house  may  sell  said 
baggage  and  property,  at  public  auction  to  the  highest 
bidder,  after  giving  notice  of  such  sale  by  publication  of 
a  notice  containing  the  name  of  the  debtor,  the  amount 
due,  a  brief  description  of  the  property  to  be  sold,  and 
the  time  and  place  of  such  sale,  once  every  week,  for  four 
successive  weeks,  prior  to  the  date  of  sale,  in  a  newspaper 
of  general  circulation  in  the  county  in  which  said  fur- 
nished apartment  house  is  situated,  and  also  by  mailing, 
at  least  fifteen  days  prior  to  the  date  of  sale,  a  copy  of 
such  notice  addressed  to  such  tenant  or  guest  at  his  post- 
office  address,  if  known,  and  if  not  known,  such  notice 
shall  be  addressed  to  such  tenant  or  guest  at  the  place 
where  such  furnished  apartment  house  is  situated;  and, 
after  satisfying  such  lien  out  of  the  proceeds  of  such 
sale,  together  with  any  reasonable  costs  that  may  have 
been  incurred  in  enforcing  said  lien,  the  residue  of  said 
proceeds  of  sale,  if  any,  shall,  upon  demand  made  within 
six  months  after  such  sale,  be  paid  by  said  keeper  of  a 
furnished  apartment  house  to  such  tenant  or  guest ;  and 
if  not  demanded  within  six  months  from  the  date  of  such 
sale,  said  residue,  if  any,  shall  be  paid  into  the  treasury 
of  the  county  in  which  such  sale  took  place;  and  if  the 
same  be  not  claimed  by  the  owner  thereof,  or  his  legal 
representative,  within  one  year  thereafter,  it  shall  be  paid 
into  the  general  fund  of  the  county;  and  such  sale  shall 


180  BUSINESS  LAW  FOR  BUSINESS  MEN. 

be  a  perpetual  bar  to  any  action  against  said  keeper  of 
a  furnished  apartment  house  for  the  recovery  of  such 
baggage  or  property,  or  of  the  value  thereof,  or  for  any 
damages  growing  out  of  the  failure  of  such  tenant  or 
guest  to  receive  such  baggage  or  property. 

Act  of  the  Legislature,  approved  June  1,  1917 ; 
in  effect  July  31,  1917. 

Section  114. — DEFRAUDING  HOTEL  KEEPERS. — Any  per- 
son who  obtains  any  food  or  accommodation  at  an  hotel, 
inn,  restaurant,  boarding  house,  lodging  house,  or  fur- 
nished apartment  house  without  paying  therefor,  with 
intent  to  defraud  the  proprietor  or  manager  thereof,  or 
who  obtains  credit  at  an  hotel,  inn,  restaurant,  boarding 
house,  lodging  house,  or  furnished  apartment  house,  by 
the  use  of  any  false  pretense,  or  who,  after  obtaining 
credit  or  accommodation,  absconds  or  surreptitiously  re- 
moves his  baggage  therefrom  without  paying  for  his  food 
or  accommodations,  is  guilty  of  a  misdemeanor.  If  a 
person  is  convicted  of  this  offense,  he  is  punishable  by 
imprisonment  in  the  county  jail  not  exceeding  six  months, 
or  by  fine  not  exceeding  $500,  or  by  both  fine  and  im- 
prisonment. 

Act  of  the  Legislature,  approved  April  30,  1919 ; 
in  effect  July  22,  1919. 

Section  115. — SANITARY  REGULATIONS. — An  act  of  1917 
provides  as  follows: 

(a)  Hotel  Defined. — Section  1.  Every  building  or 
structure,  kept  as,  used  as,  maintained  as,  or  advertised 
as,  or  held  out  to  the  public  to  be,  a  place  where  sleeping 
or  rooming  accommodations  are  furnished  to  the  public, 
or  any  part  of  the  public,  whether  with  or  without  meals, 
shall,  for  the  purpose  of  this  act,  be  deemed  to  be  a  hotel, 
and  whenever  the  word  "hotel"  shall  occur  in  this  act, 
it  shall  be  deemed  to  include  lodging  house  and  rooming 
house. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  181 

(b)  Clean  Bedding,  Etc. — Sec.  2.    All  bedding,  bed- 
clothes, or  bedcovering,  including  mattresses,  quilts,  blan- 
kets, sheets,  pillows  or  comforters,  used  in  any  hotel  in 
this  state  must  be  kept  clean  and  free  from  all  filth  or 
dirt;  provided,  that  no  bedding,  bedclothes  or  bedcover- 
ing,  including  mattresses,  quilts,  blankets,  sheets,  pillows 
or  comforters,  shall  be  used  which  is  worn  out  or  unfit 
for  use  by  human  beings  according  to  the  true  intent  and 
meaning  of  this  act. 

(c)  Infected  Rooms  Fumigated. — Sec.  3.    Any  room 
in   any  hotel   in   this    state  which   is    or   shall   be   in- 
fected with  vermin  or  bedbugs  or  similar  things,  shall 
be  thoroughly  fumigated,  disinfected  and  renovated  until 
such  vermin  or  bedbugs  or  other  similar  things  are  en- 
tirely exterminated. 

(d)  Clean  Rooms. — Sec.  4.    Every  room  in  any  hotel 
in  this  state  used  for  sleeping  purposes,  must  be  kept 
free  from  any  and  every  kind  of  dirt  or  filth  of  whatso- 
ever nature,  and  the  walls,  floors,  ceilings  and  doors  of 
every  such  room  shall  be  kept  free  from  dirt. 

(e)  Ventilation  Devices. — Sec.  5.    Every  room  in  any 
hotel,  used  for  sleeping  purposes,  shall  have  devices,  such 
as  a  window  or  transom,  so  constructed  as  to  allow  for 
proper  and  a  sufficient  amount  of  ventilation  in  each  such 
room. 

(f)  Size  of  Sheets. — Sec.  6.    Every  bed,  for  the  ac- 
commodation of  any  person  or  persons  or  guests,  kept 
or  used  in  any  hotel  in  this  state,  must  be  provided  with 
a  sufficient  supply  of  clean  bedding  and  must  be  provided 
with  sheets  at  least  eighty-one  inches  wide  and  ninety- 
eight   inches   long;   provided,   lioivever,   that   on   every 
single  bed  there  shall  be  sheets  at  least  fifty  inches  wide 
and  ninety-eight  inches  long.     Every  bed  shall  be  sup- 
plied with  clean  sheets  and  pillow  slips  as  often  as  as- 
signed to  a  different  person. 

(g)  Individual  Towels. — Sec.  7.    Every  hotel,  within 
this  state,  having  a  public  washstand  or  washbowl,  where 
different  persons  gather  to  wash  themselves,  must  keep 


182  BUSINESS  LAW  FOR  BUSINESS  MEN. 

a  sufficient  supply  of  clean  individual  towels  for  the  use 
of  such  persons  within  easy  access  of  or  to  such  persons 
and  in  plain  sight  and  view. 

(E)  Penalty  for  Violation. — Sec.  8.  Every  owner, 
manager,  lessee  or  other  person  in  charge  of  any  hotel 
in  this  state  who  shall  fail  to  comply  with  this  act,  whether 
through  the  acts  of  his  agents  or  employees,  or  other- 
wise, shall  be  guilty  of  a  misdemeanor  and  upon  convic- 
tion shall  be  fined  not  more  than  two  hundred  dollars  or 
shall  be  imprisoned  for  not  more  than  three  months; 
and  every  day  that  any  hotel  shall  be  kept  in  violation  of 
any  of  the  provisions  of  this  act  such  keeping  shall  con- 
stitute a  separate  offense. 

Act  of  the  Legislature,  approved  May  11,  1917; 
in  effect  .July  27,  1917. 

Section  116. — CONSTRUCTION  OF  HOTELS. — See  the  sub- 
ject, ''Building  Contracts." 

LEASES 

Section  117.— LEASES  OF  REAL  ESTATE. — The  Legisla- 
ture of  California  has  passed  laws  regulating  by  statute 
the  making  of  leases  of  real  estate.  It  is  the  policy  of 
this  state  to  discourage  long  leases,  which  have  the  effect 
of  tying  up  property  for  many  years,  and  therefore  the 
law  prescribes  the  longest  terms  for  which  real  estate 
may  be  leased  in  California,  and  the  courts  have  sus- 
tained these  regulations  as  being  wise  and  prudent. 

Section  118. — TERM  OF  LEASE. — No  lease  or  grant  of 
land  for  agricultural  or  horticultural  purposes  for  a 
longer  period  than  fifteen  years,  in  which  shall  be  re- 
served any  rent  or  service  of  any  kind,  shall  be  valid; 
provided,  that  any  land  of  a  municipality  used  for  agri- 
cultural or  horticultural  purposes  and  upon  which  is  dis- 
charged sewage  or  waste  water  may  be  leased  for  a 
period  not  exceeding  twenty-five  years. 
Statutes  of  1915,  Chapter  1.76. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  183 

No  lease  or  grant  of  any  town  or  city  lot  for  a  longer 
period  than  ninety-nine  years,  in  which  shall  be  reserved 
any  rent  or  service  of  any  kind,  shall  be  valid ;  provided, 
that  the  property  of  any  municipality,  or  any  minor  or 
incompetent  person,  shall  not  be  leased  for  a  longer 
period  than  ten  years,  excepting  that  the  sewer  farm  of 
a  municipality  and  all  waters  and  sewage  used  or  dis- 
charged thereon  may  be  leased  for  a  period  not  exceeding 
twenty-five  years;  and  excepting  that  the  tidelands  and 
submerged  lands  granted  to  any  city  by  the  state,  or  any 
lands  belonging  to  such  city  adjacent  to  such  tidelands 
and  submerged  lands,  may  be  leased  for  a  period  not 
exceeding  forty  years  if  the  grant  from  the  State  of 
California  of  the  use  of  said  tidelands  and  submerged 
lands  does  not  provide  specifically  for  a  term  of  years 
for  which,  said  lands  may  be  leased.  Said  tidelands  and 
submerged  lands  and  lands  adjacent  thereto  can  only  be 
leased  for  industrial  uses,  the  purposes  of  improvement 
and  development  of  the  harbor  of  said  city,  and  the  con- 
struction and  maintenance  of  wharves,  docks,  piers  or 
bulkhead  piers  or  for  other  public  uses  and  purposes 
consistent  with  the  requirements  of  commerce  or  naviga- 
tion at  said  harbor. 

Act  of  the  Legislature,  approved  May  21,  1917 ; 
in  effect  July  27,  1917. 

Section  119. — WHEN  VERBAL  LEASE  MAY  BE  MADE.— 
A  lease  for  a  term  not  exceeding  one  year  may  be  made 
verbally,  and  need  not  be  witnessed  by  any  writing 
whatever. 

Section  120. — WHEN  LEASE  MUST  BE  IN  WRITING.— 
A  lease  for  a  term  longer  than  one  year  must  be  in 
writing. 

Section  121. — FORM  OF  LEASE. — A  lease  is  not  required 
to  be  in  any  particular  form,  so  long  as  it  can  be  ascer- 
tained from  its  terms  what  property  is  leased,  the  rent 


184  BUSINESS  LAW  FOB  BUSINESS  MEN. 

reserved,  and  the  term  for  which  the  lease  is  made.  The 
lease  must  be  signed  by  the  parties,  of  course,  but  it  is 
not  required  to  be  acknowledged.  Without  acknowledg- 
ment before  a  notary,  and  without  recording,  a  lease  is 
good  between  the  parties  to  it.  But,  as  the  rights  of 
creditors,  and  other  claims  of  third  parties,  may  involve 
the  property  in  litigation,  it  is  always  safest  and  best  to 
acknowledge  and  record  a  lease,  as  in  this  manner  a 
binding  notice  of  the  execution  and  terms  of  the  lease  is 
given  to  the  world.  Following  is  a  form  of  lease  for 
common  use  in  California: 

THIS  INDENTURE,  made  the day  of. 

,  19 ,  witnesseth : 

That  I,  ,  of 

the  County  of ,  State  of  California, 

lessor,  do  hereby  lease,  demise,  and  let  unto 

,  of  the  same  place,  lessee,  the  follow- 
ing described  real  estate  situate,  lying,  and  being  in  the 

County  of ,  State  of  California,  and 

particularly  described  as  follows,  to-wit : 

(Here  insert  description  of  property.) 

To  have  and  to  hold,  for  the  term  of years,  to-wit : 

from  the day  of. ,  19 , 

to  the day  of ,  19 , 

yielding  and  paying  therefor  the  rent  of 

Dollars,  Gold  Coin  of  the  United  States 

of  America ;  and  the  said  lessee  promises  to  pay  the  said 
rent  in  such  Gold  Coin,  at  and  in  the  following  times  and 

installments,  namely, Dollars  on  the 

day  of ,  19 , 

Dollars  on  the day  of 

19 ,  and Dollars  on  the. 

day  of ,  19 

(Or,  in  place  of  above,  insert  for  monthly  payments, 
as  follows:    In  such  Gold  Coin,  as  follows,  to-wit:  the 

sum  of Dollars  per  month,  monthly 

in  advance,  on  the day  of  each  and  every  month 

during  said  term.) 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  185 

And  the  said  lessee  promises  to  quit  and  deliver  up 
the  premises  to  the  lessor  or  his  agent  or  attorney,  peace- 
ably and  quietly,  at  the  end  of  the  term,  in  as  good  order 
and  condition  (reasonable  use  and  wear  thereof,  and 
damages  by  the  elements  excepted)  as  the  same  are  now 
or  may  be  put  into,  and  to  pay  the  rent  as  above  stated 
during^  the  term,  and  not  to  make  or  suffer  any  waste 
thereof,  nor  lease,  nor  underlet,  nor  permit  any  other 
person  or  persons  to  occupy  or  improve  the  same,  or 
make,  or  suffer  to  be  made,  any  alteration  therein,  with- 
out the  consent  of  the  lessor  thereto  in  writing  having 
been  first  obtained,  and  that  the  lessor  may  enter  to  view 
and  make  improvements,  and  to  expel  the  lessee  if  he 
shall  fail  to  pay  the  rent  as  aforesaid,  or  make  or  suffer 
any  waste  thereof. 

And  should  default  be  made  in  the  payment  of  any 
portion  of  said  rent  when  due,  the  said  lessor,  his  agent 
or  attorney,  may  at  his  option  terminate  this  lease,  and 
re-enter  and  take  possession  of  said  property. 

In  witness  whereof  the  parties  hereto  have  hereunto 
set  their  hands  and  seals  the  day  and  year  first  above 
written. 

(Seal.) 

....(Seal.) 

Section  122. — FORM  OF  LEASE  OF  AGRICULTURAL  LANDS. 
The  following  is  a  form  of  lease  of  agricultural  lands : 

THIS  INDENTURE,  made  the day  of 

,  in  the  year  of  our  Lord  one  thousand  nine 

hundred  and ,  between 

,  of  the  County  of 

,  State  of  California,  the  party  of  the  first  part, 

and ,  of  said  County 

and  State,  the  party  of  the  second  part,  witnesseth : 

That  the  said  party  of  the  first  part,  for  and  in  con- 
sideration of  the  rents,  covenants,  and  agreements  here- 
inafter mentioned,  reserved  and  contained  on  the  part  of 
the  said  party  of  the  second  part,  to  be  paid,  kept,  and 
performed,  has  granted,  demised,  and  to  farm  let,  and 


186  BUSINESS  LAW  FOR  BUSINESS  MEN. 

by  these  presents  does  grant,  demise,  and  to  farm  let, 
unto  the  said  party  of  the  second  part,  all  those  lots, 
pieces,  or  parcels  of  land,  situate  in  the  County  of 
,  State  of  California,  and  par- 
ticularly described  as  follows,  to-wit: 

(Here  describe  land.) 

for  the  term  of years  from  the 

day  of. ,  19 

To  have  and  to  hold  the  said  demised  premises,  unto 
the  party  of  the  second  part,  his  heirs,  executors,  and 
administrators,  for  his  and  their  sole  and  proper  use  and 
benefit,  for  and  during  the  term  aforesaid,  together  with 
all  the  tenements  and  hereditaments  thereunto  appertain- 
ing; and  all  the  stock  and  farming  utensils,  of  every 
name  and  nature,  now  being  in  or  upon  the  same,  be- 
longing to  the  said  party  of  the  first  part. 

In  consideration  whereof,  the  said  party  of  the  second 
part  hereby  covenants  and  agrees  to  and  with  the  party 
of  the  first  part,  that  he  will  occupy,  till,  and  in  all  re- 
spects cultivate  the  premises  above  mentioned,  during  the 
term  aforesaid,  in  a  farmerlike  manner,  and  according  to 
the  usual  course  of  farming  in  the  neighborhood ;  that  he 
will  not  commit  any  waste  or  damage  or  suffer  any  to 
be  done;  that  he  will,  at  his  own  cost  and  expense,  keep 
the  fences  and  buildings  on  the  said  premises  in  good 
repair,  reasonable  wear  thereof  and  damages  by  the  ele- 
ments excepted;  that  he  will  pay  the  party  of  the  first 
part  as  rental  for  said  premises  for  said  term  the  full 

sum  of. Dollars,  Gold  Coin 

of  the  United  States,  as  follows,  to-wit :  

Dollars  on  the day  of ,  19 , 

and  the  remainder  in  equal  yearly  payments  of 

Dollars,  on  the day 

of ,  in  each  and  every  year  during 

said  term  of .years;  that  this  lease 

cannot  and  will  not  be  assigned  without  the  written  con- 
sent of  the  lessor;  and  that  he  will  give  up  and  yield 
peaceable  possession  of  the  said  premises  at  the  expira- 
tion of  said  term. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  187 

In  witness  whereof,  the  parties  hereto  have  hereunto 
set  their  hands  and  seals  the  day  and  year  first  above 
written. 

(Seal.) 

(Seal.) 

(Acknowledgment  in  usual  form.) 

Section  123. — ASSIGNMENT  OF  LEASE. — The  lessee  may 
make  an  assignment  of  the  lease,  with  the  written  con- 
sent of  the  lessor ;  or,  if  the  lease  contains  no  provision 
against  assignment  without  consent,  then  the  lessee  may 
make  an  assignment  of  the  lease  without  the  consent  of 
the  lessor. 

Section  124. — FORM  OF  ASSIGNMENT  OF  LEASE. — The 
following  is  a  form  of  assignment  of  lease : 

KNOW  ALL  MEN  BY  THESE  PEESENTS :  That 

I, ,  of  the  County 

of ,  State  of  California,  for  and  in 

consideration  of  the  sum  of 

Dollars,  Gold  Coin  of  the  United  States,  to  me  in  hand 

paid  by ,  of  the  same 

place,  do  by  these  presents  sell,  convey,  assign,  transfer, 

and  set  over  unto  the  said ." 

,  a  certain  indenture  of  lease  bearing- 
date  the day  of. ,  19 ,  made  by 

,  of  the  County 

of ,  State  of  California,  to  me,  of 

a  certain  lot,  piece,  or  parcel  of  land  situate  in  the 

County  of.. ,  State  of  California,  and 

particularly  described  as  follows,  to-wit :  

(Here  describe  property.) 

for  the  term  of years,  reserving  unto  the 

said : the  rent  of 

Dollars,  payable  in (monthly 

or  yearly)  payment  of Dollars  on 

the day  of in  each  and  every 

(month  or  year) during  said  term,  with  all  and 

singular  the  premises  therein  mentioned  and  described, 


188  BUSINESS  LAW  FOE  BUSINESS  MEN. 

and  the  buildings  thereon,  together  with  the  appur- 
tenances. 

To  have  and  to  hold  the  same  unto  the  said 

,  his  heirs,  executors, 

and  administrators,  from  the day  of 

,  19 ,  for  and  during-  all  the  remainder 

yet  to  come  of  the  said  term  of years, 

mentioned  in  said  indenture  of  lease.    And  I  do  hereby 

covenant  and  agree  to  and  with  the  said 

,  that  the  said  assigned  premises 

now  are  free  and  clear  of  and  from  all  former  and  other 
gifts,  grants,  bargains,  sales,  leases,  judgments,  execu- 
tions, back  rents,  taxes,  assessments,  and  incumbrances, 
by  me  suffered,  made,  or  created. 

In  witness  whereof,  I  have  hereunto  set  my  hand  and 
seal  the  day  and  year  first  above  written. 

(Seal.) 

(Seal.) 

(Acknowledgment  in  usual  form.) 

Section  125. — WHAT  REPAIRS  LESSOR  MUST  MAKE.— 
The  lessor  of  a  building  intended  for  the  occupation  of 
human  beings  must,  unless  there  is  an  agreement  to  the 
contrary,  put  the  building  into  a  condition  fit  for  occu- 
pation, and  keep  it  in  tenantable  repair  during  the  term 
of  the  lease.  If  the  building  gets  out  of  repair  by  the 
fault  of  the  tenant,  or  in  a  dangerous  condition  by  reason 
of  the  tenant's  lack  of  ordinary  care,  the  lessor  is  not 
bound  to  make  such  repairs,  but  the  tenant  himself  will 
be  liable  to  make  them. 

Civil  Code,  Sections  1941,  1949. 

Section  126. — WHEN  LESSEE  MAY  MAKE  REPAIRS.— 
When  dilapidations  have  been  occasioned  to  a  dwelling 
which  the  landlord  ought  to  repair,  but  neglects  to  do 
so,  the  tenant  may  make  the  repairs  himself,  provided 
the  cost  of  such  repairs  is  not  more  than  one  month's 
rent  of  the  premises ;  and  the  tenant  may  deduct  the  cost 
of  such  repairs  as  he  is  compelled  to  make  from  the  rent. 
But,  before  he  can  legally  make  the  repairs  himself,  so 


BUSINESS  CONTKACTS  AND  LEGAL  OBLIGATIONS.  189 

as  to  deduct  the  cost  from  the  rent,  he  must  give  reason- 
able notice  to  the  lessor,  stating  the  character  of  the 
dilapidations  and  the  repairs  needed,  and  that  the  lessee 
intends  to  make  the  repairs  if  the  lessor  does  not.  This 
notice  may  be  given  verbally  or  in  writing.  If  after  such 
notice  the  lessor  refuses  or  neglects  to  make  the  repairs, 
the  lessee  may  vacate  the  premises,  in  which  case  he  will 
be  discharged  from  further  payment  of  rent,  or  the  per- 
formance of  the  other  conditions  of  the  lease.  The  la\v 
gives  the  tenant  the  privilege  of  vacating  the  premises  in 
case  the  landlord  neglects  to  make  the  repairs  needed, 
and  also  authorizes  him,  if  he  prefers,  to  remain  and 
make  the  repairs  himself,  when  they  do  not  require  an 
expenditure  exceeding  one  month's  rent.  The  law  re- 
lates only  to  buildings  intended  to  be  occupied  by  human 
beings,  and  the  Supreme  Court  of  this  State  has  in- 
timated in  several  decisions  that  the  tenant  of  business 
property  has  no  right  to  make  repairs  himself  at  the 
expense  of  the  landlord,  and  that  the  lessor  of  business 
property  is  not  required  by  the  law  to  keep  the  building 
in  repair  at  all.  So  far  as  business  property  is  con- 
cerned, that  is,  buildings  not  intended  for  human  habita- 
tion, for  residence,  the  law  leaves  the  matter  of  repairs 
to  be  determined  solely  by  the  terms  of  the  agreements 
in  the  lease. 

Civil  Code,  Section  1942. 

'  Section  127. — TERMINATION  OF  LEASE. — A  lease  is  ter- 
minated by  the  expiration  of  the  term,  or  by  the  hap- 
pening of  some  event  which  works  a  forfeiture  of  the 
lease,  or  by  consent  of  the  parties.  A  lease  is  terminated, 
as  a  matter  of  course,  at  the  end  of  the  term.  So,  too, 
it  is,  of  course,  within  the  power  of  the  parties  to  agree, 
before  the  end  of  the  term,  for  the  termination  of  the 
lease  at  any  time.  The  lease  may  provide  that,  if  any 
condition  of  the  lease  be  broken,  as  for  non-payment  of 
the  stipulated  rent  at  the  time  agreed  upon,  or  for  breach 
of  a  covenant  not  to  assign  the  lease  without  the  consent 


190  BUSINESS  LAW  FOB  BUSINESS  MEN. 

of  the  lessor,  the  lease  shall  be  terminated,  and  a  breach 
of  the  condition  will  terminate  the  lease. 

Section  128. — RENEWAL  OF  LEASE. — A  lease  may  pro- 
vide by  its  terms  for  its  renewal,  and  the  lessee  will  have 
the  right  to  a  renewal  of  the  lease  according  to  the  agree- 
ment. But  if  the  lease  gives  the  privilege  of  renewal  for 
a  further  term,  the  lessee  must,  before  the  expiration  of 
the  original  term,  give  the  lessor  notice  that  he  elects  to 
renew  the  lease ;  and  if  he  does  not  give  such  notice,  his 
right  to  insist  upon  the  privilege  of  renewal  is  lost.  If  a 
lessee  of  real  property  remains  in  possession  after  the 
expiration  of  the  term,  and  the  lessor  accepts  rent  from 
him,  the  law  presumes  that  the  parties  have  renewed  the 
contract  on  the  same  terms  and  for  the  same  time,  but 
not  exceeding  one  month,  when  the  rent  is  payable 
monthly,  nor  in  any  case  exceeding  one  year.  In  all  cases 
of  tenancy  upon  agricultural  lands,  where  the  tenant  has 
held  over  and  retained  possession  for  more  than  sixty 
days  after  the  expiration  of  the  term  without  any  de- 
mand for  possession  or  notice  to  quit  by  the  landlord,  he 
will  be  deemed  to  be  holding  by  permission  of  the  land- 
lord and  will  be  entitled  to  hold  the  land  under  the  terms 
of  the  lease  for  another  full  year. 
Civil  Code,  Section  1945. 

Section  129. — FORM  OF  NOTICE  OF  INTENTION  TO  RENEW 
LEASE. — Following  is  a  form  of  notice  by  tenant  of  his 
intention  to  renew  the  lease.  It  is  not  required  to  be 
acknowledged,  or  recorded;  even  though  the  original  may 
be  both  acknowledged  and  recorded.  The  notice  may  be 
served  on  the  landlord  either  personally  or  by  mail.  It 
must  be  served  on  the  landlord  at  any  time  before  the 
expiration  of  the  original  lease: 

San  Francisco.  California, ,  19 

John  Smith: — Dear  Sir: 

You  are  hereby  notified  that  I  elect  and  intend  to 
renew  the  lease  dated ,  19 , 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  191 

executed  and  delivered  by  you  to  me,  for  the  property 

situated  at ,  State  of  California, 

in  accordance  with  the  terms  stated  in  said  original  lease 
with  reference  to  a  renewal  thereof. 


Tenant. 

Section  130. — TERM  OF  HIRING  WHEN  No  LIMIT  Is 
FIXED. — By  the  statute  of  California  it  is  provided,  that 
a  hiring  of  real  property,  other  than  lodgings  and 
dwelling-houses,  in  places  where  there  is  no  custom  on 
the  subject,  is  presumed  to  be  for  one  year  from  its  com- 
mencement, when  no  limit  is  fixed  to  the  term  by  the 
agreement  between  the  parties.  The  hiring  of  lodgings 
or  a  dwelling-house  for  an  unspecified  term  is  presumed 
to  have  been  made  for  such  length  of  time  as  the  parties 
adopt  for  the  estimation  of  the  rent.  Thus,  a  hiring  at 
a  monthly  rate  of  rent  is  presumed  to  be  for  one  month. 
If  there  is  no  agreement  respecting  either  the  length  of 
time  or  the  rent,  the  hiring  is  presumed  to  be  monthly. 
Civil  Code,  Sections  1943,  1944. 

Section  131. — WHEN  BENT  is  PAYABLE. — The  law  pro- 
vides, that  when  there  is  no  usage  or  contract  to  the  con- 
trary, rents  are  payable  at  the  termination  of  the  hold- 
ing, when  it  does  not  exceed  one  year.  If  the  holding  is 
by  the  day,  week,  month,  quarter,  or  year,  rent  is  pay- 
able at  the  termination  of  the  respective  periods,  as  it 
successively  becomes  due. 

Civil  Code,  Section  1947. 

Section  132. — NOTICE  TO  QUIT. — When  the  term  of 
hiring  of  real  property  is  not  specified  by  the  parties,  to 
terminate  the  hiring,  one  of  the  parties  must  give  notice 
to  the  other  of  his  intention  to  end  the  hiring.  The 
tenancy  may  be  terminated  by  the  landlord  giving  notice 
to  the  tenant,  in  writing,  to  remove  from  the  premises. 
The  notice  must  specify  the  time  within  which  the  tenant 
must  remove  from  the  premises,  and  mrist  give  him  a 
period  of  not  less  than  thirty  days.  After  this  notice  has 


192  BUSINESS  LAW  FOR  BUSINESS  MEN. 

been  served,  and  the  period  specified  in  the  notice  has 
expired,  the  landlord  may  proceed  to  recover  possession, 
either  by  re-entering  and  taking  possession  or  by  a  suit 
in  court.  Three  days'  notice  only  is  required  to  be  served 
on  a  tenant  under  a  lease  for  a  stated  term.  If  such 
tenant  fails  to  pay  the  rent  agreed  upon,  the  landlord,  at 
any  time  within  one  year  after  the  rent  becomes  due,  may 
give  three  days'  notice,  in  writing,  requiring  the  payment 
of  the  rent  within  that  time ;  and  this  notice  must  also  be 
served  on  any  subtenant  who  may  be  in  possession  of 
any  portion  of  the  premises.  If  the  tenant  has  broken 
some  other  condition  of  the  lease,  the  same  written  no- 
tice must  be  served  on  him,  and  on  subtenants,  if  there 
be  any,  requiring  him  to  perform  the  conditions  of  the 
lease  or  surrender  the  possession  of  the  property.  The 
lease  will  be  saved  from  forfeiture  if  the  rent  is  paid  or 
other  condition  of  the  lease  performed  within  three  days 
after  service  of  the  notice.  If  the  rent  is  not  paid  or 
condition  performed  within  three  days  after  service  of 
the  notice,  the  landlord  may  recover  possession  of  the 
property  in  a  suit  for  unlawful  detainer. 

'Civil  Code,  Sections  789,  1946;  Code  of  Civil 
Procedure,  Section  1161. 

Section  133. — RAISING  THE  RENT. — In  all  leases  of 
lands  or  tenements,  or  of  any  interest  therein,  from 
month  to  month,  the  landlord  may,  upon  giving  notice  in 
writing  at  least  thirty  days  before  the  expiration  of  the 
month,  change  the  terms  of  the  lease  to  take  effect  at 
the  expiration  of  the  month.  The  notice,  when  served 
upon  the  tenant,  shall  of  itself  operate  and  be  effectual  to 
create  and  establish,  as  a  part  of  the  lease,  the  terms, 
rent,  and  conditions  specified  in  the  notice,  if  the  tenant 
shall  continue  to  hold  the  premises  after  the  expiration 
of  the  month.  This  law  applies  only  to  tenants  from 
month  to  month. 

Act  of  the  Legislature,  in  effect  February  26, 
1907. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  193 

Section  134.  —  NOTICE  TO  QUIT  —  How  NOTICE  MUST  BE 
SERVED.  —  The  notice  to  quit  must  be  served  either  by 
delivering  a  copy  to  the  tenant  personally;  or,  if  he  is 
absent  from  his  place  of  business  or  residence,  by  leaving 
a  copy  of  the  notice  at  either  place  with  some  person  of 
suitable  age  and  discretion,  and  sending  a  copy  through 
the  mail,  addressed  to  the  tenant  at  his  place  of  resi- 
dence ;  or  if  his  place  of  business  or  residence  cannot  be 
ascertained,  or  if  no  person  of  suitable  age  and  discretion 
can  be  found  at  either  place,  the  notice  may  be  served  by 
posting  a  copy  in  a  conspicuous  place  on  the  premises, 
and  delivering  a  copy  to  any  person  found  residing  there, 
and  also  sending  a  copy  through  the  mail  addressed  to 
the  tenant  at  the  place  where  the  property  is  situated. 
Code  of  Civil  Procedure,  Section  1162. 


Section  135.  —  -Fo^M  OF  NOTICE  TO  QUIT.  —  A  notice  to 
quit  need  not  be  in  any  particular  form  to  be  valid.    It  is 
sufficient,  in  any  form,  if  it  shows  on  its  face  that  pos- 
session is   demanded,  and  that  the  time  fixed  by  the 
statute  is  given.     The  following  is  a  form  of  notice  to 
quit,  to  be  served  where  the  tenancy  is  for  no  definite 
term: 

.......................................................................................  ,  State  of 

California,  ............................................................  ,  19  .......... 

To  .....................................................................  , 

Take  notice  that  you  are  hereby  required  to  quit  and 
deliver  up  to  me  the  possession  of  the  premises  now  held 
and  occupied  by  you,  known  as  .................................................................... 

(Here  describe  the  premises.) 

on  the  .................................  day  of  ...................................................  ,  19  .......... 

This  is  intended  as  a  thirty  days'  notice  to  quit,  for 
the  purpose  of  terminating  your  tenancy. 

Landlord. 


194  BUSINESS  LAW  FOB  BUSINESS  MEN. 

Section  136. — FORM  OF  NOTICE  TO  PAY  BENT  OB  SUR- 
BENDER  POSSESSION. — The  following  is  a  form  of  three 
days '  notice  to  pay  rent  or  surrender  possession : 

,  State  of  California, 

,19 

To „ , 

You  are  hereby  required  to  pay  the  rent  of  the  prem- 
ises hereinafter  described,  and  which  you  now  hold  pos- 
session of,  amounting  to  the  sum  of 

Dollars,  being  the  amount  now  due  and  owing  to  me  by 
you,  within  three  days  after  service  of  this  notice  as 
required  by  law,  or  deliver  up  to  me  the  possession  of 
the  said  premises. 

Said  premises  are  situated  at 

,  and  described  as  follows,  to-wit : 

(Here  describe  property.) 


Landlord. 

Section  137. — OPTION  TO  PURCHASE  IN  LEASE. — The 
lessor  may  provide  in  the  lease  that  the  lessee  shall  have 
the  right  to  purchase  the  leased  premises  at  some  time 
within  the  term.  If  the  lessee  concludes  to  take  advan- 
tage of  the  option  given  him,  he  must  so  notify  the  lessor, 
and  tender  the  purchase  price  agreed  upon  in  the  lease. 
If  he  notifies  the  lessor  that  he  will  take  the  property,  as 
provided  for  in  the  lease,  and  tenders  the  purchase  price, 
the  lessee  will  have  the  right  to  a  deed,  and  the  lessor 
can  be  compelled  to  execute  his  deed  to  the  property. 

Section  138. — FORM  OF  LEASE  OF  PERSONAL  PROPERTY. 
The  following  is  a  form  of  lease  of  personal  property: 

THIS  INDENTURE,  made  this day  of 

,  19 ,  between ,  of 

the  County  of....  ,  State  of  California,  the 

party  of  the  first  part,  and ,  of  the 

same  place,  witnesseth: 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  195 

• 

That  in  consideration  of  the  rents,  covenants  and 
agreements  to  be  paid  and  performed  on  the  part  of  the 
said  party  of  the  second  part,  the  said  party  of  the  first 
part  does  hereby  lease  to  the  party  of  the  second  part  all 

those  certain  goods  and  chattels,  situate  at 

,  and  particularly  described  as 

follows,  to-wit: 


(Here  give  a  particular  description  of  each  article  of 
personal  property.) 

To  have  and  to  hold  the  same  to  the  said  lessee,  for 

the  term  of years,  beginning 

,  19 ,  and  ending 

,  19 ,  the  said  lessee  paying 

therefor  the  yearly  rent  of Dollars 

during  the  said  term. 

And  the  said  lessee  covenants  and  agrees  with  the 
said  lessor  that  he  will  pay  the  rent  aforesaid,  in  monthly 

payments  of Dollars  each,  on  the  first 

day  of  each  and  every  month  during  said  term ;  and  that 
he  will  not  assign  nor  underlet  this  lease  or  the  said 
goods  and  chattels,  nor  any  part  thereof,  without  the 
written  consent  of  said  lessor;  and  that  he  will,  at  his 
own  expense,  replace  any  and  all  of  said  goods  and  chat- 
tels which  shall  be  lost,  or  carelessly  or  accidentally  in- 
jured, during  the  said  term;  and  at  the  expiration  of 
said  term,  or  sooner  termination  of  this  lease,  he  will 
restore  the  said  goods  and  chattels  to  the  said  lessor,  in 
the  like  good  order  in  which  they  now  are,  wear  and 
diminution  resulting  from  reasonable  use  and  unavoid- 
able casualties  excepted.  And  it  is  agreed  that,  until  the 
expiration  of  said  term,  or  until  condition  broken,  said 
party  of  the  second  part  shall  peaceably  retain  posses- 
sion of  said  goods  and  chattels,  but  in  case  any  one  or 
more  of  the  conditions  of  this  lease  are  broken  by  the 
said  party  of  the  second  part,  the  party  of  the  first  part 
may  at  any  time,  day  or  night,  enter  the  place  where  said 


196  BUSINESS  LAW   FOR  BUSINESS  MEN. 

• 

goods  and  chattels,  or  any  part  thereof,  may  be,  and  re 
move  the  same,  and  he  may  use  all  necessary  force  to 
remove  the  property  herein  described. 

And  it  is  further  agreed  that  time  is  of  the  essence  of 
this  contract. 

In  witness  whereof  the  parties  hereto  have  hereunto 
set  their  hands  and  seals  the  day  and  year  first  above 
written. 

(Seal.) 

(Seal.) 

Section  139. — TENANT  MUST  DELIVER  NOTICE  SERVED 
ON  HIM. — Every  tenant  who  receives  notice  of  any  pro- 
ceeding to  recover  the  real  property  occupied  by  him,  or 
its  possession,  must  inform  his  landlord  immediately, 
and  must  also  deliver  to  his  landlord  the  notice  he  re- 
ceived, if  in  writing;  and  if  the  tenant  fails  to  inform 
his  landlord  of  any  such  notice,  or  to  deliver  the  notice  to 
him,  if  in  writing,  he  will  be  liable  to  the  landlord  for 
all  damages  which  he  may  sustain  by  reason  of  his 
failure. 

Civil  Code,  Section  1949. 

Section  140. — FORM  OF  FARMING  LEASE  ON  SHARES.— 
The  following  is  a  form  of  farming  lease  on  shares: 

THIS  INDENTURE,  made  the day  of 

,  19 ,  between 

of  the  County  of 

State   of   California,   the   party   of  the   first  part,   and 

....,  of  the  same  place,  the  party  of 
the  second  part,  witnesseth: 

That  the  said  party  of  the  first  part,  for  and  in  con- 
sideration of  the  rents,  covenants,  and  agreements  here- 
inafter mentioned,  reserved  and  contained  on  the  part  of 
the  said  party  of  the  second  part,  his  executors  or  ad- 
ministrators, to  be  paid,  kept,  and  performed,  has 
granted,  demised,  and  to  farm  let,  unto  the  said  party  of 
the  second  part,  his  executors  or  administrators,  all  those 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  197 

certain  lots,  pieces  or  parcels  of  land  situate,  lying  and 
being  in  the  County  of State  of  Cali- 
fornia, and  particularly  described  as  follows,  to-wit : 

(Here  describe  the  land.) 

To  have  and  to  hold  the  said  demised  premises,  unto 
the  party  of  the  second  part,  his  heirs,  executors,  or  ad- 
ministrators, for  his  and  their  sole  and  proper  use  and 

benefit,  for  and  during  the  term  of ...years, 

beginning ,19 ,  and  ending 

,  19 ,  together  with  all  the  tenements 

and  hereditaments  thereunto  appertaining,  and  all  the 
stock  and  farming  utensils,  of  every  name  and  nature, 
now  being  in  or  upon  the  same,  belonging  to  the  said 
party  of  the  first  part. 

In  consideration  whereof,  the  said  party  of  the  second 
part  hereby  covenants  and  agrees  to  and  with  the  said 
party  of  the  first  part,  that  he  will  occupy }  till  and  in  all 
respects  cultivate  the  premises  above  mentioned,  during 
the  term  aforesaid,  in  a  farmerlike  manner,  and  accord- 
ing to  the  usual  course  of  farming  practiced  in  the  neigh- 
borhood; that  he  will  not  commit  any  waste  or  damage, 
or  suffer  any  to  be  done ;  that  he  will,  at  his  own  cost  and 
expense,  keep  the  fences  and  the  buildings  on  the  said 
premises  in  good  repair,  reasonable  wear  thereof  and 
damages  by  the  elements  exce'pted;  and  that  he  will 
deliver  to  the  said  party  of  the  first  part,  his  heirs, 
executors,  or  administrators,  or  to  his  or  their  order, 
each  year  during  the  term  of  this  lease,  one  equal  (here 
insert  share  agreed  on)  of  all  the  proceeds  and  crops 
produced  on  the  said  farm  and  premises  aforesaid,  of 
every  name,  kind  and  description,  to  be  divided  on  the 
said  premises,  in  stack  and  sack,  according  to  the  usual 
course  and  custom  of  making  such  divisions  in  the  neigh- 
borhood, and  in  a  seasonable  time  after  such  crop  or 
crops  shall  have  been  gathered  and  harvested. 

It  is  further  understood  and  agreed  between  the 
aforesaid  parties,  that  the  party  of  the  second  part  shall 
find  all  seed  or  seeds  necessary  to  be  sown  on  said  prem- 
ises ;  that  the  party  of  the  second  part  is  to  do,  or  cause 
to  be  done,  all  necessary  work  and  labor  in  aiid  about  the 


198  BUSINESS  LAW  FOB  BUSINESS  MEN. 

cultivation  of  the  said  premises;  that  he  is  to  have  full 
permission  to  inclose,  pasture,  or  till  and  cultivate,  the 
.said  premises,  so  far  as  the  same  may  be  done  without 
injury  to  the  reversion,  and  to  cut  all  necessary  timber 
for  firewood,  farming  purposes  and  repairing  fences; 
and  that  he  is  to  give  up  and  yield  peaceable  possession 
of  the  said  premises  at  the  expiration  of  said  term.  Said 
iirst  party  shall  furnish  on  said  premises,  at  the  proper 
lime  in  each  year  during  the  term  of  this  lease,  sacks 
sufficient  to  hold  all  the  grain  coming  to  said  first  party. 
In  witness  whereof  the  parties  hereto  have  hereunto 
set  their  hands  and  seals  the  day  and  year  first  above 
written. 

(Seal.) 

(Seal.) 

(Acknowledgment  in  usual  form.) 

Section  141. — FIXTURES  ON  LEASED  PREMISES. — If  the 
tenant  puts  in  fixtures  on  the  premises — as  by  building 
partition  walls,  elevators,  or  shelving,  counters,  etc.,  at- 
tached and  built  into  or  upon  the  walls  or  other  parts  of 
the  building  so  as  to  form  fixtures  therein — he  cannot  re- 
move such  fixtures  without  the  consent  of  the  landlord, 
unless  the  lease  itself  contains  a  clause  giving  him  that 
right. 

If  a  lease  expires,  which  contains  a  clause  allowing 
the  tenant  to  remove  the  fixtures,  and  a  new  lease  is  then 
made  which  leaves  out  that  clause,  the  tenant  loses  the 
right  to  take  the  fixtures  away ;  and,  upon  the  expiration 
of  the  second  lease,  the  fixtures  must  be  left  in  the  build- 
ing and  be  the  property  of  the  landlord. 

Section  142. — DESTRUCTION  OF  PREMISES  BY  FIRE. — In 
this  state,  the  hiring  of  a  thing  ends  by  the  destruction 
of  the  thing  hired.  Therefore,  if  a  store,  dwelling,  or 
factory  is  leased,  and  is  destroyed  by  fire,  so  as  to  be  no 
longer  fit  for  use,  the  lease  is  terminated  and  the  lessee 
released  from  future  payment  of  rent.  But  a  lessee,  who 
has  taken  possession  of  leased  premises  for  a  term  of 
years  and  paid  a  part  of  his  rent  in  advance,  cannot,  in 


Page  199,  10th  Edition,  Business  Law  for  Business  Men — Anti- 
Japanese  Law — California's  New  Anti-Alien  Land  Law,  an  initiative  Act 
approved  at  the  General  election  in  November,  1920,  went  into  effect 
December  9,  1920. 

The  law  repeals  the  previous  three-year  land  leasing  privilege,  so 
far  as  it  applied  to  aliens  ineligible  to  citizenship  leasing  land  for  agri- 
cultural purposes.  The  law  also  provides  specifically  that  no  alien  in- 
eligible to  citizenship,  nor  any  organization  controlled  by  such  aliens, 
may  act  as  guardian  of  a  minor  who,  because  of  birth  in  this  country, 
may  legally  acquire  agricultural  land. 

The  law  also  provides,  that  any  alien  ineligible  to  citizenship  may 
acquire,  use,  transmit  and  inherit  real  property  only  as  prescribed  by 
treaty,  and  not  otherwise. 

"Hereafter  all  aliens,  other  than  those  specified  in  section  one  here- 
of (those  eligible  to  citizenship),  may  become  members  of  or  acquire 
shares  of  stock  in  any  company,  association  or  corporation  that  is  or 
may  be  authorized  to  acquire,  possess,  enjoy  or  convey  agricultural  land, 
in  the  manner  and  to  the  extent  and  for  the  purpose  prescribed  by  any 
treaty  now  existing  between  the  government  of  the  United  States  and 
the  nation  or  country  of  which  such  alien  is  a  citizen  or  subject,  and  not 
otherwise. 

"Hereafter  no  alien  mentioned  in  section  two  hereof  (ineligible  to 
citizenship)  and  no  company,  association,  or  company  mentioned  in  sec- 
tion three  hereof  (controlled  by  ineligible  aliens)  may  be  appointed 
guardian  of  that  portion  of  the  estate  of  a  minor  which  consists  of 
property  which  such  alien  or  such  company,  association  or  corporation 
is  inhibited  from  acquiring,  possessing  or  transferring  by  reason  of  the 
provisions  of  this  act.  The  public  administrator  of  the  proper  county, 
or  any  other  competent  person  or  corporation,  may  be  appointed  guar- 
dian of  the  estate  of  a  minor  citizen  whose  parents  are  ineligible  to 
appointment  under  the  provisions  of  this  act.  Such  administrators  as 
may  be  appointed  under  the  provisions  just  quoted  will  be  required,  ac- 
cording to  the  new  law,  to  make  detailed  reports  on  the  estate  they  are 
administering  to  the  Secretary  of  State." 

"Violation  of  the  provisions  of  the  law  referring  to  guardianship  is 
made  a  misdemeanor  and  shall  be  punished  by  a  fine  not  exceeding  $1000 
or  by  imprisonment  in  the  County  Jail  not  exceeding  one  year,  or  by 
both  such  fine  and  imprisonment." 

Conspiracy  to  effect  a  transfer  of  real  property  in  violation  of  the 
provisions  of  the  law  is  made  punishable  by  imprisonment  in  the  County 
Jail  or  State  penitentiary  not  exceeding  two  years,  or  by  a  fine  not  ex- 
ceeding $5000  or  both. 

— Initiative  Act  adopted  by  the  people  of  California  at  the  General  Elec- 
tion  in    November,    1920;    in    eft'ect    December   9,    1920. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  199 

the  absence  of  any  covenant  in  the  lease,  recover  the  rent 
so  paid,  in  case  of  the  total  destruction  of  the  premises 
by  fire  without  any  fault  of  either  party  to  the  lease. 
(Decided  by  the  Supreme  Court  of  California,  in  the  case 
of  Harvey  vs.  Weisbaum,  which  decision  is  printed  in 
Vol.  10,  California  Decisions,  page  177.) 

Section  143. — REPUDIATION  OF  LEASE  —  LANDLORD'S 
REMEDY. — The  abandonment  of  leased  premises,  and  a 
declaration  of  intention  by  the  lessee  not  to  pay  any  more 
rent,  does  not  change  the  relation  of  lessor  and  lessee, 
nor  discharge  the  latter  from  the  obligation  to  pay  rent, 
although  the  lessor  may  relet  the  premises  for  the  benefit 
of  the  lessee.  Where  a  lease  is  repudiated  and  the  prem- 
ises abandoned,  the  landlord  may  rest  upon  his  contract 
and  sue  his  tenant  as  each  installment  of  rent,  or  the 
whole  thereof,  becomes  due,  or  he  may  take  possession 
of  the  premises  and  recover  damages,  which  damages 
is  the  difference  between  what  he  may  be  able  to  rent  the 
premises  for  and  the  price  agreed  to  be  paid  under  the 
lease.  Where  the  landlord  sues  for  damages  he  cannot 
recover  in  advance  the  full  price  to  be  paid  for  the  un- 
expired  term,  but  is  limited  in  his  recovery  as  above 
stated.  (Decided  by  the  Supreme  Court  of  California,  in 
the  case  of  Bradbury  vs.  Higginson,  which  decision  is 
printed  in  Vol.  42,  California  Decisions,  page  284.) 

DEEDS 

Section  144. — TRANSFER  BY  DEED. — The  title  to  real 
property  is  transferred  from  one  to  another  by  an  in- 
strument in  writing  called  a  deed.  A  deed  must  be 
signed  by  the  vendor,  and  acknowledged  by  him  before 
a  notary,  or  other  officer  having  authority  to  take  ac- 
knowledgments, and  must  be  recorded  in  the  office  of  the 
County  Recorder  of  the  county  where  the  land  is  situated. 

Section  145. — WHO  MAY  TAKE  ACKNOWLEDGMENTS  OF 
DEEDS. — The  acknowledgment  of  a  deed  may  be  made  in 


200  BUSINESS  LAW  FOR  BUSINESS  MEN. 

this  state,  within  the  city,  county,  city  and  county,  town- 
ship or  district  for  which  the  officer  was  elected,  or  ap- 
pointed, before  either: 

Clerk  of  a  court  of  record; 

C&unty  recorder ; 

Court  commissioner ; 

Notary  public ; 

Justice  of  the  peace. 

Act  of  the  Legislature,  approved  March  21, 1911. 

Section  146. — DEED  TO  COMMUNITY  PROPERTY. — Prop- 
erty acquired  by  husband  and  wife,  during  their  mar- 
riage, by  their  joint  efforts,  is  community  property.  All 
property  acquired  during  marriage  is  community  prop- 
erty, except  property  owned  by  either  before  marriage, 
or  property  acquired  by  either  after  marriage  by  gift, 
will,  or  as  heir  of  a  deceased  person. 

The  husband  has  the  management  and  control  of  the 
community  personal  property,  with  like  absolute  power 
of  disposition,  other  than  testamentary,  as  he  has  of  his 
separate  estate ;  provided,  however,  that  he  can  not  make 
a  gift  of  such  community  personal  property,  or  dispose 
of  the  same  without  a  valuable  consideration,  or  sell,  con- 
vey, or  encumber  the  furniture,  furnishings,  or  fittings  of 
the  home,  or  the  clothing  or  wearing  apparel  of  the  wife 
or  minor  children  that  is  community,  without  the  written 
consent  of  the  wife. 

The  husband  has  the  management  and  control  of  the 
community  real  property,  but  the  wife  must  join  with  him 
in  executing  any  instrument  by  which  such  community 
real  property  or  any  interest  therein  is  leased  for  a 
longer  period  than  one  year,  or  is  sold,  conveyed,  or 
encumbered ;  provided,  however,  that  the  sole  lease,  con- 
tract, mortgage  or  deed  of  the  husband,  holding  the 
record  title  to  community  real  property,  to  a  lessee,  pur- 
chaser or  encumbrancer,  in  good  faith  without  knowl- 
edge of  the  marriage  relation  shall  be  presumed  to  be 
valid ;  but  no  action  to  avoid  such  instrument  shall  be 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  20l 

commenced  after  the  expiration  of  one  year  from  the 
filing  for  record  of  such  instrument  in  the  recorder's 
office  in  the  county  in  which  the  land  is  situate. 

Act  of  the  Legislature,  approved  May  23,  1917 ; 
in  effect  July  27,  1917. 

Section  147. — DEED  TO  SEPARATE  PROPERTY. — Either 
husband  or  wife  has  the  right  to  deed  his  or  her  separate 
property,  without  the  consent  of  the  other,  and  without 
the  signature  of  the  other  to  the  deed. 

Section  148. — DEED  OF  GIFT. — A  property  considera- 
tion is  not  necessary  to  a  valid  deed  in  California.  A 
deed  of  gift,  for  love  and  affection,  may  be  made  by  one 
person  to  another  of  real  property,  and  the  deed  will  be 
for  a  consideration  which  the  law  recognizes  as  sufficient 
and  will  sustain. 

Section  149. — FORM  OF  DEED  OF  GIFT. — The  follow- 
ing is  a  form  of  deed  of  gift,  for  use  in  the  State  of 
California : 

THIS  INDENTURE,  made  the day  of 

,  19 ,  between 

,  of  the  County  of ,  State 

of  California,  the  party  of  the  first  part,  and 

,  of  the  same  place,  the  party  of  the 

second  part,  witnesseth:— 

That  the  said  party  of  the  first  part,  for  and  in  consid- 
eration of  the  love  and  affection  which  the  said  party  of 
the  first  part  has  and  bears  unto  the  said  party  of  the  sec- 
ond part,  as  also  for  the  better  maintenance,  support,  pro- 
tection, and  livelihood  of  the  said  party  of  the  second 
part,  does  by  these  presents  give,  grant,  alien,  and  con- 
firm unto  the  said  party  of  the  second  part,  and  to 

heirs  and  assigns  forever,  all  those  certain  lots,  pieces, 
or  parcels  of  land  situate,  lying,  and  being  in  the  County 
of ,  State  of  California, 


202  BUSINESS  LAW  FOB  BUSINESS  MEN. 

bounded  and  particularly  described  as  follows,  to-wit : ;.., 

(Here  describe  property.) 

Together  with  all  and  singular  the  tenements,  heredita- 
ments, and  appurtenances  thereunto  belonging  or  in  any 
wise  appertaining,  and  the  reversion  and  reversions,  re- 
mainder and  remainders,  rents,  issues,  and  profits 
thereof. 

To  have  and  to  hold,  all  and  singular  the  said  prem- 
ises, together  with  the  appurtenances,  unto  the  said  party 
of  the  second  part, heirs  and  assigns  forever. 

In  witness  whereof,  the  said  party  of  the  first  part  has 

hereunto  set hand  and  seal  the  day  and  year 

first  above  written. 

(Seal.) 

STATE  OF  CALIFOBNIA,  } 
COUNTY  OF \ 

On  this day  of ,  A.  D. 

one  thousand  nine  hundred  and , 

before  me,  ,  a 

Notary  Public  in  and  for  said County 

and  State,  residing  therein,  duly  commissioned  and  sworn, 

personally  appeared 

,  known  to  me  to  be  the  person whose 

name , subscribed  to  and  who  executed  the 

within  instrument,  and acknowledged  to  me 

that executed  the  same. 

In  witness  whereof,  I  have  hereunto  set  my  hand  and 

affixed  my  official  seal,  at  my  office  in  the 

County  of ,  the  day  and  year  in 

this  certificate  first  above  written. 


Notary  Public  in  and  for  the 

County  of ,  State  of 

California. 
Commission  expires 19 


BUSINESS  CONTRACTS  AND  LEGAL.  OBLIGATIONS.  203 

Section  150. — BARGAIN  AND  SALE  DEED. — The  most 
common  form  of  transfer  of  real  estate  is  by  bargain  and 
sale  deed.  In  such  a  deed,  the  true  consideration  need 
not  be  stated.  If  the  consideration,  for  instance,  is  $500, 
it  may  be  stated  in  the  deed  at  $1.00,  or  any  other  sum. 
The  law  presumes  that  an  adequate  consideration  was 
given,  and  if  that  should  become  a  disputed  question,  the 
law  allows  proof  to  be  made  as  to  what  the  consideration 
really  was. 

Section  151. — FORM  OF  BARGAIN  AND  SALE  DEED. — The 
following  is  a  form  of  bargain  and  sale  deed : 

THIS  INDENTURE,  made  the day  of 

,  19 ,  between 

,  of  the  County  of ,  State 

of  California,  the  party  of  the  first  part,  and 

,. ,  of  the  same  place,  the  party 

of  the  second  part,  witnesseth:— 

That  the  said  party  of  the  first  part,  for  and  in  con- 
sideration of  the  sum  of Dollars,  Gold 

Coin  of  the  United  States  of  America,  to  him  in  hand  paid 
by  the  said  party  of  the  second  part,  the  receipt  whereof 
is  hereby  acknowledged,  does  by  these  presents  grant, 
bargain,  sell,  and  convey  unto  the  said  party  of  the  second 
part,  and  to  his  heirs,  and  assigns,  forever,  all  those  cer- 
tain lots,  pieces,  or  parcels  of  land  situate,  lying  and  be- 
ing in  the  County  of ,  State  of  Califor- 
nia, and  bounded  and  particularly  described  as  follows, 
to-wit: 

(Here  describe  the  land.) 

Together  with  all  and  singular  the  tenements,  here- 
ditaments, and  appurtenances  thereunto  belonging,  or  in 
anywise  appertaining,  and  the  reversion  and  reversions, 
remainder  and  remainders,  rents,  issues,  and  profits 
thereof. 

To  have  and  to  hold,  all  and  singular  the  said  prem- 
ises, together  with  the  appurtenances,  unto  the  said  party 
of  the  second  part,  his  heirs  and  assigns  forever. 


204  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Iii  witness  whereof,  the  said  party  of  the  first  part  has 
hereunto  set  his  hand  and  seal  the  day  and  year  first 
above  written. 

(Seal.) 

STATE  OF  CALIFORNIA,  1 

COUNTY  OF j       ss' 

On  this day  of ,  A.  D.  one  thousand  nine 

hundred  and ,  before  me 

,  a  Notary  Public  in  and  for  said 

County  and  State,  residing  therein,  duly  commissioned 

and  sworn,  personally  appeared , 

,  known  to  me  to  be  the  person whose 

name subscribed  to,  and  who  executed  the 

within  instrument  and acknowledged  to  me 

that executed  the  same. 

IN  WITNESS  WHEREOF,  I  have  hereunto  set  my 

hand  and  affixed  my  official  seal,  at  my  office  in  the 

County  of tho  day  and 

year  in  this  certificate  first  above  written. 

Notary  Public  in  and  for  the County 

of ,  State  of  California. 

Commission  expires 19 

Section  152. — QUITCLAIM  DEED. — It  may  occur  that 
the  grantor  has  some  interest  in  real  estate,  which  he 
wishes  to  transfer,  yet  the  interest  is  not  so  exactly  ascer- 
tained as  to  be  capable  of  definite  description.  In  this 
event,  it  is  usual  to  make  a  quitclaim  deed,  the  grantor 
transferring  all  his  right,  title,  or  claim  in  or  to  the  land, 
and  relinquishing  all.  his  claim  or  right,  whatever  it  may 
be,  to  his  grantee. 

Section  153. — FORM  OF  QUITCLAIM  DEED. — The  follow- 
iny  is  a  form  of  quitclaim  deed: 

THIS  INDENTURE,  made  the day  of 

19 ,  between of  the  County  of 

,  State  of  California,  the  party  of  the 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  205 

first  part,  and ,  of  the 

same  place,  the  party  of  the  second  part,  witnesseth  :— 
That  the  said  party  of  the  first  part,  for  and  in  con 

sideration  of  the  sum  of Dollars,  Gold 

Coin  of  the  United  States  of  America,  to  him  in  hand 
paid  by  the  said  party  of  the  second  part,  the  receipt 
whereof  is  hereby  acknowledged,  has  remised,  released, 
and  forever  quitclaimed,  and  by  these  presents  does  re- 
mise, release,  and  forever  quitclaim,  unto  the  said  party 

of  the  second  part,  and  to heirs  and  assigns,  all 

those  certain  lots,  pieces,  or  parcels  of  land,   situate, 

lying,  and  being  in  the  County  of ,  State 

of  California,  and  bounded  and  particularly  described  as 
follows,  to-wit: 

(Here  describe  land.) 

Together  with  all  and  singular  the  tenements,  here- 
ditaments, and  appurtenances  thereunto  belonging,  or  in 
any  wise  appertaining,  and  the  reversion  and  reversions, 
remainder  and  remainders,  rents,  issues,  and  profits 
thereof. 

To  have  and  to  hold,  all  and  singular  the  said  prem- 
ises, together  with  the  appurtenances,  unto  the  said  party 
of  the  second  part, heirs  and  assigns  forever. 

In  witness  whereof,  the  said  party  of  the  first  part  has 

hereunto  set hand  and  seal  the  day  and  year  first 

above  written. 

( Seal. ) 

STATE  OF  CALIFORNIA,  j 

COUNTY  OF j 

On  this dajr  of.  ,  A.  D.  one  thousand 

nine  hundred  and ,  before 

me,  ,  a  Notary 

Public  in  and  for  said  County  and  State,  resid- 
ing therein,  duly  commissioned  and  sworn,  personally  ap- 
peared  ,  known  to  me  to  be 

the  person whose  name subscribed  to 

and  who  executed  the  within  instrument,  and 

noknowledged  to  me  that...  executed  the  same. 


206  BUSINESS  LAW  FOE  BUSINESS  MEN. 

IN  WITNESS  WHEREOF,  I  have  hereunto  set  my 
hand  and  affixed  my  official  seal  at  my  office  in  the  County 

of ,  the  day  and  year  in  this  certificate 

first  above  written. 

Notary  Public  in  and  for  the  County  of , 

State  of  California. 
Commission  expires ,  19 

Section  154. — WARRANTY  DEED. — The  purchaser  of 
real  estate  may  insist  upon  an  agreement  on  the  part  of 
the  seller  to  defend  the  title,  to  secure  him  in  the  pos- 
session, in  the  event  of  his  possession  being  invaded  or 
questioned  by  a  third  person  after  the  sale.  The  parties 
to  a  sale  of  land  may  lawfully  make  an  agreement  where- 
by the  seller  will  be  bound  to  defend  the  title  and  pos- 
session in  the  purchaser.  This  agreement  is  evidenced 
by  a  warranty  deed,  conveying  the  property,  and  at  the 
same  time  binding  the  seller  to  stand  ready  to  defend 
the  right  of  possession  in  the  purchaser,  should  it  be 
attacked. 

Section  155. — FORM  OF  WARRANTY  DEED. — The -follow- 
ing is  a  form  of  warranty  deed: 

THIS  INDENTURE,  made  the day  of , 

19 ,  between ,  of  the  County  of 

,  State  of  California,  the  party 

of  the  first  part,  and 

of  the  same  place,  the  party  of  the  second  part,  witness- 
eth:— 

That  the  said  party  of  the  first  part,  for  and  in  con- 
sideration of  the  sum  of ,  Dollars,  Gold 

Coin  of  the  United  States  of  America,  the  receipt  whereof 
is  hereby  acknowledged,  does  by  these  presents  grant, 
bargain,  sell,  and  convey  unto  the  said  party  of  the  sec- 
ond part,  and  to heirs  and  assigns  forever,  all 

those  certain  lots,  pieces,  or  parcels  of  land,  situate,  lying, 
and  being  in  the  County  of ,  State  of 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  207 

California,  and  bounded  and  particularly  described  as  fol- 
lows, to-wit: „ 

(Here  describe  land.) 

Together  with  all  and  singular  the  tenements,  heredita- 
ments, and  appurtenances  thereunto  belonging,  or  in  any 
wise  appertaining,  the  reversion  and  reversions,  re- 
mainder and  remainders,  rents,  issues,  and  profits 
thereof. 

To  have  and  to  hold,  all  and  singular,  the  above  men- 
tioned and  described  premises,  together  with  the  appur- 
tenances, unto  the  said  party  of  the  second  part,  and  to 
heirs  and  assigns  forever. 

And  the  said  party  of  the  first  part,  and heirs, 

the  said  premises,  in  the  quiet  and  peaceable  possession 

of  the  said  party  of  the  second  part, heirs,  and 

assigns,  against  the  said  party  of  the  first  part,  and  his 
heirs,  and  against  all  and  every  person  or  persons  whom- 
soever lawfully  claiming  or  to  claim  the  same,  shall  and 
will  warrant,  and  by  these  presents  forever  defend. 

In  witness  whereof  the  said  party  of  the  first  part  has 

hereunto  set hand  and  seal  the  day  and  year  first 

above  written. 

(Seal.) 

STATE  OF  CALIFORNIA,  1 

COUNTY  OF ] 

On  this day  of ,  A.  D.  one  thousand 

nine  hundred  and ,  before  me, 

,  a  Notary  Public  in  and  for  said 

County  and  State,  residing  therein,  duly  commissioned 

and  sworn,  personally  appeared 

,  known  to  me  to  be  the  person 

whose  name subscribed  to,  and  who  executed  the 

within  instrument,  and acknowledged  to  me  that 

executed  the  same. 

IN  WITNESS  WHEREOF,  I  have  hereunto  set  my 
hand  and  affixed  my  official  seal  at  my  office  in  the  County 


208  BUSINESS  LAW  FOE  BUSINESS  MEN. 

of ,  the  day  and  year  in  this  cer- 

tificate first  above  written. 


Notary  Public  in  and  for  the  County  of.. 

State  of  California. 
Commission  expires ,  19 


Section  156. — CORPORATION  DEED. — A  deed  may  be 
made  by  a  corporation,  but  the  deed  must  be  authorized 
by  a  resolution  of  the  Board  of  Directors.  When  the 
Board  of  Directors  of  a  corporation  has  passed  a  resolu- 
tion directing  the  execution  of  a  deed,  the  President  may 
sign,  execute,  and  deliver  the  deed  for  the  corporation. 

Section  157. — FORM  OF  CORPORATION  DEED  AND  AC- 
KNOWLEDGMENT.— The  following  is  a  form  of  corporation 
deed,  and  the  acknowledgment  thereto.  The  acknowl- 
edgment is  different  from  the  acknowledgment  to  the 
deed  of  an  individual,  in  that  it  must  show  the  official 
capacity  of  the  person  executing  it : 

THIS  INDENTURE,  made  the day  of 

19 ,  between , 

a  corporation  duly  authorized  under  the  laws  of  the  State 
of  California,  whose  principal  place  of  business  is  at 

,  in  the  County  of 

State  of  California,  party  of  the  first  part,  and 

of  the  same  place,  party  of  the  second  part, 

Witnesseth: 

That,  whereas,  the  said  party  of  the  first  part  is  a  cor- 
poration duly  incorporated  and  existing  under  and  by  vir- 
tue of  the  laws  of  the  State  of  California ;  and,  whereas, 
in  pursuance  of  the  statutes  in  such  cases  made  and  pro- 
vided, it  has  acquired  and  is  the  owner  of  the  land  and 
premises  hereinafter  described;  and  whereas,  the  Board 
of  Directors  of  said  corporation,  duly  assembled,  on  the 

day  of ,  duly  passed  the 

following  resolutions,  to-wit: 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  209 

(Here  insert  in  full  the  resolution  adopted  by  the  Board 
of  Directors  authorizing  the  sale  of  the  land.) 


Now,  therefore,  in  pursuance  of  said  resolution  afore- 
said, and  in  consideration  of  the  sum  of 

Dollars,  gold  coin  of  the  United 

States  of  America,  to  it  in  hand  paid  by  the  said  party  of 
the  second  part,  the  receipt  whereof  is  hereby  acknowl- 
edged, the  said  party  of  the  first  part  does  by  these  pres- 
ents grant,  bargain,  sell,  and  convey  unto  the  said  party 
of  the  second  part,  and  to  his  heirs  and  assigns  forever, 
all  those  certain  lots,  pieces,  or  parcels  of  land  situate, 

lying,  and  being  in  the  County  of ,  State  of 

California,  and  bounded  and  particularly  described  as 
follows,  to-wit: ,. 

(Here  describe  the  land.) 

Together  with  all  and  singular  the  tenements,  heredita- 
ments, and  appurtenances  thereunto  belonging,  or  in  any 
wise  appertaining,  and  the  reversion  and  reversions,  re- 
mainder and  remainders,  rents,  issues,  and  profits 
thereof. 

To  have  and  to  hold,  all  and  singular,  the  said  prem- 
ises, together  with  the  appurtenances,  unto  the  said  party 
of  the  second  part,  his  heirs  and  assigns  forever. 

IN  WITNESS  WHEREOF,  the  said  party  of  the  first 
part,  by  resolution  of  its  Board  of  Directors,  has  caused 
these  presents  to  be  subscribed  by  its  President,  and  its 
corporate  name  and  seal  to  be  hereunto  affixed,  the  day 
and  year  first  above  written. 

( Seal. ) 

By ,  President. 

STATE  OF  CALIFORNIA,  j 

CSS. 
OUNTY  OF ) 

On  this day  of ,  in  the  year  19 , 

before  me,  ,  a  Notary  Public  in  and  for 


210  BUSINESS  LAW  FOR  BUSINESS  MEN. 

the  said  County  and  State,  residing  therein,  duly  commis- 
sioned and  sworn,  personally  appeared 

known  to  me  to  be  the  Presi- 
dent of  the  corporation  described  in  and  that  executed  the 
within  instrument,  and  also  known  to  me  to  be  the  person 
who  executed  it  on  behalf  of  the  corporation  therein 
named,  and  he  acknowledged  to  me  that  such  corporation 
executed  the  same. 

IN  WITNESS  WHEREOF,  I  have  hereunto  set  my 
hand  and  affixed  my  official  seal  at  my  office  in  the  County 

of ,  the  day  and  year  in  this  certificate 

first  above  written. 

Notary  Public  in  and  for  the  County  of 

,  State  of  California. 

Commission  expires ,  19 

Section  158 — DEED  IN  ESCROW — A  deed  may  be  depos- 
ited by  the  grantor  with  a  third  person,  to  be  delivered 
to  the  grantee  on  performance  of  a  condition,  to  take  ef- 
fect when  the  condition  is  performed.  Thus,  a  deed  de- 
posited with  a  bank,  to  be  delivered  to  the  grantee  upon 
the  payment  of  so  much  money,  or  a  deed  placed  in  the 
hands  of  a  third  party,  to  be  delivered  to  the  grantee  upon 
the  death  of  the  grantor,  will  take  effect  when  the  money 
is  paid,  or  when  the  death  of  the  grantor  occurs.  While 
in  the  possession  of  the  third  person,  and  subject  to  the 
condition,  the  deed  is  called  an  escrow. 
Civil  Code,  Section  1057. 

Section  150 — -EFFECT  OF  DEED  IN  ESCROW — It  often  oc- 
curs that  a  person  will  make  a  deed  in  escrow,  without 
sufficient  knowledge  of  the  effect  of  his  act,  and  when,  if 
he  knew  the  law,  the  deed  would  not  have  been  made. 
Many  people  suppose  that  a  deed  can  be  made,  and  placed 
in  the  hands  of  a  third  person,  to  be  delivered  upon  the 
death  of  the  maker,  and  still  be  taken  out  of  escrow  at  any 
time.  But  this  is  not  the  law.  On  the  contrary,  it  is  the 


BUSINESS  CONTKACTS  AND  LEGAL  OBLIGATIONS.  211 

law  of  California,  that  when  the  owner  of  land  makes  a 
deed,  and  delivers  it  to  another,  with  instructions  only  to 
hold  without  recording  until  his  death,  and  then  to  de- 
liver it  to  the  grantee,  the  grantor  cannot  recall  the  deed, 
nor  alter  its  provisions,  and  he  has  no  interest  in  the 
land  left,  except  a  life  estate.  His  deed  passes  the  title 
to  the  land  at  once  to  the  grantee,  qualified  only  by  the 
right  of  the  grantor  to  use  and  occupy  the  property,  or 
take  and  receive  the  rents  and  profits,  during  his  life.  The 
person  with  whom  such  a  deed  is  left  in  escrow  has  no 
right  to  give  it  back  to  the  grantor,  if  the  latter  should 
change  his  mind  about  it.  The  act  of  the  grantor,  in  mak- 
ing such  a  deed,  delivered  to  a  third  person  in  escrow,  is 
irrevocable  by  hin\  no  matter  how  much  he  would  like  to 
take  it  back,  or  how  deeply  he  may  regret  his  act.  (De- 
cided by  the  Supreme  Court  of  California,  in  the  case  of 
Bury  vs.  Young,  which  decision  is  printed  in  Volume  98 
of  the  California  Reports,  page  446.) 

Section  160 — DEED  CANNOT  BE  CANCELED. — If  a  deed 
is  made,  executed,  and  acknowledged,  and  delivered,  but 
not  recorded,  the  property  cannot  be  transferred  back  by 
a  redelivery  of  the  deed,  or  by  its  cancellation.  The 
grantee  in  such  a  case  must  make  a  deed  back  to  the 
grantor,  and  both  deeds  must  then  be  recorded. 
Civil  Code,  Section  1058. 

Section  161 — POWER  OF  ATTORNEY  TO  MAKE  DEED.— 
The  owner  of  real  estate  may  authorize  another  person 
to  sell,  and  to  make  and  execute  a  deed  conveying  his  land, 
for  and  on  his  behalf.  This  authority  he  may  delegate 
to  another  by  means  of  a  power  of  attorney.  The  power 
of  attorney  must  be  executed  and  acknowledged  in  the 
same  manner  as  a  deed. 

For  a  form  of  power  of  attorney  authorizing  an  agent 
to  sell  and  convey  real  property,  see  the  subject,  "Power 
of  Attorney." 


212  BUSINESS  LA\V  FOK  BUSINESS  MEN. 

Section  162 — DEED  TO  COMMUNITY  PROPERTY  WHERE 
HUSBAND  OR  WIFE  Is  INSANE. — Where  real  property  is 
held  as  community  property,  and  either  the  husband  or 
wife  has  been  adjudged  insane,  the  husband  or  wife  not 
insane  may  petition  the  superior  court  of  the  county  in 
which  such  community  real  property  is  situated  for  an 
order  permitting  the  husband  or  wife,  not  insane,  to  sell 
and  convey,  mortgage  or  lease,  such  community  real  prop- 
erty to  raise  moneys  to  provide  for  the  support  and  care 
either  of  the  sane  or  insane  spouse,  or  of  their  minor 
children,  and  also  to  raise  moneys  for  the  payment  of 
the  necessary  taxes,  interest  and  other  charges  incurred 
and  required  to  be  paid  for  the  protection  and  preserva- 
tion of  the  community  estate.  Such  petition  must  be  sub- 
scribed and  sworn  to  by  the  applicant,  setting  forth  the 
name  and  age  of  the  insane  husband  or  wife;  a  descrip- 
tion of  the  premises  constituting  the  community  real  prop- 
erty petitioned  to  be  sold,  mortgaged,  or  leased ;  the  value 
of  same ;  the  county  in  which  it  is  situated ;  and  such  facts, 
in  addition  to  the  insanity  of  the  husband  or  wife,  relat- 
ing to  the  circumstances  and  necessities  of  the  applicant 
and  his  or  her  family  as  he  or  she  may  rely  upon  in  sup- 
port of  the  petition. 

Notice  of  the  application  for  such  order  must  be  given 
by  publication  of  the  same,  in  a  newspaper  published  in 
the  county  in  which  such  community  real  property  is  sit- 
uated, if  there  is  a  newspaper  published  therein,  once  each 
week  for  three  successive  weeks,  prior  to  the  hearing  of 
such  application,  and  a  copy  of  such  notice  must  also  be 
personally  served  upon  the  nearest  relative  of  such  in- 
sane husband  or  wife,  resident  in  this  state,  at  least  three 
weeks  prior  to  such  application;  and  in  case  there  is  no 
such  relative  known  to  the  applicant,  a  copy  of  such  notice 
must  be  so  served  upon  the  public  administrator  of  the 
county  in  which  such  community  real  property  is  situ- 
ated ;  and  in  such  case  it  is  the  duty  of  such  public  admin- 
istrator to  appear  and  represent  the  interests  of  such  in- 
sane person.  For  nil  such  services  rendered  by  the  pub- 


Section  162,  page  212,  "Business  Law  for  Business  Men" — INSANE  OR 
INCOMPETENT  HUSBAND  OR  WIFE— Wherever  the  word  "insane" 
appears  in  Section  162  add  the  words  "or  incompetent."  The  law  now  applies 
to  community  property  where  the  husband  or  wife  is  either  insane  or  incom- 
petent. Act  of  the  Legislature  of  California,  approved  May  12,  1921;  in  ef- 
fect July  12,  1921. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  213 

lie  administrator  he  must  be  allowed  a  reasonable  fee,  to 
be  fixed  by  the  court,  and  the  same  must  be  taxed  as  costs 
against  the  person  making  application  for  the  order 
herein  provided  for. 

If  it  appears  to  the  court  that  such  husband  or  wife 
has  been  adjudged  insane,  the  court  may  make  an  order 
permitting  the  husband  or  wife,  not  insane,  to  sell  and 
convey,  or  mortgage  or  lease  such  community  real  prop- 
erty, and  thereafter  any  sale,  conveyance,  mortgage  or 
lease,  made  in  pursuance  of  such  order  is  as  valid  and  ef- 
fectual as  if  the  property  affected  thereby  was  the  abso- 
lute property  of  the  person  making  such  sale,  conveyance, 
mortgage  or  lease.  If  a  sale  is  ordered  it  must  be  re- 
ported to  and  confirmed  by  the  court. 

Act  of  the  Legislature,  approved  May  27,  1919 ; 
in  effect  July  27,  1919. 

Section  163 — DEFECTIVELY  ACKNOWLEDGED  DEED. — Any 
instrument  affecting  the  title  to  real  property,  including 
any  instrument  executed  by  a  married  woman  on  or  after 
the  first  day  of  July,  1891,  which  was,  previous  to  the  first 
day  of  January,  1919,  copied  into  the  proper  book  of  rec- 
ord, kept  in  the  office  of  any  county  recorder,  imparts, 
after  that  date,  notice  of  its  contents  to  subsequent  pur- 
chasers and  encumbrancers,  notwithstanding  any  defect, 
omission,  or  informality  in  the  execution  of  the  instru- 
ment, or  in  the  certificate  of  acknowledgement  thereof,  or 
the  absence  of  any  such  certificate;  but  nothing  herein 
affects  the  rights  of  purchasers  or  encumbrancers  previ- 
ous to  the  taking  effect  of  this  act.  Duly  certified  copies 
of  the  record  of  any  such  instrument  may  be  read  in  evi- 
dence with  like  effect  as  copies  of  an  instrument  duly  ac- 
knowledged and  recorded;  provided,  when  such  copying 
in  the  proper  book  of  record  occurred  within  fifteen  years 
prior  to  the  trial  of  the  action,  it  is  shown  first  that  the 
original  instrument  was  genuine. 

Act  of  the  Legislature,  approved  May  5,  1919; 
in  effect  July  22,  1919. 


214  *    BUSINESS  LAW  FOB  BUSINESS  MEN. 

Section  164 — MAPS  OF  SUBDIVISIONS. — Whenever  any 
tract  or  subdivision  of  land  shall  be  laid  out  into  lots  for 
the  purpose  of  sale,  the  owner  or  owners  thereof  shall 
cause  to  be  made  out  and  filed  with  the  county  recorder  of 
the  county  in  which  the  same  is  situated,  an  accurate  map 
or  plat  thereof  on  cloth,  drawn  and  attested  to  by  a  civil 
engineer  or  licensed  surveyor  from  his  own  survey  of  the 
ground.  Said  engineer  or  surveyor  shall,  in  making  the 
surveys,  leave  sufficient  permanent  monuments  so  that 
another  surveyor  or  engineer  may  retrace  his  work.  The 
nature  and  location  of  these  monuments  shall  be  plainly 
shown  on  the  map.  The  map  shall  also  particularly  set 
forth  and  describe : 

First — All  parcels  of  ground  within  such  tract  or  sub- 
division used  for  public  purposes  or  offered  for  dedica- 
tion for  public  uses,  whether  they  be  intended  for  public 
highways,  parks,  courts,  commons  or  other  public  uses, 
and  their  dimensions  and  boundaries  and  the  courses  of 
their  boundary  lines. 

Second — All  lots  intended  for  sale,  or  reserved  for 
private  purposes  and  not  offered  for  dedication  to  the 
public  use,  either  by  number  or  letter,  and  their  dimen- 
sions and  boundaries  and  the  courses  of  the;r  boundary 
lines.  All  parcels  of  land  offered  for  dedication  as  pub- 
lic highways  and  not  accepted  by  the  proper  authorities 
upon  presentation  to  them,  shall  also  be  designated  by 
number  or  letter. 

Third — The  exact  location  of  such  tract  or  subdivi- 
sion of  land  into  lots  with  reference  to  adjacent  subdivi- 
sions of  land  into  lots,  the  maps  or  plats  of  which  have 
been  previously  recorded,  if  any,  or  if  none,  then  with 
reference  to  corners  of  a  United  States  survey,  or  to  some 
natural  or  artificial  monument. 

Every  such  map  or  plat  shall  be  on  cloth  and  clearly 
and  legibly  drawn  in  all  its  details  upon  tracing  cloth  of 
good  quality.  The  size  of  the  sheets  of  drawing  cloth 
must  be  18  by  26  inches  or  13  by  18  inches.  Marginal 
lines  must  be  drawn  around  the  entire  sheet,  leaving  a 


Section  164,  page  214,  "Business  Law  for  Business  Men" — EXCLUDING 
LANDS  FROM  SUB-DIVISIONS— Upon  the  application  of  the  owners  of 
at  least  two-thirds  of  the  area  of  land  included  within  the  boundaries  of  any 
tract  or  subdivision  of  land  described  in  a  recorded  map  or  plat,  or  of  that 
portion  thereof  sought  to  be  excluded,  where  application  is  made  to  vacate 
a  portion  of  any  subdivision  or  tract,  the  superior  court  of  the  county  or  city 
and  county  wherein  such  land  is  situated,  may  cause  all  or  any  portion  of  such 
land  to  be  excluded  from  the  subdivision  or  tract  and  the  recorded  map  or 
plat  thereof  to  be  altered  or  vacated. 

Act  of  the  Legislature  of  California,  approved  May  23,  1921;  in  effect, 
July  23,  1921. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  215 

margin  of  one  inch  from  the  edges  of  the  sheets,  and  the 
name,  title,  or  other  designation,  and  all  drawings,  affi- 
davits, certificates,  acknowledgments,  indorsements,  ac- 
ceptances of  dedication,  and  notarial  seals  must  be  within 
said  marginal  lines.  The  scale  to  which  the  drawing  is 
made  must  be  large  enough  to  show  the  details  clearly, 
and  two  or  more  sheets  must  be  used  if  one  does  not  give 
sufficient  room  to  accomplish  this  end.  If  more  than  one 
sheet  is  used,  each  sheet  must  be  numbered,  connections 
of  one  sheet  to  another  clearly  given  and  the  number  of 
the  sheets  used  in  the  subdivision  must  be  given  in  the 
affidavit. 

Upon  every  map  or  plat  there  shall  be  indorsed  a  con- 
sent to  the  making  thereof,  signed  by  the  owner  or  own- 
ers of  the  tract  or  other  subdivision  of  land  .shown 
thereon,  and  also  by  all  other  persons  whose  consent  is 
necessary  to  pass  a  clear  title  to  such  land,  and  acknowl- 
edged by  all  the  signers  in  the  same  manner  as  convey- 
ances of  real  property;  also  a  certificate  from  the  county 
auditor,  and  from  the  auditor  or  other  proper  officer  of 
any  municipal  corporation,  in  which  any  part  of  such 
tract  or  other  subdivision  is  situated,  showing  that  there 
are  no  liens  for  unpaid  state,  county,  municipal  or  other 
taxes,  except  taxes  not  yet  payable,  against  said  tract  or 
subdivision  of  land  or  any  part  thereof ;  also  a  certificate 
of  the  clerk  of  the  board  of  supervisors  that  a  bond  has 
been  filed  with  said  board  as  provided  herein ;  and  the 
owner  or  owners  of  any  tract,  or  other  subdivision  of 
land  shown  thereon,  shall  execute  and  file  with  the  board 
of  supervisors  of  the  county  wherein  such  tract,  or  sub- 
division, or  any  part  thereof,  is  situated,  a  good  and  suf- 
ficient bond  to  be  approved  by  and  in  an  amount  to  be 
fixed  by  said  board  of  supervisors  and  by  its  terms  made 
to  inure  to  the  benefit  of  the  county  wherein  such  tract, 
subdivision,  or  any  part  thereof,  is  situate,  and  condi- 
tioned for  the  payment  of  all  taxes  which  are  at  the  time 
of  filing  thereof,  a  lien  against  any  such  tract,  or  sub- 
division, or  any  part  thereof,  but  not  yet  payable.  Upon 


216  BUSINESS  LAW  FOB  BUSINESS  MEN. 

every  such  map  or  plat  which  shows  any  parcels  of  land 
intended  for  public  use  and  not  previously  dedicated 
therefor,  there  shall  be  indorsed  a  statement  of  the  dedi- 
cation of  such  parcels  of  ground  intended  for  public  use, 
executed  by  the  owner  or  owners,  and  by  all  other  per- 
sons whose  consent  is  necessary  to  pass  a  clear  title  to 
such  parcels  of  ground  to  the  public,  and  acknowledged 
by  all  persons  executing  the  same  in  the  same  manner  as 
conveyances  of  real  property. 

The  map  or  plat  so  made,  indorsed  and  acknowledged 
shall  be  submitted  to  thfr  governing  body  of  the  city,  city 
and  county,  or  county  having  control  of  public  highways 
in  the  territory  shown  on  such  map  or  plat,  for  the  ap- 
proval of  such  governing  body,  before  such  map  or  plat 
is  filed  for  record  in  the  recorder's  office.  Such  govern- 
ing body,  after  examination  duly  made,  shall  approve  or 
disapprove  such  map  or  plat  within  thirty  days  after  the 
same  is  submitted  to  it  as  above  provided.  If  approved, 
the  governing  body  shall  indorse,  or  cause  to  be  indorsed, 
on  said  map  or  plat,  its  approval  of  the  same.  Without 
such  approval  the  said  map  or  plat  shall  not  be  filed  for 
record  or  be  recorded.  Such  governing  body  may  require 
the  public  highways,  if  any,  offered  for  dedication  by  said 
map  or  plat  and  the  parcel  or  parcels  of  land,  if  any, 
therein  reserved  or  indicated  for  highway  or  right  of 
way  purposes,  and  not  offered  for  dedication  to  public 
use,  to  be  as  wide  as  and  to  conform,  as  near  as  practica- 
ble, to  the  adjoining,  surrounding  or  neighboring  streets 
or  highways  of  said  city,  city  and  county,  or  county.  If 
such  map  or  plat  offer  for  dedication  any  highways  said 
governing  body  shall  indorse  thereon  which  of  the  high- 
ways so  offered  for  dedication  are  accepted  on  behalf  of 
the  public,  and  thereupon  such  highways  which  have  been 
so  accepted,  and  no  others,  shall  be  and  become  dedicated 
to  the  public  use. 

No  map  or  plat  referred  to  in  this  act  shall  be  ac- 
cepted by  the  county  recorder  for  filing  or  recording,  un- 
less the  same  shall  in  all  respects  comply  with  the  provi- 


BUSINESS  CONTRACTS  ANJD  LEGAL  OBLIGATIONS.  217 

sions  of  this  act,  and  the  recorder  shall  be  entitled,  before 
accepting  or  refusing  such  map  or  plat,  to  sufficient  time 
to  enable  him  to  examine  the  same. 

No  person  shall  sell  or  offer  for  sale  any  lot  or  parcel 
of  laud,  by  reference  to  any  map  or  plat,  unless  such  map 
or  plat  has  been  made,  certified,  indorsed,  acknowledged 
and  filed  in  all  respects  as  provided  in  this  act,  or  was 
filed  or  recorded  prior  to  the  taking  effect  of  this  act  and 
in  accordance  with  the  laws;  in  force  at  the  time  it  was  so 
filed  or  recorded,  and  no  person  shall  sell  or  offer  for 
sale  any  lot  or  parcel  of  land  by  reference  to  any  map  or 
plat  other  than  such  recorded  map  or  plat  or  true  and 
correct  copy  thereof. 

Every  person  who  violates  any  of  the  provisions  of 
this  act  is  guilty  of  a  misdemeanor,  and  upon  conviction 
thereof  shall  be  punishable  by  a  fine  of  not  less  than 
twenty-five  dollars  and  not  more  than  five  hundred  dol- 
lars, or  by  imprisonment  in  the  county  jail  for  a  period  of 
not  more  than  six  months,  or  by  both  such  fine  and  im- 
prisonment, and  the  recordation  of  any  map  or  plat  which 
is  not  executed  and  approved  as  herein  required  shall  be 
null  and  void ;  provided,  however,  that  any  owner  or  own- 
ers of  any  such  tract  or  subdivision,  who  prior  to  the 
taking  effect  of  this  act  caused  to  be  prepared  proper 
maps  or  plats  thereof  in  conformity  with  the  provisions 
of  the  act  mentioned  in  section  one  hereof,  and  thereafter, 
through  inadvertence  or  excusable  neglect,  bailed  to  re- 
cord the  same  prior  to  conveying  lots  shown  thereon, 
may,  within  one  year  after  this  act  takes  effect,  petition 
the  superior  court  of  the  county  wherein  such  land  is 
situate  for  an  order  permitting  such  map  or  plat  to  be 
filed  and  recorded  as  in  said  act  provided ;  and  the  court 
may,  upon  the  hearing  of  such  petition,  if  satisfied  that 
good  cause  exists  therefor,  make  such  order.  A  copy  of 
the  petition  shall  be  served  upon  the  county  recorder  at 
least  ten  days  prior  to  such  hearing,  and  a  certified  copy 
of  such  order,  if  any  be  made,  shall  be  filed  with  the  map. 
Statutes  of  1913,  Chapter  306. 


218  BUSINESS  LAW  FOB  BUSINESS  MEN. 

Section  165. — JOINT  TENANCY  DEED. — A  deed  may  be 
made  to  grantees  who  are  called  joint  tenants,  with  the 
right  of  survivorship.  That  is,  if  we  suppose  that  a  deed 
of  land  is  made  by  John  Jones,  the  grantor,  to  Samuel 
Green  and  Sarah  Green,  his  wife,  the  grantees ;  the  deed 
may  lawfully  provide  that  the  grantees  shall  hold  the  land 
as  joint  tenants,  and  that  if  one  of  them  dies  the  title  shall 
remain  in  the  survivor. 

Section  166. — FOEM  OP  JOINT  TENANCY  DEED. — The 
following  is  a  form  of  joint  tenancy  deed : 

THIS  INDENTURE,  Made  the day  of 

,  in  the  year  of  our  Lord  one  thousand 

nine  hundred  and 

between  John  Jones,  of  the  County  of  Los  Angeles,  State 
of  California,  the  party  of  the  first  part,  and  Samuel 
Green  and  Sarah  Green,  his  wife,  of  the  same  place,  as 
joint  tenants,  with  the  right  of  survivorship,  the  parties 
of  the  second  part, 

WITNESSETH  :  That  the  said  party  of  the  first  part,  for 

and  in  consideration  of  the  sum  of Dollars, 

in  Gold  Coin  of  the  United  States  of  America,  to  him  in 
hand  paid  by  the  said  parties  of  the  second  part,  the  re- 
ceipt whereof  is  hereby  acknowledged,  does  by  these 
presents  grant,  bargain  and  sell,  convey  and  confirm  unto 
the  said  parties  of  the  second  part,  as  joint  tenants,  and 
to  the  survivor  of  them  forever,  all  that  certain  real 

property  situate  in  the , 

County  of State  of  California,  and 

particularly  described  as  follows : 


Together  with  all  and  singular  the  tenements,  heredita- 
ments and  appurtenances  thereunto  belonging  or  in  any- 
wise appertaining,  and  the  reversion  and  reversions,  re- 
mainder and  remainders,  rents,  issues  and  profits  thereof. 


BUSINESS  CONTEACTS  AND  LEGAL  OBLIGATIONS.  219 

To  have  and  to  hold  all  and  singular  the  said  prem- 
ises, together  with  the  appurtenances,  unto  the  said 
parties  of  the  second  part  and  to  the  survivor  of  them 
forever. 

IN  WITNESS  WHEREOF  the  said  party  of  the  first  part 

has  hereunto  set  his  hand and  seal the  day  and 

year  in  this  indenture  first  above  written. 

: (Seal) 

Signed,  Sealed  and  Delivered  in  the  Presence  of 


STATE  OF  CALIFORNIA, 

COUNTY.  J 

On  this day  of in  the 

year  of  our  Lord  one  thousand  nine  hundred  and , 

before  me, ,  a  Notary  Public  in 

and  for  said  County  of ,  State  of  California, 

residing  therein,  duly  commissioned  and  sworn,  person- 
ally appeared 


known  to  me  to  be  the  person described  in  and  whose 

name  is  subscribed  to    the    foregoing   instrument    and 

he acknowledged  to  me  that  he executed  the 

same. 

IN  WITNESS  WHEREOF,  I  have  hereunto  set  my 
hand  and  affixed  my  official  seal  the  day  and  year  in  this 
Certificate  first  above  written. 

Notary  Public  in  and  for  the  County  of 

,  State  of  California. 

My  commission  expires ,  19 

Section  167 — RECORD  TITLE  OF  SURVIVOR  IN  JOINT  TEN- 
ANCY.— For  a  long  time  much  uncertainty  existed  as  to 
the  exact  status  of  the  surviving  joint  tenant,  and  in  what 
manner  his  title  could  be  exhibited  or  proved  by  the  offi- 
cial records.  The  Legislature  of  California  in  1917  passed 
a  law  intended  to  remove  all  doubts,  and  to  provide  for  a 


220  BUSINESS  LAW  FOR  BUSINESS  MEN. 

positive  and  permanent  record  of  the  title  of  the  surviv- 
ing joint  tenant.    The  Act  reads  as  follows : 

If  any  person  has  died  or  shall  hereafter  die  who  at 
the  time  of  his  death  was  the  owner  of  a  life  estate  which 
terminates  by  reason  of  the  death  of  such  person;  or  if 
such  person  at  the  time  of  his  death  was  one  of  two  or 
more  persons  holding1  land  in  joint  tenancy,  which  land  by 
reason  of  his  death  vests  absolutely  in  the  surviving  joint 
tenant  or  tenants;  or  if  such  person  at  the  time  of  his 
death  was  the  spouse  of  a  person  owning  land  upon  which 
either  spouse  had  declared  a  homestead,  the  homestead 
interest  of  which  deceased  person  absolutely  terminated 
by  reason  of  his  death ;  any  person  interested  in  the  land, 
or  in  the  title  thereto,  in  which  such  estate  or  interest 
was  held,  may  file  in  the  superior  court  of  the  county  in 
which  the  land  or  any  part  thereof  is  situated,  his  veri- 
fied petition  setting  forth  such  facts,  and  thereupon  and 
after  such  notice  of  publication  or  otherwise  as  the  court 
may  order,  (provided,  that  notice  shall  be  given  in  each 
county  wliere  any  part  of  said  land  is  situated  in  the  same 
manner  as  in  the  county  where  said  petition  is  filed,)  the 
court  shall  hear  such  petition  and  the  evidence  offered 
in  support  thereof,  and  if  upon  such  hearing  it  shall  ap- 
pear that  such  estate  or  interest  so  terminated  or  vested, 
the  court  shall  make  a  decree  to  that  effect,  and  there- 
upon a  certified  copy  of  such  decree  shall  be  recorded  in 
the  office  of  the  county  recorder  of  each  county  in  which 
any  part  of  said  land  is  situated,  and  thereafter  shall 
have  the  same  effect  as  a  decree  of  final  distribution  so 
recorded;  provided,  that  if  such  estate  or  interest  was 
a  joint  tenancy,  any  inheritance  tax  which  is  dve  and  pay- 
able by  reason  of  the  death  of  such  deceased  person,  must 
be  fully  paid  before  such  decree  is  made ;  and  the  amount 
of  said  inheritance  tax  shall  be  fixed,  and  said  tax  shall 
be  paid,  in  the  same  manner  as  in  the  case  of  an  admin- 
istration upon  the  estate  of  a  decedent. 

Act  of  the  Legislature,  approved  May  31,  1917; 
in  effect  July  30,  1917. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  221 

INSTALLMENT  SALES  OF  REAL  ESTATE. 

Section  168 — SALES  ON  THE  INSTALLMENT  PLAN. — Real 
estate  may  be  sold  on  the  installment  plan,  the  purchaser 
agreeing  to  make  certain  payments  at  stated  times,  the 
title  to  remain  in  the  vendor  until  full  payment  is  made. 
This  is  what  is  termed  a  conditional  sale.  The  buyer  may 
be  let  into  the  possession  of  the  property,  and  yet  the  legal 
title  will  remain  with  the  seller,  if  it  is  expressed  in  the 
agreement  of  sale  that  all  installments  must  be  paid  be- 
fore the  title  will  pass  or  deed  be  given.  The  agreement 
for  sale  of  real  property  on  the  installment  plan  must  be 
in  writing,  and  the  agreement  should  be  recorded.  If  re- 
corded, it  is  notice  to  the  world  that  the  grantee  has  a 
claim  upon  the  land,  and  the  right  to  obtain  the  legal  title 
by  making  stipulated  payments. 

Section  169 — PAYMENT  OF  INSTALLMENTS. — Where  the 
agreement  provides  that  time  shall  be  of  the  essence  of 
the  contract  and  that  payments  shall  be  made  in  install- 
ments at  specified  times,  it  is  essential  that  the  purchaser 
pay  each  installment  as  it  becomes  due,  if  he  wishes  to 
keep  the  contract  good.  He  must  pay,  for  if  he  does  not, 
the  seller  may  rescind  the  contract  and  forfeit  the  pay- 
ments already  made. 

Section  170 — VENDOR'S  REMEDY  IF  INSTALLMENTS  ARE 
NOT  PAID. — If  the  purchaser  fails  to  pay  any  installment, 
when  due,  the  seller  may  rescind  the  contract.  He  cannot 
do  this  arbitrarily,  however,  without  regard  to  the  rights 
of  the  purchaser.  The  seller  should  give  reasonable  no- 
tice to  the  purchaser,  that  the  unpaid  installment  must  be 
paid,  or  otherwise  the  contract  will  be  rescinded  and  can- 
celed and  all  prior  payments  forfeited.  If,  after  receiv- 
ing this  notice,  the  purchaser  still  fails  to  pay  the  install- 
ment, the  vendor  may  cancel  the  contract,  retain  the 
money  already  paid,  and  regain  the  possession  of  the 
property.  If  the  purchaser  is  in  possession  of  the  prop- 


222  BUSINESS  LAW  FOB  BUSINESS  MEN. 

\ 

erty,  and  refuses  to  give  it  up,  the  vendor  may  bring  a 
suit  for  ejectment,  and  the  courts  will  put  him  in  posses- 
sion. 

The  vendor  is  not  compelled  to  cancel  the  contract, 
however.  For  he  may,  on  the  contrary,  sue  the  purchaser 
for  the  amount  of  each  installment,  as  default  is  made  in 
its  payment,  and  gel  a  judgment  against  him.  The  effect 
of  this  will  be  to  enforce  and  maintain  the  contract  of 
sale,  and  the  judgment  against  the  purchaser  for  the  in- 
stallments due  can  be  collected  out  of  his  property. 

Where  there  is  an  absolute  agreement  on  the  part  of 
the  purchaser,  that,  if  payment  is  not  made  at  the  exact 
time  stipulated  therefor,  all  his  rights  thereunder  shall 
be  forfeited,  the  courts  of  California  will  enforce  the  con- 
tract as  it  finds  it.  The  hardship  of  any  case  will  not  jus- 
tify a  court  in  setting  aside  the  solemn  agreement  of  the 
parties. 

The  vendor  cannot  wait  until  all  the  installments  are 
due,  before  he  takes  action,  and  then  expect  the  courts  to 
enforce  the  contract  as  harshly  as  it  may  be  drawn  up 
between  the  parties.  If  he  waits  until  all  the  installments 
are  due,  he  must  tender  a  deed  of  the  land  to  the  pur- 
chaser and  demand  payment  of  the  installments  due,  if 
he  wishes  to  enforce  the  contract.  A  vendor  who  waits 
until  the  last  installment  of  the  purchase  price  is  due  can- 
not sue  the  vendee  for  the  unpaid  purchase  money  with- 
out proof  of  performance,  or  readiness  to  perform,  on  his 
part ;  and  the  tender  of  a  deed  before  suit  is  not  alone  suf- 
ficient, but  the  tender  must  be  kept  good  during  the  court 
proceedings;  the  deed  must  be  kept  in  readiness  to  de- 
liver, should  the  vendee  elect  to  pay  up  and  receive  the 
title,' 

The  vendor  may  sue  to  compel  the  purchaser  to  carry 
out  the  contract,  and  the  courts  will  give  damages  for 
failure  to  do  so.  The  damages  allowed  will  be  the  differ- 
ence in  the  value  of  the  land  at  the  time  of  the  suit  and 
the  contract  price.  The  reason  of  this  rule  of  damages 
is,  the  property  may  have  increased  in  value,  and  thus  the 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  223 

vendor  may  not  be  damaged  at  all,  or  may  even  be  bene- 
fited, when  he  gets  the  property  back. 

Section  171. — PURCHASER'S  REMEDY  IF  VENDOR  FAILS 
TO  FULFILL  CONTRACT. — It  may  happen  that  the  vendor, 
when  the  time  comes  when  he  should  make  a  deed  convey- 
ing the  title  to  the  purchaser,  is  unable  to  do  so.  He  may 
have  been  mistaken  as  to  his  own  title,  or  some  other  cir- 
cumstances may  render  it  impossible  for  the  vendor  to 
meet  his  obligation,  so  that  he  cannot  convey  a  title  to 
the  land  to  the  purchaser.  In  such  case,  the  law  is,  the 
purchaser  may  sue  the  vendor,  and  recover  back  the 
money  he  has  paid,  with  interest  thereon.  If  the  pur- 
chaser has  been  in  possession,  and  has  made  improve- 
ments on  the  land,  the  value  of  the  improvements  may 
also  be  recovered,  if  the  vendor  misrepresented  the  facts 
and  thereby  induced  the  purchaser  to  buy. 

Section  172. — FORM  OF  INSTALLMENT  AGREEMENT  FOR 
SALE  OF  REAL  ESTATE. — The  following  is  a  form  of  install- 
ment contract  for  the  sale  of  real  estate  :— 

This  Agreement,  made  and  entered  into  on  the 

day  of ,  in  the  year  of  our  Lord  one  thousand 

nine  hundred  and ,  between 

,  of  the  County  of 

,  State  of  California,  the  party 

of  the  first  part,  and , 

of  the  same  place,  the  party  of  the  second  part,  witness- 
eth: 

That  the  said  party  of  the  first  part,  in  consideration 
of  the  covenants  and  agreements  on  the  part  of  the  said 
party  of  the  second  part,  hereinafter  contained,  agrees  to 
sell  and  convey  unto  the  said  party  of  the  second  part, 
and  said  second  party  agrees  to  buy,  all  that  certain  lot 

and  parcel  of  land  situate  in  the  County  of 

,  State  of  California,  bounded  and  de- 
scribed as  follows,  to-wit : 

(Here  insert  description  of  land.) 
for  the  sum  of Dollars,  lawful  money 


224  BUSINESS  LAW  FOE  BUSINESS  MEN. 

of  the  United  States,  to  be  paid  in  the  manner  following, 

to-wit:  Dollars  on  the  execution  of 

this  contract,  the  receipt  whereof  is  hereby  acknowledged, 

and  the  remainder  in  monthly  installments  of 

Dollars,  payable  on  the  first  day  of  each 

and  every  month  thereafter,  until  the  whole  of  said  pur- 
chase price  shall  have  been  paid,  together  with  interest 

on  deferred  payments  at  the  rate  of per  cent 

per  annum  from  date  until  paid. 

And  the  said  party  of  the  second  part  agrees  to  pay 
all  State.  City,  and  County  taxes,  or  assessments  of  what- 
soever nature,  which  are  or  may  become  due  on  the  prem- 
ises above  described. 

In  the  event  of  a  failure  to  pay  the  said  installments, 
or  any  of  them,  by  the  party  of  the  second  part,  as  said 
installments  or  installment  shall  become  due,  the  said 
party  of  the  first  part  shall  be  released  from  all  obliga- 
tion in  law  or  equity  to  convey  said  property,  and  the 
said  party  of  the  second  part  shall  forfeit  all  rights 
thereto,  and  all  payments  theretofore  made  by  said  party 
of  the  second  part  shall  be  thereby  forfeited  to  the  party 
of  the  first  part. 

Time  is  the  essence  of  this  contract. 

And  the  said  party  of  the  first  part,  on  receiving  such 
payments,  at  the  time  and  in  the  manner  above  men- 
tioned, agrees  to  execute  and  deliver  to  the  said  party  of 
the  second  part,  or  to  his  assigns,  a  good  and  sufficient 
deed  conveying  the  title  to  said  property  herein  described, 
free  and  clear  of  incumbrances. 

And  it  is  understood  that  the  stipulations  aforesaid 
are  to  apply  to  and  bind  the  heirs,  executors,  adminis- 
trators, and  assigns  of  the  respective  parties  hereto,  and 
that  said  party  of  the  second  part  is  to  be  let  into  and 
have  immediate  possession  of  said  premises. 

IN  WITNESS  WHEREOF,  the  parties  hereto  have 
hereunto  set  their  hands  and  seals  the  day  and  year  first 
above  written. 

(Seal.) 

( Seal. ) 

(If  the  above  agreement  is  intended  to  be  recorded,  it 
must  be  acknowledged.) 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  225 

EMPLOYEE  AND  EMPLOYEE 

Section  173. — CONTRACT  OF  EMPLOYMENT. — The  con- 
tract of  employment  is  one  by  which  a  person,  called  an 
employer,  engages  another,  called  an  employee,  to  do 
.something  for  a  compensation.  In  such  a  contract  there 
is  always  either  an  express  agreement  or  an  implied 
agreement  to  pay  a  compensation  for  the  services  per- 
formed. If  the  agreement  between  the  employer  and  the 
employee  fixes  the  computation,  the  law  will  not  interfere 
with  it ;  but  if  there  is  a  contract  of  employment,  and  no 
rate  of  compensation  is  fixed  by  the  parties,  then  the  law 
will  imply  an  obligation  on  the  part  of  the  employer  to 
pay  what  the  services  performed  by  the  employee  were 
reasonably  worth. 

Section  174. — OBLIGATIONS  OF  THE  EMPLOYER. — It  may 
be  stated  generally  of  the  obligations  of  the  employer, 
which  he  assumes  towards  the  employee,  by  the  contract 
or  relation  which  they  mutually  enter  into,  that  by  the  law 
of  California  the  employer  is  bound  to  provide  a  safe  place 
and  safe  appliances  and  machinery  for  the  performance 
by  the  employee  of  his  work ;  that  the  employer  is  bound 
to  inform  the  employee  of  anything  within  his  own  knowl- 
edge which  renders  the  place  or  appliances  dangerous, 
or  which  increases  the  ordinary  risks  of  the  employment, 
and  which  knowledge  is  not  equally  open  to  ,the  observa- 
tion of  the  employee;  that  the  employer  is  bound  to  use 
reasonable  care  and  diligence  in  the  selection  of  compe- 
tent fellow-servants,  and  he  will  be  liable  to  an  employee 
for  injuries  sustained  by  reason  of  his  negligence  in  hir- 
ing incompetent  employees  to  work  with  him;  that  the 
employer  must  keep  in  safe  condition  the  premises  in 
which  his  employee  works,  and  must  use  ordinary  care 
in  the  inspection  and  repair  of  such  premises,  and  in  the 
inspection  and  repair  of  machinery  and  appliances  used 
by  him.  Also,  the  law  provides  that  the  employer  must 
indemnify  his  employee  for  all  that  he  necessarily  ex- 


226  BUSINESS  LAW  FOB  BUSINESS  MEN. 

pends  or  loses  in  direct  consequence  of  the  discharge  of 
his  duties  or  in  obedience  to  the  directions  of  the  em- 
ployer, provided  that  an  employer  is  not  bound  to  indem- 
nify his  employee  for  losses  suffered  by  the  latter  in  con- 
sequence of  the  ordinary  risks  of  the  business  in  which  he 
is  employed.  And  an  employer  must  in  all  cases  indem- 
nify his  employee  for  losses  caused  by  the  employer's 
want  of  ordinary  care,  provided  that  the  employee's  own 
negligence  must  not  contribute  to  his  own  injury.  It  is 
the  duty  of  the  employer  to  inform  his  employee  of  latent 
defects,  or  extraordinary  dangers  or  risks,  connected 
with  the  service,  of  which  the  employer  has  knowledge, 
but  which  are  unknown  to  the  employee.  If  the  employer 
does  not  inform  the  employee  of  such  defects  or  dangers, 
be  will  be  liable  for  damages  if  the  employee  is  injured. 
(Decided  by  the  Supreme  Court  of  California,  in  the  case 
of  Bone  vs.  Ophir  Silver  Mining  Co.,  which  decision  is 
printed  in  Volume  86  of  the  Pacific  Eeporter,  page  685.) 

Section  175. — OBLIGATIONS  OF  THE  EMPLOYEE. — The 
law  imposes  upon  the  employee  the  obligation  of  serving 
bis  employer  in  good  faith,  using  ordinary  care  and 
diligence,  and  all  the  skill  which  he  possesses,  in  serving 
his  employer's  interest  during  his  employment.  The  em- 
ployee must  substantially  comply  with  all  the  reasonabe 
directions  of  his  employer  concerning  the  service  on 
which  he  is  engaged,  except  where  it  is  impossible  or  un- 
lawful for  him  to  do  so.  Everything  which  the  employee 
acquires  by  virtue  of  the  employment  belongs  to  the  em- 
ployer, except  the  compensation  which  is  due  to  him  from 
the  employer.  An  employee  must,  on  demand,  render  to 
his  employer  just  accounts  of  all  his  transactions  in  the 
course  of  his  employment,  and  must  render  such  accounts 
as  often  as  may  be  reasonable.  An  employee  who  has  any 
business  to  transact  on  his  own  account,  similar  to  that 
intrusted  to  him  by  his  employer,  must  always  give  the 
latter  the  preference.  An  employee  who  is  guilty  of  gross 
negligence  in  the  performance  of  his  duties  is  liable  to  his 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  227 

employer  for  the  damages  thereby  caused  to  him ;  and  iu 
such  case  the  employer  is  only  liable  to  the  employee  for 
the  value  of  such  services  as  are  properly  rendered. 

Civil  Code,  Sections  1978,  1981,  1984, 1985,  1986, 
1988,  1990. 

Section  176. — TERMINATION  OF  EMPLOYMENT. — The 
employment  may  be  terminated  at  any  time  by  the  mutual 
agreement  of  the  parties.  The  employment  is  also  ter- 
minated by  the  expiration  of  the  term  contracted  for,  or 
by  the  extinction  of  its  subject,  or  by  the  death  of  the 
employee,  or  by  the  legal  incapacity  of  the  employee  to  act, 
as  in  the  case  where  the  employee  becomes  insane.  An 
employment  will  also  be  terminated  by  notice  of  the  death 
of  the  employer,  and  by  notice  of  his  legal  incapacity  to 
contract;  but  there  is  an  exception  to  this  rule  in  cases 
where  the  employee  has  an  interest  in  the  subject  of  the 
employment,  as  where,  by  the  terms  of  the  contract  of 
employment,  the  employee  is  to  have  a  part  ownership  of 
the  thing  upon  which  he  is  employed.  An  employment 
having  no  specified  term  may  be  ended  at  the  will  of 
either  party,  on  notice  to  the  other.  The  employer  may 
discharge  the  employee  for  any  wilful  breach  of  duty  by 
him  in  the  course  of  his  employment,  or  in  case  of  the 
habitual  neglect  of  his  duty  by  the  employee,  or  long-con- 
tinued incapacity  to  do  his  work;  and  the  employee  may 
quit  the  service  of  his  employer,  even  though  he  has  con- 
tracted for  a  specified  term,  where  the  employer  is  guilty 
of  any  wilful  or  permanent  breach  of  his  obligations  to 
the  employee,  as  where  the  employer  fails  to  provide  a 
safe  place  to  work  or  safe  appliances  or  competent  fellow- 
servants,  or  in  any  other  way  wilfully  fails  to  keep  the 
obligations  which  the  law  or  his  own  contract  enjoins 
upon  him  for  the  benefit  of  the  employee.  An  employee, 
dismissed  by  his  employer  for  good  cause,  is  not  entitled 
to  any  compensation  for  services  rendered  since  the  last 
contract.  An  employee  who  quits  the  service  of  the  em- 
day  upon  which  a  payment  became  due  to  him  under  the 


±28  BUSINESS  LAW  FOR  BUSINESS  MEN. 

ployer  for  good  cause  is  entitled  to  a  proportionate  pay: 
ment  of  the  compensation  which  he  would  have  received 
under  a  full  performance  of  the  contract,  as  compared 
with  the  portion  of  the  services  already  performed  by 
him. 

Civil  Code,  Sections  1996,  1997,  1999,  2000,  2001, 
2002,  2003. 

Section  177. — SANITARY  CONDITION  OF  WORKSHOPS.— 
Factories  and  workshops  must  be  kept  in  good  sanitary 
condition.  Where  dust,  filaments,  or  injurious  gases  are 
produced  or  generated,  exhaust  fans  or  blowery  must  be 
used,  with  pipes  and  hoods  extending  to  each  machine. 

Act  of  the  Legislature,  approved  February  22, 
1909. 

Section  178. — CONTRACT  FOR  PERSONAL,  SERVICES. — A 
contract  to  render  service,  other  than  a  contract  of  ap- 
prenticeship, cannot  be  enforced  against  the  employee 
beyond  the  term  of  five  years  from  the  commencement 
of  service  under  it;  but  if  the  employee  voluntarily  con- 
tinues his  service  under  it  beyond  that  time,  the  contract 
may  be  referred  to  as  affording  a  presumptive  measure 
of  compensation. 

Act  of  the  Legislature,  approved  May  25,  1919; 
in  effect  July  25,  1919. 

Section  179. — PAYMENT  OF  WAGES. — Sec.  1.  Whenever 
an  employer  discharges  an  employee,  the  wages  or  com- 
pensation for  labor  or  service  earned  and  unpaid  at  the 
time  of  such  discharge  shall  become  due  and  payable 
immediately.  Whenever  an  employee  not  having  a  writ- 
ten contract  for  a  definite  period  quits  or  resigns  his 
employment,  the  wages  or  compensation  shall  become  due 
and  payable  not  later  than  seventy-two  hours  thereafter, 
unless  such  employee  shall  have  given  seventy-two  hours 
previous  notice  of  his  intention  to  quit,  in  which  latter 
case  such  employee  shall  be  entitled  to  his  wages  or  com- 
pensation at  the  time  of  quitting. 


Section  177,  page  228,  "Business  Law  for  Business  Men"— FOUNDRY 
AND  METAL  SHOPS — The  owner,  employer  or  manager  of  every  foundry 
or  metal  shop  engaged  in  the  casting,  fabricating  or  working  over  in  any 
manner,  of  iron,  brass,  steel,  or  other  metal  or  compound,  and  where  five  or 
more  men  are  employed,  shall  establish  and  maintain,  for  the  use  of  the  em- 
ployees, wash  bowls,  sinks  or  other  appliances,  connected  with  running  water, 
and  also  a  water  closet  connected  with  running  water.  The  room  where  the 
wash  bowls  are  installed,  and  the  water  closet  shall  be  kept  properly  venti- 
lated and  protected,  so  far  as  may  be  reasonably  practicable,  from  the  dust 
and  fumes  of  the  foundry  or  metal  shop. 

Whoever  fails  to  comply  with  the  provisions  of  this  act  shall  be  deemed 
guilty  of  a  misdemeanor  and  shall  be  fined  not  more  than  one  hundred  dollars 
for  each  offense. 

Act  of  the  Legislature  of  California,  approved  May  24,  1921;  in  effect 
on  and  after  January  1,  1922. 


BUSINESS  CONTEACTS  AND  LEGAL  OBLIGATIONS.  229 

(a)  Wages  Due  Semi-monthly. — Sec.  2.    All  wages 
or  compensation  other  than  those  mentioned  in  section 
one  of  this  act  earned  by  any  person  in  any  employment 
not  exempt  by  law,  shall  become  due  and  payable  semi- 
monthly or  twice  during  each  calendar  month,  on  days  to 
be  designated  in  advance  by  the  employer  as  the  regular 
pay  days;  provided,  however,  that  services  rendered  be- 
tween the  first  and  fifteenth  days,  inclusive,  of  any  calen- 
dar month  shall  be  paid  for  between  the  sixteenth  and 
the  twenty-sixth  day  of  the  month  during  which  services 
were  rendered,  and  for  all  services  rendered  between  the 
sixteenth  and  the  last  day,  inclusive,  of  any  calendar 
month,  said  services  shall  be  paid  for  between  the  first 
and  tenth  day  of  the  following  month ;  provided,  however, 
that  in  agricultural,  vitlcultural  and  horticultural  pur- 
suits, in  stock  or  poultry  raising,  and  in  household  domes- 
tic service,  and  when  the  employees  in  the  said  employ- 
ments are  boarded  and  lodged  by  the  employer,  the  wages 
or  compensation  due  any  employee  remaining  in  such 
employment  shall  become  due  and  payable  monthly  or 
once  in  each  calendar  month,  on  a  day  designated  in  ad- 
vance as  the  regular  pay  day,  but  no  two  successive  pay 
days  to  be  more  than  thirty-one  days  apart,  and  the  pay- 
ment or  settlement  shall  include  all  amounts  due  for  labor 
or  service  up  to  the  regular  pay  day. 

(b)  What  Wages  Shall  Include. — Sec.  3.    The  wages 
or  compensation  subject  to  the  provisions  of  this  act  shall 
include  all  amounts  for  labor  or  service  performed  by 
employees  of  every  description,  whether  the  amount  is 
fixed  or  ascertained  by  the  standard  of  time,  task,  piece, 
or  other  method  of  calculating  the  same,  or  whether  the 
labor  or  service  is  performed  under  contract,  subcontract, 
partnership,  subpartnership,  station  plan,  or  other  agree- 
ment for  the  performance  of  labor  or  service;  provided, 
that  the  labor  or  service  to  be  paid  for  is  performed  per- 
sonally by  the  person  demanding  payment.    Nothing  con- 
tained in  this  act  shall  in  any  way  limit  or  prohibit  the 


230  BUSINESS  LAW  FOB  BUSINESS  MEN. 

payment  of  wages  or  compensation  at  more  frequent  in- 
tervals, or  in  greater  amounts,  or  in  full  when  or  before 
due. 

(c)  Notice  of  Time  and  Place  of  Payment. — Sec.  4. 
Every  employer  shall  post  and  keep  posted  conspicuously 
at  the  place  of  work,  if  practicable,  or  otherwise  where  it 
can  be  seen  as  employees  come  or  go  to  their  place  of 
work,  or  at  the  office  or  nearest  agency  for  payment  kept 
by  the  employer,  a  notice  specifying  the  regular  pay  days 
and  the  time  and  place  of  payment,  also  any  changes  in 
those  regards  occurring  from  time  to  time.    Every  em- 
ployee who  is  discharged  shall  be  paid  at  the  place  of  dis- 
charge, and  every  employee  who  quits  or  resigns  shall  be 
paid  at  the  office  or  agency  of  the  employer  in  the  county 
or  city  and  county  where  such  employee  has  been  per- 
forming the  labor  or  service  for  the  employer.    In  the 
happening  of  any  strike,  the  unpaid  wages  or  compensa- 
tion earned  by  such  striking  employees  shall  become  due 
and  payable  on  the  employer 's  next  regular  pay  day,  and 
the  payment  or  settlement  shall  include  all  amounts  due 
such  striking  employees  without  abatement  or  reduction, 
and  the  employer  shall  return  to  each  such  striking  em- 
ployee any  deposit  or  money  or  other  guaranty  required 
by  him  from  such  employee  for  the  faithful  performance 
of  the  duties  of  the  employment.    Any  violation  of  the 
provisions  of  this  section  shall  be  punishable  as  for  a 
misdemeanor,  and  any  failure  to  post  any  notice  as  in 
this    section   prescribed    shall   be  deemed   prima   facie 
evidence  of  a  violation  of  this  act. 

(d)  Failure,  of  Employer  to  Pay. — Sec.  5.     In  the 
event  that  an  employer  shall  wilfully  fail  to  pay,  without 
abatement  or  reduction,  any  wages  or  compensation  of 
any  employee  who  is  discharged  or  who  resigns  or  quits, 
as  in  section  one  of  this  act  provided,  then  as  a  penalty 
for  such  nonpayment  the  wages  or  compensation  of  such 
employees  shall  continue  from  the  due  date  thereof  at  the 
same  rate  until  paid,  or  until  an  action  therefor  shall  be 
commenced;  provided,  that  in  no  case  shall  such  wages 


Section  179,  page  228,  "Business  Law  for  Business  Men" — On  page  231 
add  the  following  to  section  179,  after  sub-division  (e) : 

(f)  There  shall  not  be  deducted  from  the  wages  of  an  employee,  on  ac- 
count of  the  employee's  coming  late  to  work,  a  sum  in  excess  of  the  propor- 
tionate wage  which  weuld  have  been  earned  during  the  time  actually  lost; 
provided,  that  for  a  loss  of  time  less  than  thirty  minutes  a  half  hour's  wage 
may  be  deducted. 

Act  of  the  Legislature  of  California,  approved  June  3,  1921;  in  effect 
August  3,  1921. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  231 

continue  for  more  than  thirty  days;  and  provided,  fur- 
ther, that  no  such  employee  who  secretes  or  absents  him- 
self to  avoid  payment  to  him,  or  who  refuses  to  receive 
the  payment  when  fully  tendered  to  him,  including  any 
penalty  then  accrued  under  the  provisions  of  this  sec- 
tion, shall  be  entitled  to  any  benefit  under  this  act  for 
such  time  as  he  so  avoids  payments. 

(e)     Refusal  of  Employer  to  Pay. — Sec.  6.    Any  per- 
son, firm,  association,  or  corporation,  or  agent,  manager, 
superintendent,  or  officer  thereof,  who  having  the  ability 
to  pay,  shall  wilfully  refuse  to  pay  the  wages  due  and 
payable  when  demanded,  as  herein  provided,  or  falsely 
deny  the  amount  or  validity  thereof,  or  that  the  same  is 
due,  with  intent  to  secure  for  himself,  his  employer  or 
ther  person,  any  discount  upon  such  indebtedness,  or 
<th  intent  to  annoy,  harass,  or  oppress,  or  hinder,  or 
lay,  or  defraud,  the  person  to  whom  such  indebtedness 
due,  shall,  in  addition  to  any  other  penalty  imposed 
pon  him  by  this  act,  be  guilty  of  a  misdemeanor. 

Act  of  the  Legislature,  approved  May  6,  1919 ; 
in  effect  July  22,  1919. 

Section  180. — MINORS — HOURS  OF  LABOR. — No  minor 
under  the  age  of  eighteen  years  shall  be  employed  in 
laboring  in  any  manufacturing,  mechanical,  or  mercantile 
establishment  or  other  place  of  labor,  more  than  eight 
hours  in  one  day  of  twenty-four  hours,  or  more  than 
forty-eight  hours  in  one  week,  except  when  it  is  necessary 
to  make  repairs  to  prevent  interruption  of  the  ordinary 
running  of  the  machinery,  or  when  a  different  apportion- 
ment of  the  hours  of  labor  is  made  for  the  sole  purpose 
of  making  a  shorter  day's  work  for  one  day  of  the  week, 
nor  before  the  hour  of  five  o'clock  in  the  morning,  nor 
after  the  hour  of  ten  o'clock  in  the  evening. 

Act  of  the  Legislature,  approved  May  10,  1919 ; 
in  effect  July  22, 1919. 

Section  181. — CHILD  LABOR  LAW. — A  law  was  passed 
in  1919  to  regulate  child  labor  in  California. 


232  BUSINESS  LAW  FOE  BUSINESS  MEN. 

(a)  Children  Under  Sixteen. — No  minor  under  the 
age  of  sixteen  years  shall  be  employed,  permitted  or  suf- 
fered to  work  in  or  in  connection  with  any  mercantile 
establishment,  manufacturing  establishment,  mechanical 
establishment,  workshop,  office,  laundry,  place  of  amuse- 
ment, restaurant,  hotel,  apartment  house,  or  in  the  dis- 
tribution or  transmission  of  merchandise  or  messages,  or 
in  any  other  place  of  labor  at  any  time  except  as  may  be 
permitted  under  school  certificates. 

(b)  Work  Defined. — Work  shall  be  deemed  to  be 
done  for  a  manufacturing  establishment  within  the  mean- 
ing of  this  act,  whenever  it  is  done  at  any  place  upon  the 
work  of  a  manufacturing  establishment,  or  upon  any  of 
the  materials  entering  into  the  products  of  a  manufactur- 
ing establishment,  whether  under  contract  or  arrange- 
ment with  any  person  in  charge  of  or  connected  with  a 
manufacturing     establishment     directly     or    indirectly 
through  the  instrumentality  of  one  or  more  contractors 
or  other  third  persons. 

(c)  Messenger  Service. — No  girl  under  the  age  of 
eighteen  years  and  no  boy  under  the  age  of  sixteen  years 
shall  be  employed,  permitted  or  suffered  to  work  as  a 
messenger  for  any  telegraph,   telephone  or  messenger 
company,  or  for  the  United  States  government  or  any  of 
its  departments  while  operating  a  telegraph,  telephone 
or  messenger  service,  in  the  distribution,  transmission 
or  delivery  of  goods  or  messages  in  towns  of  more  than 
fifteen  thousand  inhabitants,  nor  shall  any  boy  under  the 
age  of  eighteen  years  be  employed,  permitted  or  suffered 
to  engage  in  any  of  the  work  last  mentioned  before  the 
hour  of  six  o'clock  in  the  morning  or  after  the  hour  of 
nine  o'clock  in  the  evening. 

(d)  Street  Trades. — No  boy  under  ten  years  of  age, 
nor  girl  under  eighteen  years  of  age,  shall  be  employed, 
permitted  or  suffered  to  work  at  any  time  in  or  in  connec- 
tion with  the  street  occupation  of  peddling,  bootblacking, 
the  sale  or  distribution  of  newspapers,  magazines,  peri- 
odicals or  circulars  nor  in  any  other  occupation  pursued 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  233 

in  any  street  or  public  place;  provided,  however,  that 
nothing  in  this  section  shall  be  construed  to  apply  to 
cities  whose  population  is  less  than  twenty-three  thou- 
sand according  to  the  last  federal  census. 

(e)  Prohibited  Occupations. — No  minor  under  the 
age  of  sixteen  years  shall  be  employed,  permitted  or  suf- 
fered to  work  in  any  capacity  at  any  of  the  following 
occupations  or  in  any  of  the  following  positions,  to-wit: 
(1)  Adjusting  any  belt  to  any  machinery,  or  sewing  or 
lacing  machine  belts  in  any  workshop  or  factory,  or  oil- 
ing, wiping  or  cleaning  machinery,  or  assisting  therein, 
or  operating  or  assisting  in  operating  any  of  the  follow- 
ing machines:  (a)  Circular  or  baud  saws;  (b)  wood  shap- 
ers;  (c}  wood  jointers;  (d)  planers;  (e)  sandpaper  or 
wood-polishing  machinery;  (/)  wood-turning  or  boring 
machinery;  (g]  picker  machines  or  machines  used  in  pick- 
ing wool,  cotton,  hair  or  any  other  material;  (Ji)  carding 
machines;  (i)  paper-lace  machines;  (j)  leather-burnish- 
ing machines ;  (Jc)  printing  presses  of  all  kinds;  (I)  boring 
or  drill  presses;  (m)  stamping  machines  used  in  sheet- 
metal  and  tinware  or  in  paper  and  leather  manufactur- 
ing, or  in  washer  and  nut  factories;  (n)  metal  or  paper- 
cutting  machines;  (o)  corner-staying  machines  in  paper 
box  factories;  (p)  corrugating  rolls,  such  as  are  used  in 
corrugated  paper,  roofing  or  washboard  factories;  (q) 
steam  boilers;  (r)  dough  brakes  or  cracker  machinery  of 
any  description;  (#)  wire  or  iron  straightening  or  draw- 
ing machinery;  (/)  rolling  mill  machinery;  (u)  power 
punches  or  shears;  (v)  washing,  grinding  or  mixing  ma- 
chinery; (zc)  calendar  rolls  in  paper  and  rubber  manu- 
facturing; (x)  laundering  machinery;  or  in  proximity  to 
any  hazardous  or  unguarded  belts,  machinery  or  gear- 
ing; or  (2)  upon  any  railroad,  whether  steam,  electric  or 
hydraulic;  or  (3)  upon  any  vessel  or  boat  engaged  in 
navigation  or  commerce  within  the  jurisdiction  of  this 
state;  or  (4)  in,  about,  or  in  connection  with  any  pro- 
cesses in  which  dangerous  or  poisonous  acids  are  used; 
or  (5)  in  the  manufacture  or  packing  of  paints,  colors, 


234  BUSINESS  LAW  FOR  BUSINESS  MEN. 

white  or  red  lead;  or  (6)  in  soldering;  or  (7)  in  occupa- 
tions causing  dust  in  injurious  quantities;  or  (8)  in  the 
manufacture  or  use  of  dangerous  or  poisonous  dyes;  or 
(9)  in  the  manufacture  or  preparation  of  compositions 
with  dangerous  or  poisonous  gases;  or  (10)  in  the  manu- 
facture or  use  of  compositions  of  lye  in  which  the  quan- 
tity thereof  is  injurious  to  health;  or  (11)  on  scaffold- 
ing; or  (12)  in  heavy  work  in  the  building  trades ;  or  (13) 
in  any  tunnel  or  excavation;  or  (14)  in,  about  or  in  con- 
nection with  any  mine,  coal  breaker,  coke  oven,  or 
quarry:  or  (15)  in  assorting,  manufacturing  or  packing 
tobacco;  or  (16)  in  operating  any  automobile,  motor  car 
or  truck;  or  (17)  in  a  bowling  alley;  or  (18)  in  a  pool  or 
billiard  room;  or  (19)  in  any  other  occupation  dangerous 
to  the  life  or  limb,  or  injurious  to  the  health  or  morals  of 
such  child ;  provided,  however,  that  the  provisions  of  this 
section  shall  not  apply  to  the  courses  of  training  in  voca- 
tional or  manual  training  schools  or  in  state  institutions. 

(f)  Bureau  of  Labor  Statistics  to  Determine  Whether 
Business  Is  Prohibited. — The  bureau   of  labor  statis- 
tics may,  from  time  to  time,  after  a  hearing  duly  had, 
determine  whether  or  not  any  particular  trade,  process 
of  manufacture  or  occupation,  in  which  the  employment 
of  children  under  the  age  of  sixteen  years  is  not  already 
forbidden  by  law,  or  any  particular  method  of  carrying 
on  such  trade,  process  of  manufacture  or  occupation,  is 
sufficiently  dangerous  to  the  lives  or  limbs  or  injurious  to 
the  health  or  morals  of  children  under  sixteen  years  of 
age  to  justify  their  exclusion  therefrom.    No  child  under 
sixteen  years  of  age  shall  be  employed,  permitted  or  suf- 
fered to  work  in  any  occupation  thus  determined  to  be 
dangerous  or  injurious  to  such  children.    There  shall  be 
a  right  of  appeal  to  the  superior  court  from  any  such 
determination. 

(g)  Agricultural  Labor. — Nothing  in  this  act  shall 
be  construed  to  prohibit  the  employment  of  minors  six- 
teen years  of  age  or  over  at  agricultural,  horticultural, 
or  viticultural,  or  domestic  labor  for  more  than  eight 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  235 

hours  in  one  day  or  more  than  forty-eight  hours  in  one 
week.  Nor  shall  anything  in  this  act  be  construed  to  pro- 
hibit the  employment  of  minors  at  agricultural,  horticul- 
tural, or  viticultural,  or  domestic  labor  during  the  time 
the  public  schools  are  not  in  session,  or  during  other  than 
school  hours.  For  the  purpose  of  this  act,  horticultural 
shall  be  understood  to  include  the  curing  and  drying,  but 
not  the  canning,  of  all  varieties  of  fruit.  Nor  shall  any- 
thing in  this  act  be  construed  to  prohibit  any  minor  be- 
tween the  ages  of  fifteen  and  eighteen  years,  who  is  by  any 
statute  or  statutes  of  the  State  of  California,  now  or  here- 
after in  force,  permitted  to  be.  employed  as  an  actor,  or 
actress,  or  performer  in  a  theater  or  other  place  of  amuse- 
ment, previous  to  the  hour  of  ten  o'clock  p.  m.,  in  the 
presentation  of  a  performance,  play  or  drama,  continu- 
ing from  an  earlier  hour  till  after  the  hour  of  ten  o  'clock 
p.  m.,  from  performing  his  or  her  part  in  such  presenta- 
tion as  such  employee  between  the  hours  of  ten  and  twelve 
o  'clock  p.  m. ;  provided,  the  written  consent  of  the  com- 
missioner of  the  bureau  of  labor  statistics  is  first  ob- 
tained. Nor  shall  anything  in  this  act  prevent,  or  be 
construed  to  prohibit,  the  employment  of  any  minor, 
whether  resident  or  nonresident,  in  the  presentation  of  a 
drama,  play,  performance,  concert  or  entertainment,  with 
the  written  consent  of  the  commissioner  of  the  bureau  of 
labor  statistics,  but  no  such  consent  shall  be  given  unless 
the  officer  giving  it  is  satisfied  that  the  environment  in 
which  the  drama,  play,  performance,  concert  or  enter- 
tainment is  to  be  produced  is  a  proper  environment  for 
the  minor,  and  that  the  conditions  of  such  employment 
are  not  detrimental  to  the  health  of  such  minor,  and  that 
the  minor's  education  will  not  be  neglected  or  hampered 
by  its  participation  in  such  drama,  play,  performance, 
concert  or  entertainment,  and  the  commissioner  may  re- 
quire the  person  charged  with  the  issuance  of  age  and 
schooling  certificates  to  make  the  necessary  investigation 
into  such  conditions ;  and  every  such  written  consent  shall 
specify  the  name  and  age  of  the  minor  together  with  such 


236  BUSINESS  LAW  FOE  BUSINESS  MEN. 

other  facts  as  may  be  necessary  for  the  proper  identifica- 
tion of  such  minor,  and  the  date  when,  and  the  theaters 
or  other  places  of  amusement  in  which  such  drama,  play, 
performance,  concert  or  entertainment  is  to  be  produced, 
and  shall  specify  the  drama,  play,  performance,  concert, 
or  entertainment  in  which  the  minor  is  permitted  to  par- 
ticipate, and  every  such  consent  shall  be  revocable  at  the 
will  of  the  officer  giving  it.  Dramas  and  plays  shall  in- 
clude the  production  of  motion  picture  plays. 

(h)  Employer  to  Keep  Register. — Every  person, 
firm,  corporation  or  agent,  or  officer  of  a  firm  or  corpora- 
tion, employing  either  directly,  or  indirectly  through  the 
instrumentality  of  one  or  more  contractors  or  other  third 
persons,  minors  under  the  age  of  eighteen  years,  shall 
keep  a  separate  register  containing  the  nam«s,  ages  and 
addresses  of  such  minor  employees  and  shall  post  and 
keep  posted  in  a  conspicuous  place  in  every  room  where 
such  minors  are  employed,  a  written  or  printed  notice 
stating  the  hours  per  day  for  each  day  of  the  week  re- 
quired of  such  minors,  and  shall  keep  on  file  all  permits 
and  certificates  either  to  work  or  to  employ.  Such  records 
and  files  shall  be  open  at  all  times  to  the  inspection  of  the 
school  attendance  and  probation  officers,  the  state  board 
of  education  and  the  officers  of  the  state  bureau  of  labor 
statistics. 

All  such  certificates  and  permits  to  work  or  to  employ 
shall  be  returned  to  the  authority  issuing  the  same  with- 
in five  days  after  the  minor  quits  his  employment.  Such 
certificate  or  permit  shall  be  subject  to  cancellation  at 
any  time  by  such  commissioner  of  the  bureau  of  labor  sta- 
tistics, or  by  the  authority  issuing  the  same,  whenever 
such  commissioner  or  such  issuing  authority  shall  find 
that  the  conditions  for  the  legal  issuance  of  such  certif- 
icate or  permit  no  longer  exist  or  have  never  existed. 

(i)  Report  by  Authority  Issuing  Permits. — At  least 
once  in  every  six  months,  to-wit,  on  or  before  January 
tenth  and  on  or  before  July  tenth  of  each  year,  the  au- 
thority issuing  all  permits  and  certificates  either  to  work 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  237 

or  to  employ,  shall  file  a  full  written  report  of  the  same, 
stating  the  names,  ages  and  addresses  of  the  minors 
under  sixteen  years  of  age  affected  thereby,  with  the 
state  bureau  of  labor  statistics  and  the  state  board  of 
education. 

(j)  Penalty. — Any  person,  firm,  corporation,  agent, 
or  officer  of  a  firm  or  corporation,  employing  either  di- 
rectly or  indirectly  through  the  instrumentaliy  of  one  or 
more  contractors  or  other  third  persons,  or  any  parent 
or  guardian  of  a  minor  affected  by  this  act,  who  violates 
or  omits  to  comply  with  any  of  the  provisions  hereof,  or 
Avho  employs  or  suffers  or  permits  any  minor  to  be  em- 
ployed in  violation  thereof,  is  guilty  of  a  misdemeanor, 
and  shall,  upon  conviction  thereof,  be  punished  by  a  fine 
of  not  less  than  fifty  dollars,  nor  more  than  two  hundred 
dollars,  by  imprisonment  in  the  county  jail  for  not  more 
than  sixty  days,  or  by  both  such  fine  and  imprisonment 
for  each  and  every  offense. 

A  failure  to  produce  any  permit  or  certificate  either 
to  work  or  to  employ  or  to  post  any  notice  required  by 
this  act  shall  be  prima  facie  evidence  of  the  illegal  em- 
ployment of  any  minor  whose  permit  or  certificate  is  not 
so  produced  or  whose  name  is  not  so  posted. 

Act  of  the  Legislature,  approved  May  10,  1919 ; 
in  effect  July  22,  1919. 

Section  182. — AGE  AND  SCHOOLING  CEETIFICATES. — The 
superintendent  of  schools  of  any  city,  or  of  any  city  and 
county  or  of  any  county  (over  such  portions  of  any  such 
county  as  are  not  within  the  jurisdiction  of  any  superin- 
tendent of  city  schools)  shall  have  authority  to  issue  to 
any  employer  a  permit  to  employ  any  minor  of  the  age 
of  fourteen  years  who  holds  a  diploma  of  graduation 
from  the  prescribed  elementary  school  course ;  provided, 
that  such  permit  shall  be  issued  only  when  the  prospec- 
tive employer,  or  the  parent  or  guardian  of  the  minor, 
shall  present  to  the  superintendent  asked  to  issue  such 
permit,  (1)  a  physician's  certificate  or  other  evidence 


238  BUSINESS  LAW  FOR  BUSINESS  MEN. 

acceptable  to  such  authority,  that  such  minor  is  physi- 
cally fitted  for  the  labor  contemplated;  and  (2)  a  sworn 
statement  by  the  parent,  foster-parent  or  guardian  of 
such  minor  that  such  minor  is  past  the  age  of  fourteen 
years,  and  that  the  parent  or  parents,  or  foster-parent 
or  foster-parents,  or  guardian  of  such  minor  is  inca- 
pacitated for  labor  through  illness  or  injury,  or  that 
through  the  death  or  desertion  of  the  father  of  such 
minor,  the  family  is  in  need  of  the  earnings  of  such  minor, 
and  that  sufficient  aid  cannot  be  secured  in  any  other 
manner.  The  person  authorized  to  issue  such  permit  in 
granting  the  same  shall  make  a  signed  statement  that  he, 
or  a  competent  person  designated  by  him  for  this  pur- 
pose, has  carefully  investigated  the  conditions  under 
which  the  application  for  such  permit  has  been  asked, 
and  has  found  that  in  his  judgment  the  earning  of  such 
minor  are  necessary  for  such  family  to  support  such 
minor,  and  that  in  his  judgment  sufficient  aid  cannot  be 
secured  in  any  other  manner.  No  permit  shall  be  issued 
except  upon  a  written  statement  from  a  prospective  em- 
ployer that  work  is  waiting  for  such  minor  and  describ- 
ing the  nature  of  such  work.  Such  permit  sjiall  specify 
the  name  and  address  of  the  employer,  the  name,  ad- 
dress and  age  of  the  minor,  the  kind  of  work  for  which 
the  permit  is  issued  and  the  date  on  which  the  permit 
shall  expire,  which  in  no  case  shall  be  longer  than  six 
months  from  the  date  of  issuance  of  the  permit.  Such 
permit  shall  be  kept  on  file  by  the  employer  during  the 
term  of  such  employment  and  all  unexpired  permits  shall 
be  returned  by  the  employer  to  the  authority  issuing  the 
same  within  five  days  after  the  termination  of  such  em- 
ployment. Such  permit  shall  be  subject  to  cancellation 
at  any  time  by  the  superintendent  of  public  instruction, 
or  by  the  commissioner  of  the  bureau  of  labor  statistics 
or  by  the  person  issuing  the  same,  whenever  any  such 
officer  or  person  shall  find  that  the  conditions  for  the 
legal  issuance  of  such  permit  do  not  exist.  Such  permit 
shall  be  always  open  to  inspection  by  attendance  and 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  239 

probation  officers,  by  the  officers  of  the  state  bureau  of 
labor  statistics  and  by  officers  of  the  superintendent  of 
public  instruction,  and  of  the  state  board  of  education. 

Section  183. — VACATION  PERMITS  FOR  MINORS  BETWEEN 
TWELVE  AND  FIFTEEN. — Any  minor  over  the  age  of  twelve 
years  and  under  the  age  of  fifteen  years  who  holds  a 
vacation  permit  may  be  employed  on  the  regular  weekly 
school  holidays  and  during  the  regular  vacation  of  the 
public  schools  of  the  school  district,  city,  or  city  and  coun- 
ty, in  which  the  place  of  employment  is  situated.  Vaca- 
tion permits  shall  be  signed  by  the  principal  of  the  school 
or  secretary  of  the  board  of  school  trustees  or  board  of 
education  having  control  of  the  school  which  such  minor 
is  attending,  or  has  attended  during  the  term  next  pre- 
ceding any  such  vacation.  Such  permit  shall  contain  the 
name  and  age  of  the  minor  to  whom  it  is  issued,  and  when 
issued  for  the  regular  vacation,  the  date  of  the  termina- 
tion of  the  vacation  for  which  it  is  issued,  and  in  any  case 
shall  be  kept  on  file  by  the  employer  during  the  period 
of  employment,  and  at  the  termination  of  such  employ- 
ment shall  be  returned  to  the  minor  to  whom  it  was 
issued. 

Section  184. — AGE  AND  SCHOOLING  CERTIFICATE  FOR 
MINORS  OVER  FIFTEEN. — No  minor  of  the  age  of  fifteen 
years  shal  be  employed,  permitted  or  suffered  to  work 
during  the  hours  the  public  schools  are  in  session,  unless 
such  minor  is  provided  with  an  age  and  schooling  certif- 
icate as  herein  provided. 

An  age  and  schooling  certificate  shall  be  approved 
only  by  the  superintendent  of  schools  of  the  county,  city 
or  city  and  county,  or  by  a  person  authorized  by  him  in 
writing,  and  each  application  for  an  age  and  schooling 
certificate  must  be  acted  upon  within  three  days  after 
such  application  has  been  duly  filed  with  the  person  legal- 
ly authorized  to  issue  such  age  and  schooling  certificate. 
The  person  authorized  to  issue  age  and  schooling  certif- 


240  BUSINESS  LAW  FOE  BUSINESS  MEN. 

icates  shall  not  issue  such  certificates  until  the  minor  in 
question,  accompanied  by  its  parent  or  guardian,  has 
personally  made  application  to  him  therefor,  and  until 
he  has  received,  examined,  approved  and  filed  the  follow- 
ing papers  duly  executed :  (1)  The  school  record  of  such 
minor,  giving  age,  grade  and  attendance  for  the  current 
term,  duly  signed  by  the  principal  or  teacher.  (2)  Evi- 
dence of  age  such  as  the  school  enrollment  record,  or  a 
certificate  of  birth,  or  a  certificate  of  baptism  duly  attest- 
ed, or  a  passport,  or  affidavit  of  the  parent,  guardian  or 
custodian  of  such  minor,  such  as  shall  convince  such  of- 
ficer that  the  minor  is  fifteen  years  of  age  or  upwards. 
(3)  The  written  statement  of  the  person,  firm  or  corpora- 
tion in  whose  service  the  minor  is  about  to  enter,  that  he 
intends  to  employ  the  minor,  which  statement  shall  give 
the  nature  of  the  occupation  for  which  the  child  is  to  be 
employed.  (4)  A  certificate  signed  by  a  physician  ap- 
pointed by  the  school  board,  or  other  public  medical  of- 
ficer, stating  that  such  minor  has  been  examined  by  him, 
and,  in  his  opinion,  has  reached  the  normal  development 
of  a  minor  of  its  age  and  is  in  sufficiently  sound  health 
and  physically  able  to  be  employed  in  the  work  which  it 
intends  to  do;  provided,  however,  that  no  fee  shall  be 
charged  the  minor  for  such  physician's  certificate. 

Act  of  the  Legislature,  approved  May  10,  1919; 
in  effect  July  22,  1919. 

Section  185. — HOURS  OF  LABOR  OF  WOMEN  IN  CALI- 
i OHXTA. — No  female  shall  be  employed  in  any  manufac- 
turing, mechanical  or  mercantile  establishment,  laundry, 
hotel,  public  lodging  house,  apartment  house,  hospital, 
place  of  amusement,  or  restaurant,  or  telegraph  or  tele- 
phone establishment  or  office,  or  in  the  operation  of  ele- 
vators in  office  buildings  or  by  any  express  or  transporta- 
tion company  in  this  state  more  than  eight  hours  during 
any  one  day  of  twenty-four  hours  or  more  than  forty- 
eight  hours  in  one  week.  It  shall  be  unlawful  for  any 
employer  of  labor  to  employ,  cause  to  be  employed  or 


Section  185,  page  240,  "Business  Laws  for  Business  Men" — LIFTING 
HEAVY  WEIGHTS— After  section  185  add  a  new  sub-division,  as  follows: 

(a)  Boxes,  baskets  or  other  receptacles  which  with  their  contents  weigh 
seventy-five  pounds  or  over  and  which  are  to  be  moved  by  female  employees 
in  any  mill,  workshop,  packing,  canning  or  mercantile  establishment,  shall  be 
equipped  with  pulleys,  casters  or  other  contrivances  connected  with  or  upor> 
which  such  boxes  or  other  receptacles  are  placed  so  that  they  can  be  moved 
easily  from  place  to  place  in  such  establishments. 

No  female  employee  shall  be  requested  or  permitted  to  lift  any  box,  bas- 
ket, bundle,  or  other  receptacle  or  container  which  with  its  contents  weighs 
seventy-five  pounds  or  over.  Whoever  violates  the  provision  of  this  act  shall 
be  deemed  guilty  of  a  misdemeanor  and  be  punished  by  a  fine  not  exceeding 
fifty  dollars  for  every  day  during  which  there  shall  be  a  failure  to  equip  or 
provide  such  boxes,  baskets  or  other  receptacles  with  some  one  of  the  appli- 
ances specified  in  section  one  of  this  act. 

Act  of  the  Legislature  of  California,  approved  June  3,  1921;  in  effect 
August  3,  1921. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  241 

permit  any  female  employee  to  labor  any  number  of 
hours  whatever,  with  knowledge  that  such  female  has 
heretofore  been  employed  within  the  same  date  and  day 
of  twenty-four  hours  in  any  establishment  and  by  any 
previous  employer,  for  a  period  of  time  that  will,  com- 
bined with  the  period  of  time  of  employment  by  a  previ- 
ous employer  exceed  eight  hours;  provided,  that  this  shall 
not  prevent  the  employment  of  any  female  in  more  than 
one  establishment  where  the  total  number  of  hours 
worked  by  said  employee  does  not  exceed  eight  hours  in 
any  one  day  of  twenty-four  hours.  If  any  female  shall 
be  employed  in  more  than  one  such  place,  the  total  num- 
ber of  hours  of  such  employment  shall  not  exceed  eight 
hours  during  any  one  day  of  twenty-four  hours  or  forty- 
eight  hours  in  one  week.  The  hours  of  work  may  be  so 
arranged  as  to  permit  the  employment  of  females  at  any 
time  so  that  they  shall  not  work  more  than  eight  hours 
during  the  twenty-four  hours  of  one  day,  or  forty-eight 
hours  during  any  one  week;  provided,  further,  that  the 
provisions  of  this  section  in  relation  to  hours  of  employ- 
ment shall  not  apply  to  or  affect  graduate  nurses  in  hos- 
pitals, nor  the  harvesting,  curing,  canning  or  drying  of 
any  variety  of  perishable  fruit,  fish  or  vegetable  during 
such  periods  as  may  be  necessary  to  harvest,  cure,  can  or 
dry  said  fruit,  fish  or  vegetable  in  order  to  save  the  same 
from  spoiling. 

Act  of  the  Legislature,  approved  May  10,  1919 ; 
in  effect  July  22,  1919. 

Section  186.— -FORCING  EMPLOYEES  TO  PATRONIZE  EM- 
PLOYER.— It  is  unlawful  for  any  employer  of  labor,  or  any 
ollicer,  agent  or  employee  of  any  employer  of  labor  to 
make,  adopt  or  enforce  any  rule  or  regulation  compelling 
or  coercing  any  employee  to  patronize  said  employer,  or 
any  other  person,  firm  or  corporation,  in  the  purchase 
of  anything  of  value;  provided,  lioivevcr,  that  nothing 
herein  shall  be  interpreted  as  prohibiting  any  employer 
of  labor  from  prescribing  the  weight,  color,  .\jnality,  tex- 


242  BUSINESS  LAW  FOR  BUSINESS  MEN. 

lure,  style,  form  and  make  of  uniforms  required  to  be 
worn  by  their  employees. 

Any  person,  whether  as  an  individual,  or  as  an  agent 
or  employee  of  a  firm,  or  as  an  officer,  agent  or  employee 
of  a  corporation,  who  shall  violate  any  of  the  provisions 
of  this  act,  shall  be  guilty  of  a  misdemeanor,  and  upon 
conviction  thereof  shall  be  punished  by  a  fine  not  exceed- 
ing one  hundred  dollars  or  by  imprisonment  in  the  county 
jail  for  a  term  not  exceeding  six  months,  or  by  both  such 
fine  and  imprisonment. 

Act  of  the  Legislature,  approved  April  26,  1917 ; 
in  effect  July  27,  1917. 

Section  187. — KF.GISTRATION  OF  FACTORIES. — The  owner 
of  any  factory,  workshop,  mill  or  other  manufacturing 
establishment,  where  five  or  more  persons  are  employed, 
shall  register  such  factory,  workshop,  mill  or  other  manu- 
facturing establishment  with  the  bureau  of  labor  statis- 
tics, giving  the  name  of  the  owner,  the  name  under  which 
the  business  is  carried  on,  the  location  of  the  plant,  the 
address  of  the  general  offices  or  principal  place  of  busi- 
ness and  such  other  information  as  the  commissioner  of 
labor  shall  require.  All  factories,  workshops,  mills  or 
other  manufacturing  establishments  hereafter  estab- 
lished shall  be  so  registered  within  thirty  days  after  the 
commencement  of  business.  Within  thirty  days  after  a 
change  in  the  location  of  a  factory,  workshop,  mill  or 
other  manufacturing  establishment  the  owner  thereof 
shall  file  with  the  commissioner  of  the  bureau  of  labor 
statistics  the  new  address. 

Act  of  the  Legislature,  approved  May  5,  1917; 
in  effect  July  27,  1917. 

Section  188. — MUNICIPAL  EMPLOYEES — HOURS  OF  BEST. 
Any  person  in  the  employ  of  a  municipal  corporation  and 
whose  hours  of  labor  exceed  one  hundred  and  twenty 
hours  in  a  calendar  week  of  seven  days,  shall  be  entitled 
to  be  off  duty  at  least  three  hours  during  every  twenty- 


BUSINESS  CONTBACTS  AND  LEGAL  OBLIGATIONS.  243 

four  hours  for  the  purpose  of  procuring  nieals,  and  no 
deduction  of  salary  shall  be  made  by  reason  thereof. 

Act  of  the  Legislature,  approved  June  1,  1917; 
in  effect  July  31,  1917. 

Section  189. — WORKMEN'S  COMPENSATION  LAW. — See 
the  subject,  "Workmen's  Compensation  Law." 

Section  190. — MASTER  AND  SERVANT. — There  is  a  kind 
of  employment  which  is  distinguished  under  the  head  of 
"Master  and  Servant,"  in  the  law  of  California,  as  in  the 
law  of  other  countries.  The  term  applies  particularly  to 
one  who  is  employed  to  render  personal  service  to  his  em- 
ployer, otherwise  than  in  the  pursuit  of  an  independent 
calling,  and  who  in  such  service  remains  entirely  under 
the  control  and  direction  of  the  latter,  who  is  called  his 
master.  The  word  "servant"  is  not  confined  by  our  law 
to  persons  who  are  in  domestic  service,  but  it  includes  all 
who  are  entirely  under  the  direction  and  control  of  the 
employer,  with  no  independent  choice  or  business  of  their 
own,  in  rendering  of  personal  services  of  any  kind. 

Section  191. — TERM  OF  HIRING  OF  SERVANT. — A  serv- 
ant is  presumed  to  have  been  hired  for  such  length  of 
time  as  the  parties  adopt  for  the  estimation  of  wages.  A 
hiring  at  a  yearly  rate  is  presumed  to  be  for  one  year; 
a  hiring  at  a  daily  rate,  for  one  day;  a  hiring  by  piece- 
work, for  no  specified  term.  Custom  in  a  particular 
employment  or  a  particular  place  may  change  the  case, 
but  if  there  is  no  agreemnt  or  custom  as  to  the  term  of 
service,  the  time  of  payment,  or  rate  or  value  of  wages, 
a  servant  is  presumed  to  be  hired  by  the  month,  at  a 
monthly  rate  of  reasonable  wages,  to  be  paid  when  the 
services  are  performed.  Where  after  the  expiration  of 
an  agreement  respecting  wages  and  term  of  service,  the 
parties  continue  the  relation  of  master  and  servant,  they 
are  presumed  to  have  renewed  the  agreement  for  the 
same  wages  and  term.  The  Bank  of  Suisun  employed  a 
bookkeeper,  for  the  year  1898,  at  an  annual  salary  of 


244  BUSINESS  LAW  FOR  BUSINESS  MEN. 

$1,200,  payable  monthy,  and  he  continued  in  that  employ- 
ment during  the  first  two  months  of  1899.  He  was  then 
discharged,  and  he  sued  the  bank  for  $1,000,  the  balance 
of  his  salary  for  the  year.  There  was  a  judgment  of  the 
Superior  Court  for  the  amount  against  the  bank,  and 
the  Supreme  Court  decided  the  case  against  the  bank, 
saying:  "The  presumption  arises  that  the  employment 
was  renewed  for  the  same  wages  and  term  as  for  the 
previous  term."  (Decided  by  the  Supreme  Court  of 
California  in  the  case  of  Gabriel  vs.  Bank  of  Suisun, 
which  decision  is  printed  in  Volume  28,  California  De- 
cisions, page  720.) 

Civil  Code,  Section  94. 

Section  192. — WHEN  SERVANT  MAY  BE  DISCHARGED.— 
The  law  is  that  a  master  may  discharge  any  servant, 
other  than  an  apprentice,  whether  engaged  for  a  fixed 
term  or  not.  if  he  is  guilty  of  misconduct  in  the  course 
of  his  service;  or  of  gross  immorality,  though  not  con- 
nected with  his  service ;  or  if,  being  employed  about  the 
person  of  the  master  or  in  a  confidential  position,  the 
master  discovers  that  the  servant  has  been  guilty  of  mis- 
conduct before  or  after  the  commencement  of  his  serv- 
ices, of  such  a  nature  that  the  master,  had  he  known  or 
contemplated  the  facts,  would  not  have  employed  him. 
Civil  Code.  Section  2015. 

PRINCIPAL  AND  AGENT 

Section  193. — DEFINITION  OF  AGENCY. — An  agent  is 
one  who  represents  another,  called  the  principal,  in  deal- 
ings with  third  persons.  And  as  a  great  part  of  the  busi- 
ness of  all  communities  is  transacted  through  the  medium 
of  agents,  it  is  proposed  in  following  sections  to  give  the 
law  of  California  applying  to  the  relative  rights  and  ob- 
ligations of  Principal  and  Agent  in  this  state. 

Section  194. — KINDS  OF  AGENCY. — There  are  two  kinds 
of  agents,  special  agents  and  general  agents.  An  agent 
for  a  particular  transaction  is  called  a  special  agent,  be- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  245 

cause  he  is  appointed  with  special  power  to  do  that  par- 
ticular thing.  A  general  agent,  on  the  other  hand,  has  a 
general  authority  conferred  upon  him  to  transact  busi- 
ness of  his  principal,  which  includes  more  than  one  par- 
ticular act.  Any  agency,  when  it  exists  at  all,  is  either 
actual  or  ostensible.  An  agency  is  actual  when  the  agent 
is  really  employed  by  the  principal.  An  agency  is  ostensi- 
ble when  the  principal  intentionally  or  by  want  of  ordi- 
nary care  causes  a  third  person  to  believe  another,  who 
is  not  really  employed  by  him,  to  be  his  agent. 

Civil  Code,  Sections  2230,  2297,  2298,  2299. 

Section  195. — AUTHORITY  OF  AGENT. — An  agent  has 
authority  to  do  whatever  his  principal  might  do  in  the 
business  for  which  he  is  employed.  He  has  authority  to 
do  everything  necessary  or  proper  and  usual,  in  the  or- 
dinary course  of  business,  for  effecting  the  purpose  of 
his  agency.  But  he  has  only  such  authority  as  the  prin- 
cipal confers  upon  him,  and  he  will  be  limited  in  his 
authority  to  the  particular  business  for  which  he  is  em- 
ployed. Whatever  he  does  within  the  scope  of  his  em- 
ployment, necessary  or  proper  and  usual,  in  the  ordinary 
course  of  business,  to  effect  the  purpose  of  his  agency, 
will  be  binding  upon  his  principal.  His  declarations  as  to 
the  subject  of  his  agency  within  the  scope  of  his  employ- 
ment will  bind  his  principal ;  as  where  an  agent  employed 
to  sell  goods  makes  at  the. time  a  representation  as  to 
their  quantity  or  quality. 

Civil  Code,  Sections  2315,  2319,  2320. 

Section  196. — WHAT  INCLUDED  IN  AUTHORITY  TO  SELL 
PERSONAL  PROPERTY. — An  authority  to  sell  personal  prop- 
erty includes  authority  to  warrant  the  title  of  the  prin- 
cipal, and  the  quality  and  quantity  of  the  property. 
Civil  Code,  Section  2323. 

Section  197. — WHAT  INCLUDED  IN  AUTHORITY  TO  SELL 
REAL  ESTATE. — An  agent's  authority  to  sell  and  convey 


246  BUSINESS  LAW  FOB  BUSINESS  MEN. 

real  property  includes  authority  to  give  the  usual  cov- 
enants of  warranty. 

Civil  Code,  Section  2324. 

Section  198. — AUTHORITY  OF  AGENT  TO  RECEIVE  PRICE 
OF  PROPERTY. — A  general  agent  to  sell,  who  is  intrusted 
by  the  principal  with  the  possession  of  the  thing  sold,  has 
authority  to  receive  the  price.  A  special  agent  to  sell 
has  authority  to  receive  the  price  on  delivery  of  the  thing 
sold,  but  not  afterward.  But  neither  a  general  nor  a 
special  agent  to  sell  has  any  authority  to  receive  any- 
thing but  money  in  payment  of  the  price  of  the  thing  sold. 
Therefore,  if  the  agent  sells  property  of  his  principal, 
and  accepts  part  cash  and  part  in  something  else,  the 
principal  will  not  be  bound. 

Civil  Code,  Sections  2325,  2326. 

Section  199. — AGENT'S  POWER  TO  DISOBEY  INSTRUC- 
TIONS.— An  agent  has  power  to  disobey  his  instructions 
in  dealing  with  the  subject  of  the  agency,  in  cases  where 
it  is  clearly  for  the  interest  of  his  principal  that  he  should 
do  so,  when  there  is  not  time  to  communicate  with  the 
principal.  The  general  rule  is,  that  an  agent  must  fol- 
low and  adhere  to  the  instructions  and  authority  he  has 
received  from  his  principal,  but  under  some  circum- 
stances he  may  depart  from  his  instructions,  and  the  law 
will  justify  him,  and  his  principal  will  be  bound.  So 
where,  from  the  necessities  of  the  case,  without  the 
agent's  fault  or  neglect,  some  sudden  and  unexpected 
emergency  or  extraordinary  or  supervening  necessity 
arises,  or  some  unforeseen  event  happens,  which  will  not 
admit  of  delay  for  consultation  or  communication  with 
the  principal,  if  the  agent,  exercising  prudence  and  sound 
discretion,  in  good  faith  adopts  the  course  which  seems 
best  to  him,  under  all  the  circumstances  as  they  exist,  he 
will  be  justified,  and  his  acts  will  bind  his  principal, 
though  subsequent  events  may  demonstrate  that  some 
other  course  would  have  been  the  better. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  247 

Section  200. — AGENT  CANNOT  HAVE  AUTHORITY  TO  DE- 
FRAUD PRINCIPAL. — An  agent  can  never  have  authority  to 
do  any  act  which  is  a  fraud  upon  the  principal,  and  is 
known  or  suspected  by  the  person  with  whom  he  deals  to 
be  fraudulent.  The  agent  must  act  in  good  faith  with 
with  his  principal,  and  if  he  enters  into  collusion  with 
another  to  obtain  an  advantage  over  his  principal,  or  to 
obtain  the  property  of  the  principal  for  leas  than  it  is 
worth,  the  courts  of  this  state  will  be  ready  to  give  the 
principal  relief  against  both,  by  restoring  to  him  the 
property  of  which  he  has  been  defrauded,  or,  if  this  can- 
not be  done,  by  giving  him  damages  as  compensation. 
Many  illustrations  might  be  given.  When  an  agent  in- 
vests money  belonging  to  his  principal  for  the  purchase 
of  an  interest  in  a  syndicate,  of  which  the  agent  is  a  mem- 
ber, and  in  which  he  holds  an  interest,  and  which  is  in- 
debted in  a  large  amount,  and,  to  induce  the  investment, 
leads  the  principal  to  believe  that  he  is  not  a  member  of 
the  syndicate,  or  interested  therein,  and  represents  that 
the  principal  will  not  have  any  calls  to  pay  upon  becom- 
ing a  member  thereof,  the  law  imputes  fraud  on  the  part 
of  the  agent,  and  the  principal  may  avoid  the  transaction 
and  recover  from  the  agent  the  amount  so  invested.  So, 
it  is  the  law  of  this  state,  that  an  agent  must  not  unite 
his  personal  and  his  representative  characters  in  the  same 
transaction ;  for  the  law  will  not  permit  him  to  be  exposed 
to  the  temptation,  or  brought  into  a  situation  where  his 
own  personal  interests  will  conflict  with  the  interests  of 
his  principal.  In  dealing  without  the  intervention  of  his 
principal,  if  an  agent  for  the  purpose  of  selling  property 
of  the  principal  purchases  it  himself,  or  an  agent  for  the 
purpose  of  buying  property  for  the  principal  buys  it  from 
himself,  either  directly  or  through  the  instrumentality  of 
a  third  person,  the  sale  or  purchase  is  voidable,  and  will 
always  be  set  aside  at  the  option  of  the  principal. 
Civil  Code,  Section  2306. 

Section  201. — AGENT'S  ACTUAL  AUTHORITY. — The  ac- 
tual authority  of  an  agent  is  such  as  a  principal  inten- 


248  BUSINESS  LAW  FOB  BUSINESS  MEN. 

tionally  confers  upon  him,  or  intentionally  or  by  want  of 
ordinary  care  allows  the  agent  to  believe  himself  to  be 
possessed  of.  An  agent's  authority  is  actual  when  there 
is  a  contract  of  employment  existing  between  him  and 
the  principal.  The  principal  may  have  given  the  agent 
instructions  to  act  in  a  certain  way;  or  a  course  of  deal- 
ings or  other  circumstances  between  them  may  have  been 
such  as  to  lead  the  agent  to  believe  that  his  authority 
from  the  principal  extended  to  the  things  done;  or  the 
principal  may  have  stood  by  and  without  objection  wit- 
nessed the  conduct  of  the  agent,  and  thus  made  the  agent 
believe  that  his  authority  from  the  principal  was  sufficient 
to  warrant  the  acts  done  by  him ;  and  in  all  such  cases  the 
agent  will  be  deemed  to  have  had  authority  actually  given 
him  by  the  principal. 

Civil  Code,  Sections  2299,  2316. 

Section  202. — AGENT'S  OSTENSIBLE  AUTHORITY.— The 
ostensible  authority  of  an  agent  is  such  as  the  principal, 
intentionally  or  by  want  of  ordinary  care,  causes  or  al- 
lows a  third  person  to  believe  the  agent  possesses.  There 
are  two  essential  features  of  an  ostensible  authority ;  the 
third  party  must  believe  that  the  agent  has  authority; 
and  such  belief  must  be  generated  in  his  mind  by  some 
act  or  neglect  of  the  person  whom  he  seeks  to.  hold  liable 
as  principal.  A  belief  founded  on  the  agent's  statement 
is  not  sufficient;  for  a  party  has  no  right  to  take  the 
agent's  word  for  the  existence  of  his  authority.  But 
where  the  agent  shows  letters  or  telegrams,  which  are 
worded  so  as  to  lead  a  reasonable  man  to  believe  that  he 
has  received  authority  from  the  principal  to  act  for  him 
in  a  certain  way ;  or  where  the  principal  has  been  in  the 
habit  of  receiving  money,  for  shipments  of  products  or 
goods,  through  the  same  agent,  in  similar  transactions; 
or  where  the  principal  has  been  in  the  habit  of  honoring 
drafts  signed  by  the  same  person  as  his  "agent";  or 
where  similar  transactions  have  occurred  in  which  the 
acts  of  the  alleged  agents  were  authorized  or  ratified ;  in 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  249 

all  such  cases,  if  the  third  party  knows  of  the  former 
transactions,  and  has  received  no  notice  that  the  princi- 
pal will  not  be  responsible,  he  will  be  justified  in  believ- 
ing that  the  agent  has  authority,  and  the  principal  will  be 
bound,  even  though  the  person  for  whom  the  agent  as- 
sumes to  act  may  not  have  intended  to  hold  him  out  as 
such  agent.  On  the  other  hand,  a  principal  is  bound  by 
acts  of  his  agent,  under  merely  ostensible  authority,  to 
those  persons  only  who  have  in  good  faith,  and  without 
ordinary  negligence,  incurred  a  liability  or  parted  with 
value  upon  the  faith  of  it.  Therefore,  if  there  is  any- 
thing in  the  circumstances  of  a  transaction,  or  in  the  con- 
duct of  one  who  represents  himself  as  agent,  which  ought 
to  excite  the  suspicions  or  stimulate  the  inquiry  of  a  rea- 
sonable man,  and  the  means  of  inquiry  are  open  to  him, 
and  he  neglects  to  make  such  inquiry  or  investigation  as 
a  reasonable  man  under  the  circumstances  should  be  ex- 
pected to  make,  the  principal  will  not  be  liable  for  the 
acts  of  one  who  has  no  actual  authority  as  agent  to  act 
for  him.  The  statements  of  the  agent  himself  do  not  prove 
the  agency.  And  one  who  deals  with  another,  upon  his 
mere  statement  that  he  is  the  agent  of  a  third  person, 
takes  upon  himself  the  risk  of  being  able  to  show,  if  a 
dispute  occurs,  that  such  agency  really  existed.  He  can- 
not hold  the  third  person  as  a  principal,  under  such  cir- 
cumstances, unless  he  can  produce  proof  of  the  agency 
aside  from  the  agent's  own  statements.  (Decided  by  the 
District  Court  of  Appeals,  in  the  case  of  Apler  vs.  Tor- 
mey,  which  decision  is  printed  in  Volume  85  of  the  Pacific 
Reporter,  page  661.) 

Civil  Code,  Sections  2300,  2334. 

Section  203. — RATIFICATION  OF  AGENT'S  ACTS. — A  per- 
son may  ratify  the  acts  of  another,  done  for  him  as  his 
pretended  agent,  and  so  make  himself  liable,  though  he 
had  given  the  agent  no  authority  before  the  act  was  done. 
This  ratification  may  be  in  many  ways.  It  may  be  direct- 
ly, by  notice  to  the  party  with  whom  the  agent  has  dealt ; 


250  BUSINESS  LAW  FOR  BUSINESS  MEN. 

or  it  may  be  by  receiving  and  retaining  the  fruits  of  the 
agent  '&  acts ;  or  it  may  be  by  silence  and  failure  to  object 
after  being  fully  informed  of  the  facts,  for  if  one  is  fully 
informed  of  a  contract  made  by  another  in  his  name,  and 
by  virtue  of  pretended  authority  from  him,  and  remains 
silent  and  does  not  repudiate  the  contract  within  a  rea- 
sonable time,  he  is  presumed  to  give  his  consent  and 
acquiescence  to  the  contract.  But  a  ratification  can  be 
made  only  in  the  manner  that  would  have  been  necessary 
to  confer  an  original  authority  for  the  act  ratified;  so 
where  the  contract  made  by  the  agent  was  one  which  the 
law  requires  to  be  in  writing,  the  ratification  of  the 
agent's  act  must  also  be  in  writing. 
Civil  Code,  Section  2310. 

Section  204. — How  AGENCY  Is  CREATED. — An  agency 
may  be  created  by  authority  given  before  the  act  done, 
and  its  creation  will  be  presumed  from  a  subsequent  rati- 
fication. The  authority  conferred  upon  an  agent  may  be 
verbal,  and  it  will  be  sufficient  for  any  purpose,  except 
that  an  authority  to  enter  into  a  contract  required  by  law 
to  be  in  writing  can  only  be  given  by  an  instrument  in 
writing. 

Civil  Code,  Sections  2307,  2309. 

Section  205. — MUTUAL  OBLIGATIONS  OP  PRINCIPAL  AND 
THIRD  PERSONS. — An  agent  represents  his  principal  for 
all  purposes  within  the  scope  of  his  actual  or  ostensible 
authority,  and  all  the  rights  and  liabilities  which  would 
accrue  to  the  agent  from  transactions  within  such  limit, 
if  they  had  been  entered  into  on  his  own  account,  accrue 
to  the  principal.  And  the  principal  is  liable,  even  if  the 
agent  exceeds  his  instructions,  where  the  party  with 
whom  he  deals  is  not  aware  of  it.  In  either  case,  the  ques- 
tion of  the  authority  of  the  agent  must  depend,  so  far  as 
it  involves  the  rights  of  innocent  third  persons  who  have 
relied  thereon,  upon  the  character  bestowed,  and  not  upon 
the  instruction  given.  Or,  in  other  words,  the  principal 
is  bound  to  third  persons  who  have  relied  thereon  in 


BUSINESS  CONTEACTS  AND  LEGAL  OBLIGATIONS.  251 

good  faith,  and  in  ignorance  of  any  limitations  or  restric- 
tions, by  the  apparent  authority  he  has  given  to  the 
agent,  and  not  by  the  actual  or  express  authority,  where 
that  differs  from  the  apparent ;  and  this,  too,  whether  the 
agency  be  a  general  or  special  one. 

As  against  a  principal,  both  principal  and  agent  are 
deemed  to  have  notice  of  whatever  either  has  notice  of, 
and  ought  in  good  faith  and  the  exercise  of  ordinary  care 
and  diligence  to  communicate  to  the  other.  Notice  to  the 
agent  of  a  corporation  is  notice  to  the  corporation  itself. 

An  instrument  within  the  scope  of  his  authority,  by 
which  an  agent  intends  to  bind  his  principal,  does  bind 
him,  if  such  intent  is  plainly  inferable  from  the  instru- 
ment itself. 

A  principal  is  responsible  to  third  persons  for  the 
negligence  of  his  agent  in  the  transaction  of  the  business 
of  the  agency,  including  wrongful  acts  committed  by  such 
agent  as  a  part  of  the  transaction  of  such  business,  and 
for  the  agent's  wilful  omission  to  fulfill  the  obligations  of 
the  principal. 

Sometimes  a  person  deals  with  a  man  without  know- 
ing or  having  reason  to  believe  that  he  is  not  acting  for 
himself,  but  is  really  only  the  agent  for  another.  In  such 
cases,  where  the  fact  is  afterwards  disclosed  that  another 
is  the  principal,  and  the  principal  makes  a  claim  arising 
out  of  the  contract,  the  party  who  dealt  with  the  agent 
may  set  off  against  the  principal  all  claims  which  he 
might  have  set  off  against  the  agent  before  receiving  no- 
tice that  he  was  an  agent. 

An  undisclosed  principal  will  be  liable  when  he  be- 
comes known,  upon  a  contract  made  by  the  agent  in  his 
own  name.  Where  a  party  sells  goods  to  one  who  after- 
wards turns  out  to  have  been  the  agent  of  another,  and 
the  principal  receives  the  benefit  of  the  transactions,  the 
principal  will  be  held  responsible  for  the  goods  furnished 
the  agent.  But  the  statute  of  this  state  provides,  that  if 
exclusive  credit  is  given  to  an  agent  by  the  person  deal- 
ing with  him,  his  principal  is  exonerated  by  payment 


252  BUSINESS  LAW  FOB  BUSINESS  MEN. 

made  to  the  agent  in  good  faith,  before  receiving  notice 
of  the  creditor's  election  to  hold  the  principal  responsible. 
Civil  Code,  Sections  2330,  2331,  2332,  2333,  2334, 
2335,  2336,  2337,  2338. 

Section  206. — OBLIGATIONS  OF  AGENTS  TO  THIRD  PER- 
SONS.— One  who  assumes  to  act  as  an  agent  thereby  war- 
rants to  all  who  deal  with  him  in  that  capacity,  that  he 
has  the  authority  which  he  assumes.  And  if  one  acts  as 
an  agent,  without  authority,  the  party  injured  may  sue 
him  for  the  breach  of  the  warranty  and  recover  his  losses. 

If,  with  the  agent's  consent,  credit  is  given  to  him  per- 
sonally in  a  transaction,  he  will  be  responsible  as  a  prin- 
cipal to  third  persons.  He  will  also  be  personally  re- 
sponsible, whenever  he  enters  into  a  contract  in  the  name 
of  his  principal,  without  believing,  in  good  faith,  that  he 
has  authority  to  do  so.  He  will  also  be  responsible  when 
his  acts  are  wrongful  in  their  nature.  If  an  agent  receives 
anything  for  the  benefit  of  his  principal,  to  the  possession 
of  which  another  person  is  entitled,  he  must,  on  demand, 
surrender  it  to  such  person,  or  so  much  of  it  as  he  has 
under  his  control  at  the  time  of  the  demand,  on  being 
indemnified  for  any  advances  which  he  has  made  to  his 
principal,  in  good  faith,  on  account  of  the  same ;  and  he  is 
responsible  therefor,  if,  after  notice  from  the  owner,  he 
delivers  it  to  his  principal. 

Civil  Code,  Sections  2342,  2343,  2344. 

Section  207. — AGENT'S  DELEGATION  OF  His  POWER.— 
An  agent,  unless  specially  forbidden  by  his  principal  to 
do  so,  can  delegate  his  power  to  another  person  in  any  of 
the  following  cases,  and  in  no  others:  (1)  When  the  act 
to  be  done  is  purely  mechanical;  (2)  when  it  is  such  as 
the  agent  cannot  himself,  and  the  sub-agent  can,  lawfully 
perform ;  (3)  when  it  is  the  usage  of  the  place  to  delegate 
such  powers;  or,  (4)  when  such  delegation  is  specially 
authorized  by  the  principal. 

A  sub-agent  represents  the  principal  in  like  manner 
with  the  original  agent;  and  the  original  agent  is  not 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  253 

responsible  to  third  persons  for  the  acts  of  the  sub-agent. 
Of  course,  if  the  agent  should  without  lawful  authority 
appoint  a  sub-agent,  he  would  be  responsible  to  third  per- 
sons for  such  sub-agent's  acts. 

Civil  Code,  Sections  2349,  2351. 

Section  208. — TEKMINATION  OF  AGENCY. — An  agency 
is  terminated,  as  to  every  person  having  notice,  by  the 
expiration  of  its  term.  It  is  also  terminated  by  the  ex- 
tinction of  its  subject,  as  where  an  agent  to  sell  certain 
goods  disposes  of  all  of  them,  or  where  the  subject  of  the 
agency  is  lost  or  destroyed  so  that  nothing  more  can  be 
done  about  it.  It  is  also  terminated  by  the  death  of  the 
agent.  It  is  also  terminated  by  the  agent's  renunciation 
of  the  agency.  It  is  also  terminated  by  the  incapacity  of 
the  agent  to  act  as  such,  as  where  the  agent  becomes  in- 
sane, or  from  some  other  cause  it  becomes  impossible  for 
the  agent  to  perform  his  duties.  It  is  also  terminated 
when  revoked  by  the  principal,  or  by  the  principal's 
death,  or  by  the  principal's  incapacity  to  act;  but  there  is 
an  exception  to  the  rule  that  an  agency  is  thus  terminated 
because  of  the  revocation  by  death  or  incapacity  of  the 
principal,  in  cases  where  the  agent  has  acquired  from  his 
principal  an  interest  in  the  thing  which  is  the  subject  of 
the  agency ;  for  such  an  interest  may  survive  all  of  these 
events,  and  be  binding  upon  the  principal's  heirs,  admin- 
istrators, and  executors,  so  as  to  continue  the  agency  in 
existence.  The  interest  which  will  keep  alive  the  agency, 
under  such  conditions,  must  not  be  a  mere  lien  for  com- 
pensation or  commissions,  but  must  be  an  interest  in  the 
property  or  other  subject  of  the  agency. 
Civil  Code,  Section  2355,  2356. 

WHOLES  ALEE 'S  AGENTS 

Section  209. — TRAVELING  AGENTS. — In  modern  busi- 
ness enterprise  the  employment  of  traveling  agents  by 
wholesale  houses  is  adopted  as  one  of  the  necessary 
means  of  obtaining  or  keeping  trade.  The  same  ordinary 


254  BUSINESS  LAW  FOR  BUSINESS  MEN. 

rules  which  apply  to  the  agents  of  other  men  apply  to  the 
agents  employed  by  wholesalers,  except  when  varied  by 
custom  or  usage  in  a  particular  business  or  locality. 

Section  210. — SALE  BY  SAMPLE. — The  agent  of  a  whole- 
saler who  carries  samples  with  him,  when  he  exhibits  the 
samples  to  the  customer,  and  solicits  his  order  for  the 
goods,  warrants  that  the  bulk  will  be  equal  to  that  of  the 
sample.  This  is  absolutely  necessary  as  a  rule  of  law,  as 
weir  as  the  custom  among  merchants. 

Section  211. — PURCHASER'S  EIGHT  TO  EETURN  GOODS. 
The  purchaser  of  goods  sold  by  sample  has  a  right  to  make 
reasonable  inspection  of  the  goods,  and  if  the  bulk  is  not 
equal  to  the  sample,  he  may  repudiate  the  sale  and  return 
the  goods.  But  his  inspection  and  objection  must  be  rea- 
sonable. If  he  keeps  the  goods,  unpacked  and  unopened, 
for  a  long  time  after  he  receives  them,  his  inspection  will 
not  be  reasonable ;  and  if.  after  inspection,  he  uses  a  part 
of  the  goods  himself,  or  disposes  of  a  part  to  others,  or 
delays  in  sending  them  back  to  the  wholesaler,  his  right 
to  avoid  liability  for  the  purchase  price  will  be  lost.  He 
must  act  promptly  in  inspecting  the  goods,  and  must  with 
equal  promptness  return  them,  if  he  does  not  wish  to  be 
held  for  them. 

Section  212. — COLLECTIONS  BY  TRAVELING  AGENT. — A 
commercial  traveler  who  makes  collections  for  his  house 
cannot,  without  special  authority  from  the  house,  accept 
anything  but  money  from  the  debtor. 

Section  213. — GIVING  CREDIT. — A  commercial  traveler 
may  sell  goods  on  credit,  where  that  is  the  usage  or  cus- 
tom of  the  place  or  business ;  and  when  a  customer  buys 
on  credit  from  a  wholesaler's  agent,  in  accordance  with 
a  usage  between  them  of  long  standing,  and  without  no- 
tice of  any  change  in  the  wholesaler's  terms,  the  latter 
will  be  bound,  even  if  he  has  instructed  his  agent  to  give 
no  more  credit. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  200 

Section  214. — DECLARATIONS  OF  WHOLESALER'S  AGENT. 
When  a  commercial  traveler  approaches  a  customer,  with 
or  without  samples  of  his  principal's  goods,  he  stands  in 
the  place  of  the  principal  and  acts  for  and  in  his  behalf. 
As  the  principal's  own  declarations  would  bind  him,  if 
he  were  present,  so  the  agent's  declarations  within  the 
scope  of  his  authority,  made  at  the  time  of  the  sale,  and 
relating  to  the  goods,  will  be  binding  upon  the  principal. 
So,  whatever  the  agent  of  a  wholesaler  who  is  sent  out 
to  sell  the  goods  of  his  principal  states,  as  to  the  quantity, 
or  quality,  or  condition,  or  price,  or  the  time  and  manner 
of  shipment,  or  any  other  fact  which  is  material  to  or  an 
inducement  for  the  sale,  it  will  bind  the  principal  as 
though  he  had  made  the  representations  in  person. 

Section  215. — NOTICE  TO  WHOLESALER'S  AGENT. — No- 
tice of  a  fact  given  to  the  agent  is  notice  to  the  whole- 
saler. Therefore,  if  the  purchaser  gives  notice  to  the 
agent  of  any  fact  with  respect  to  the  contract  or  the  goods 
it  is  notice  to  the  wholesaler  himself,  and  he  will  be 
bound  by  it. 

Section  216. — FAILURE  TO  SHIP  GOODS. — When  a  com- 
mercial agent  solicits  and  receives  an  order  for  goods, 
and  neglects  to  send  the  order  to  his  house,  or  the  prin- 
cipal refuses  to  honor  the  order,  after  accepting  it,  the 
wholesaler  will  be  liable  to  the  customer  for  all  damages 
sustained  by  him,  if  the  goods  were  ordered  in  good 
faith. 

Section  217. — NOTICE  BY  WHOLESALER  OF  TERMINATION 
OF  AGENCY. — A  wholesaler  must  give  notice  to  his  cus- 
tomers of  the  termination  of  an  agent's  authority,  or  he 
will  be  bound  by  the  agent's  contracts  with  persons  from 
whom  he  has  formerly  solicited  orders,  even  if  made  after 
the  agent's  authority  has  actually  ceased.  Where  a  whole- 
saler dismisses  an  agent  from  his  employ,  and  revokes 
his  authority  to  sell  or  buy,  he  must  give  notice  to  third 
parties  with  whom  the  agent  has  dealings ;  and  if  he  does 
not  give  notice  to  third  parties  of  his  revocation  of  the 


256  BUSINESS  LAW  FOR  BUSINESS  MEN. 

agent's  authority,  or  unless  he  does  what  he  can  to  make 
the  revocation  as  notorious  and  generally  known  to  the 
world  as  was  the  fact  of  the  agency,  he  will  be  bound  by 
the  further  dealings  of  the  agent  with  persons  who  have 
not  received  notice  of  the  agent's  dismissal.  As  to  the 
method  of  giving  notice  that  an  agent's  authority  has 
been  revoked,  or  as  to  the  character  of  notice  required, 
the  law  does  not  prescribe  any  particular  form  of  notice 
or  method  of  giving  it.  Much  will  depend,  in  this  matter, 
upon  the  prevailing  custom  or  usage.  Sometimes  the  no- 
tice is  given  by  publishing  in  a  newspaper,  but  more  often 
by  circular  letter  mailed  to  each  of  the  wholesaler's  cus- 
tomers. The  latter  method  is  to  be  preferred;  for  the 
wholesaler's  books  will  usually  show  the  names  and  ad- 
dresses of  all  persons  with  whom  the  agent  has  had  deal- 
ings, and  a  notice  by  mail  may  more  surely  reach  the  per- 
son intended  to  be  notified  of  the  revocation  of  an  agent 's 
authority.  But  whatever  may  be  the  method  pursued,  it 
must  not  be  forgotten  that  actual  notice  of  an  agent's  dis- 
missal is  necessary  to  protect  his  former  principal  from 
being  bound  by  the  agent's  further  dealing  with  persons 
with  whom  he  formerly  dealt. 

Section  218. — WHOLESALER'S  REPUDIATION  OF  AGENCY. 
Circumstances  occur  where  the  wholesaler  will  dispute 
the  agency  altogether,  and  seek  to  repudiate  the  acts  of 
one  who  has  assumed  to  represent  him  in  a  transaction. 
In  such  cases,  if  the  wholesaler  does  anything  himself  to 
ratify  the  act  of  the  assumed  agent,  or  accepts  the  result 
of  his  services,  or  acknowledges  in  any  way  his  capacity 
as  agent  for  himself,  he  will  be  bound,  and  his  effort  to 
repudiate  the  transaction  will  be  of  no  avail.  A  repudia- 
tion of  the  act  of  one  who  assumes  to  act  as  agent,  and 
whose  agency  is  disputed,  must  be  made  promptly,  as 
soon  as  the  wholesaler  learns  of  the  pretended  agency, 
and  must  be  decisive  and  unequivocal.  There  was  a  case 
in  Colusa  County,  which  was  passed  upon  by  the  Supreme 
Court  of  California  in  1896,  which  illustrates  very  well 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  257 

• 

the  conduct  which  will  bind  a  wholesaler,  and  what  will 
not  be  considered  a  repudiation  of  an  assumed  agent's 
authority.  A  man  named  Willis,  who  represented  himself 
as  the  agent  of  J.  K.  Armsby  Co.,  San  Francisco,  made  a 
contract  with  J.  II.  Pope,  of  Colusa  County,  for  the  pur- 
chase of  a  lot  of  green  fruit.  The  contract  was  in  writing 
and  was  signed,  "J.  K.  Armsby  Company.  By  Frank 
Willis,  Agent."  Subsequently,  and  before  the  delivery 
of  any  fruit  under  the  contract,  Pope  wrote  to  the  J.  K. 
Armsby  Co.  this  letter:  " Colusa,  Cal.,  May  25,  1894. 
J.  K.  Armsby  Co..  San  Francisco — Gentlemen:  I  have 
sold  my  green  fruit  to  you,  and  have  a  contract  signed  to 
that  effect,  signed,  '  J.  K.  Armsby  Company,*  by  Frank 
Willis,  as  agent.  Now,  what  I  want  to  know,  is  F.  W.  Willis 
your  agent  for  buying  green  fruit,  and  is  the  contract 
correct?  Your  immediate  answer  and  oblige.  Yours 
truly,  J.  H.  Pope."  On  the  next  day  Pope  received  from 
the  general  manager  of  the  company  this  letter:  "San 
Francisco,  May  26,  1894.  John  H.  Pope,  Esq.,  Colusa, 
Cal.— Dear  Sir :  We  have  yours  of  the  25th.  Mr.  Willis 
bought  some  apricots  on  our  advice,  but  we  are  not  aware 
he  bought  them  in  our  name.  We  will  handle  them,  how- 
ever, and  think  there  is  no  question  on  the  money  part  of 
the  transaction.  The  writer  expects  to  visit  your  section 
within  the  next  week  or  two,  and  will  arrange  the  matter 
satisfactorily  with  you  then.  Yours  truly,  J.  K.  Armsby 
Co.  Freeman."  Afterwards  a  dispute  arose,  and  the 
J.  K.  Armsby  Company  denied  that  Willis  was  their 
agent  for  buying  the  fruit,  and  claimed  to  have  repudiated 
his  agency.  But  the  Supreme  Court  reviewed  the  facts, 
and  said  that  the  letter  from  the  company  was  not  frank, 
and  did  not  answer  the  question  put  by  Pope,  whether 
Willis  was  the  company's  agent  in  the  premises,  by  say- 
ing, in  terms,  whether  he  was  or  was  not  such  agent ;  that 
the  language  used  in  the  letter,  and  the  assurances  con- 
veyed by  it,  authorized  but  one  inference,  that  the  con- 
tract was  all  right  and  the  company  would  see  it  carried 
out.  And  the  Supreme  Court  further  said,  that  if  the 


258  BUSINESS  LAW  FOE  BUSINESS  MEN. 

« 

company  intended  to  repudiate  the  transaction,  it  was  its 
duty  to  do  so  explicitly,  and  in  such  terms  as  to  leave  no 
room  for  doubt ;  and  that  Pope  had  a  right  to  infer  from 
the  language  of  the  letter  that  the  contract  made  by 
Willis,  instead  of  being  repudiated,  was  in  fact  ratified 
by  the  J.  K.  Armsby  Company;  and  that  the  company 
was  positively  and  plainly  informed  by  Pope's  letter  that 
he  had  a  written  contract  signed  in  its  name,  and  it  was 
clearly  the  duty  of  the  company,  if  it  did  not  know  the 
terms  of  the  contract,  to  inform  itself,  before  writing  as 
it  did,  if  it  did  not  wish  to  be  bound  by  the  contract.  It 
would  have  been  a  very  easy  thing  to  have  asked  Pope 
to  send  a  copy  of  the  contract,  before  replying  to  his 
letter;  and  not  to  have  taken  this  simple  precaution  was 
negligence  on  the  company's  part,  and  precluded  it  from 
denying  the  effect  of  its  assurances  to  Pope,  which  in- 
duced the  latter  to  proceed  and  deliver  his  fruit  under 
what  he  had  a  right  to  suppose  was  a  valid  contract.  The 
case  just  referred  to,  like  a  great  many  others  of  like 
character,  exemplifies  the  rule  that  an  attempted  repudia- 
tion of  agency,  or  the  contract  of  an  agent  made  in  the 
name  of  the  principal,  must  be  unequivocal  and  plain  and 
clear,  and  must  leave  no  room  for  a  contrary  inference 
on  the  part  of  the  person  with  whom  the  agent  deals. 
(Decided  by  the  Supreme  Court  of  California  in  the  case 
of  Pope  vs.  Armsby  Co.,  reported  in  Volume  111,  Cali- 
fornia Reports,  page  159.) 

Section  219. — SALE  or  SAMPLES.— A  traveling  sales- 
man has  no  implied  authority  from  the  nature  of  his  em- 
ployment to  sell  the  samples  with  which  he  is  intrusted 
by  his  principal.  Samples  being  essential  and  necessary 
to  the  performance  of  the  salesman's  work,  no  reasonable 
inference  can  arise  that  he  is  to  dispose  of  them,  for,  if 
he  does,  he  is  left  without  available  means  for  exhibiting 
the  goods  of  his  employer.  A  traveling  salesman  cannot 
sell  his  samples  without  express  authority  and  instruc- 
tions from  his  employer. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  259 

MANUFACTURER'S  AGENT 

Section  220. — MANUFACTUKER  's  AGENT  TO  BUY  OR  SELL. 
The  law  which  applies  generally  to  agents  is  also  applica- 
ble to  agents  for  manufacturers,  whether  such  agents 
have  the  authority  to  buy  raw  material  or  to  sell  the  fin- 
ished product  to  the  retailer.  The  agent  for  the  manu- 
facturer has  such  authority  as  his  principal  gives  him,  or 
such  as  may  be  reasonably  inferred  from  a  course  of 
dealings  with  customers  of  which  the  manufacturer  has 
knowledge  and  retains  the  benefits. 

Section  221. — AGENT'S  AUTHORITY  TO  BORROW  MONEY. 
Where  a  manufacturer  establishes  an  agency  in  a  city 
other  than  the  place  where  the  factory  or  main  office  is 
located,  the  question  sometimes  arises  as  to  what  condi- 
tions %or  circumstances,  if  any,  will  justify  the  agent  in 
borrowing  money  on  his  principal's  account.  The  author- 
ity of  an  agent  to  borrow  money  for  his  principal  may 
be  expressly  given,  or  it  may  be  impliedly  conferred  upon 
him  as  an  incident  to  the  business  which  he  undertakes 
to  transact  for  his  principal.  When  the  power  to  borrow 
money  is  expressly  given  to  an  agent,  the  existence  and 
extent  of  the  power  are,  of  course,  to  be  determined  by 
a  construction  of  the  instrument  by  which  it  is  given. 
Where  a  general  power  to  borrow  money  is  expressly 
given,  such  power  includes  authority  to  give  the  lender 
the  ordinary  securities  for  the  sum  borrowed,  such  as 
bonds,  notes,  or  collaterals.  The  power  of  an  agent  to 
borrow  money  on  his  principal's  account  may  be  implied, 
when  the  carrying  on  of  the  business  intrusted  to  him 
absolutely  requires  the  exercise  of  such  power.  An  agent 
is  presumed  to  have  the  power  to  do  whatever  is  neces- 
sary to  effect  the  purposes  of  his  agency.  The  necessity 
for  borrowing  money  must,  however,  be  shown,  before 
the  power  to  borrow  can  be  inferred  from  the  original 
employment  of  the  agent.  To  justify  this  inference,  the 
1  Borrowing  must  be  practically  indispensable,  and  it  is  not 


260  BUSINESS  LAW  FOK  BUSINESS  MEN. 

sufficient  that  it  was  convenient,  or  advantageous,  or 
more  effectual  for  the  transaction  of  the  business  pro- 
vided for.  Nor  is  a  party  dealing  with  an  agent  entitled 
to  assume  the  existence  of  any  extraordinary  state  of 
facts,  in  order  to  bring  the  act  of  the  agent  within  the 
scope  of  his  apparent  authority.  Where  it  is  absolutely 
necessary,  in  order  to  carry  on  the  business  with  which 
the  agent  is  intrusted,  that  he  should  borrow  money  on 
the  credit  of  his  principal,  the  authority  to  borrow  will 
be  implied.  But  a  power  given  to  an  agent  to  draw  or 
indorse  checks,  for  and  in  the  name  of  his  principal,  gives 
him  no  authority  to  overdraw  his  principal's  account  at 
the  bank.  Where  the  act  of  an  agent,  in  borrowing  money 
for  his  principal,  was  without  original  authority,  the 
principal's  ratification  of  the  act  cannot  be  inferred  from 
the  mere  fact  that  the  money  borrowed  went  into  the 
business  of  the  principal  or  was  beneficial  or  advantage- 
ous to  him.  But  where  an  agent  without  original  author- 
ity borrows  money  on  behalf  of  his  principal,  and  uses  it 
in  a  manner  advantageous  to  the  principal,  the  ratifica- 
tion of  the  agent's  act  may  be  inferred  from  the  silence  of 
the  principal  after  knowledge  of  all  the  facts,  or  from  his 
promise  to  repay  the  money  so  borrowed. 

Section  222. — AGENT  SELLING  GOODS  OUT  OF  MANU- 
FACTURE.— An  agent  authorized  to  sell  new-pattern  goods, 
to  be  manufactured,  in  addition  to  those  the  principal  has 
already  manufactured,  or  is  willing  to  manufacture,  has 
no  authority  to  sell  old-pattern  goods,  which  have  ceased 
to  be  manufactured,  and  could  not  be  manufactured  ex- 
cept at  a  loss.  The  very  sending  of  an  agent  out  to  sell 
carries  with  it  the  idea  that  he  is  expected  by  the  manu- 
facturer to  sell  to  his  advantage;  and  this  being  so,  it 
cannot  be  said  that  because  he  is  expressly  authorized  to 
sell  manufactured  goods,  lie  is  also  authorized  to  sell 
those  that  have  ceased  to  be  manufactured,  and  could  not 
be  except  at  a  loss.  An  agent  who  has  authority  to  sell 
new-pattern  goods,  to  be  manufactured,  cannot  be  said 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  261 

to  have  authority  to  sell  what  is  not  being  manufactured 
and  will  not  be  by  his  principal,  because  to  manufacture 
it  would  result  in  a  loss,  which  is  not  the  prevalent  idea 
in  any  business.  A  reasonable  man  would  not  believe 
that  a  manufacturer  would  carry  out  such  contract,  or 
that  he  intended  to  authorize  his  agent  to  make  it. 

Section  223. — SELLING  GOODS  FOR  ONE  YEAR  MADE  IN 
ANOTHER. — The  mere  fact  that  one  acts  as  agent  of  a 
manufacturer  in  one  year,  in  the  sale  of  goods  manufac- 
tured for  sale  for  that  year,  does  not  make  him  an  osten- 
sible agent  for  the  sale  of  the  goods  for  the  next  year, 
unless  such  goods  are  continued  to  be  manufactured  or 
are  in  stock,  and  the  principal  wishes  to  sell  them. 

Section  224. — LIMITATION  OF  AUTHORITY. — A  letter 
from  a  manufacturing  firm  to  a  customer,  to  the  effect 
that,  for  the  next  year  they  had  certain  new  patterns  of 
goods,  which  they  would  be  ready  to  submit  to  the  inspec- 
tion of  the  customer  at  the  end  of  the  month,  and  that 
"our  Mr.  W.  will  call  on  you  early  in  January,  and  talk 
to  you  about  handling  the  line  for  next  year,"  only 
authorized  the  agent  to  sell  the  new  patterns  of  goods 
which  were  in  the  process  of  manufacture,  or  were  offered 
to  be  manufactured,  and  the  customer  could  not  recover 
damages  for  the  failure  of  the  manufacturer  to  deliver 
old  patterns  of  goods  which  the  latter  had  ceased  to 
manufacture. 

Section  225. — SALE  OF  PROPERTY  WHEN  MANUFAC- 
TURED.— An  agent  authorized  to  sell  the  property  of  his 
principal  when  manufactured,  has  no  authority  to  sell 
before  it  is  manufactured. 

COMMISSION  MERCHANTS 

Section  226. — SELLING  PROPERTY  ON  COMMISSION. — 
There  is  a  common  kind  of  agency  exercised  by  commis- 
sion merchants,  who  receive  the  property  of  others  to  sell 
on  commission.  But  commission  merchants,  who  usually 


262  BUSINESS  LAW  FOR  BUSINESS  MEN. 

have  possession  of  the  property  itself,  and  receive,  not  a 
salary,  but  a  part  of  the  selling  price  as  their  compensa- 
tion, and  usually  receive  few  if  any  instructions  from  the 
consignor  of  property  to  be  sold  on  commission,  are  to  be 
considered  from  a  peculiar  point  of  view  in  many  of  their 
business  relations. 

Section  227. — INSURANCE  OF  CONSIGNED  PROPERTY.— 
A  commission  merchant,  unless  he  has  received  contrary 
instructions,  has  authority  to  insure  property  consigned 
to  him  uninsured. 

Civil  Code,  Section  2368. 

Section  228. — AUTHORITY  TO  SELL  ON  CREDIT. — Unless 
specially  restricted  to  sales  for  cash,  a  commission  mer- 
chant has  authority  to  sell  on  credit  any  property  in- 
trusted to  him  for  sale;  but  such  authority  does  not  ex- 
tend to  such  things  as  it  is  customary  to  sell  for  cash. 
Therefore,  even  if  he  has  not  received  any  instructions  to 
the  contrary,  a  commission  merchant  will  not  have  au- 
thority to  sell  on  credit  any  commodity  consigned  to  him 
for  sale  which  it  is  the  custom  at  the  place  where  he  does 
business  to  sell  for  cash. 

Civil  Code,  Section  2368. 

Section    229. — PLEDGE    OF    CONSIGNED    PROPERTY. — A 
commission  merchant  has  no  power  to  pledge  or  mortgage 
property  consigned  to  him,  and  cannot  trade  the  con- 
signed property  for  other  property. 
Civil  Code,  Section  2368.  " 

Section  230. — AUTHORITY  OF  PARTNER  OR  SERVANT.— 
The  partner  or  servant  of  a  commission  merchant  may 
have  the  same  authority  to  deal  with  the  consigned  prop- 
erty as  he  has,  but  he  cannot  delegate  his  authority  to  any 
person  in  an  independent  employment. 
Civil  Code,  Section  2368. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  263 

Section  231. — INSTRUCTIONS  FROM  CONSIGNOR. — If  a 
consignment  of  property  is  received  by  a  commission 
merchant,  and  the  consignor  at  the  same  time  sends  cer- 
tain instructions  for  him  to  follow,  regarding  any  matter 
connected  with  the  sale,  it  is  the  duty  of  the  merchant  to 
follow  such  instructions  if  possible,  notwithstanding  any 
advances  he  may  have  made  to  his  principal  upon  the 
property  consigned  to  him.  But  if  he  has  an  opportunity 
to  sell  at  the  market  price,  and  the  consignor  forbids  him 
to  do  so,  he  need  not  follow  such  instructions,  unless  his 
advances  are  repaid  him;  and  if  his  advances  are  not 
repaid  him,  he  may  proceed  to  sell  for  his  own  reimburse- 
ment, after  giving  to  the  consignor  reasonable  notice  of 
his  intention  to  do  so,  and  of  the  time  and  place  of  sale. 
Civil  Code,  Section  2027. 

Section  232. — CANNOT  EXTEND  CREDIT. — When  prop- 
erty is  sold  by  a  commission  merchant  on  credit,  the  sale 
must  be  made  on  such  credit  as  is  usual,  but  he  has  no 
power  to  extend  the  credit  agreed  upon. 
Civil  Code,  Section  2028. 

Section  233. — GUARANTY  OF  CERTAIN  PRICE. — Where 
the  commission  merchant  guarantees  that  the  goods  shall 
yield  to  the  consignor  a  fixed  price,  he  cannot  by  selling 
for  less,  or  by  deducting  his  commission,  avoid  his  lia- 
bility to  make  his  returns  to  the  consignor  amount  to  the 
price  agreed  upon.  The  value  of  the  goods,  as  it  turns 
out  to  be,  is  not  material.  He  has  fixed  his  own  liability, 
and  his  guaranty  of  a  certain  price,  and  his  liability  to 
the  consignor  for  so  much,  becomes  absolute  whenever  he 
makes  a  sale,  whether  for  cash  or  upon  credit. 

Section  234. — INSTRUCTIONS  TO  "SELL  ON  ARRIVAL/' 
Where  a  consignment  of  property  is  made  to  a  commis- 
sion merchant,  with  instructions  to  "sell  on  arrival,"  the 
merchant  is  bound  to  follow  the  instructions  and  sell  for 


264  BUSINESS  LAW  FOE  BUSINESS  MEN. 

the  price  the  property  will  command,  and  if  he  does  not 
do  so,  but  holds  the  property  and.  neglects  to  sell  on 
arrival,  he  will  be  liable  for  any  losses  sustained  by  tho 
consignor  occasioned  by  a  fall  in  price.  He  cannot  excuse 
himself  by  saying  that  the  market  'was  dull,  for  he  had 
received  his  instructions,  and  it  was  his  duty  to  sell,  if 
the  property  might  have  been  disposed  of  even  at  a  re- 
duced price.  It  was  his  duty  to  sell  on  arrival,  no  matter 
at  what  loss. 

Section  235. — SPECIAL  PEOPEKTY  IN  CONSIGNMENTS.— 
A  commission  merchant  to  whom  goods  have  been  con- 
signed for  sale,  has  a  special  property  in  the  goods,  by 
virtue  of  his  position  with  relation  to  them.  For  many, 
if  not  for  most  purposes,  he  is  treated  as  the  owner  of 
the  goods.  He  has  possession;  he  may  sell  and  make 
shipments;  he  may  collect  the  purchase  price;  and,  in 
fact,  he  may  deal  with  the  property  as  though  it  were 
his  own,  in  the  absence  of  explicit  instructions  limiting  his 
authority.  And  it  follows,  necessarily,  that  any  limita- 
tion upon  his  general  authority  must  be  brought  to  the 
notice  of  those  with  whom  he  deals,  or  his  principal 
will  be  bound,  even  though  he  should  go  outside  his 
instructions. 

Section  236. — IN  WHOSE  NAME  INSURANCE  MAY  BE 
PUT. — Insurance  on  property,  consigned  to  a  commission 
merchant  for  sale,  may  be  for  the  benefit  and  in  the  names 
of  both  merchant  and  consignor.  The  merchant  is  not 
bound  to  insure,  unless  he  has  received  orders  to  do  so ; 
but  he  may  insure,  in  his  own  name,  or  in  the  name  and 
for  the  benefit  of  his  principal. 

Section  237. — EESPONSIBILITY  OP  PURCHASER. — It  is  the 
duty  of  a  commission  merchant  who  sells  on  credit  to 
make  strict  inquiry  as  to  the  responsibility  of  the  pur- 
chaser ;  and  if  he  neglects  to  do  so,  and  a  loss  occurs,  he 
will  be  liable  for  it  to  his  principal. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  265 

Section  238. — RIGHT  TO  COMMISSIONS. — If  a  commis- 
sion merchant  properly  performs  his  duties,  he  will 
always  be  entitled  to  his  commission  in  such  sum  as  has 
been  agreed  upon  between  himself  and  principal ;  and  if 
there  has  been  no  agreement  as  to  the  amount  of  the  com- 
mission, then  for  a  reasonable  amount,  which  may  depend 
upon  usage  or  custom.  But  if  the  merchant  be  guilty  of 
gross  misconduct,  or  if  he  perform  his  duties  in  such  a 
negligent  manner  as  to  prevent  any  benefit  to  the  prin- 
cipal, he  will  not  be  entitled  to  receive  his  commission. 
If  expenses  are  occasioned  by  his  own  negligence,  he 
cannot  recover  them;  and  he  will  not  be  entitled  to  the 
difference,  when  through  his  own  negligence  the  proceeds 
of  the  sale  are  not  equal  to  the  expenses. 

Section  239. — MAY  SELL  IN  His  OWN  NAME. — Having 
a  special  property  in  goods  consigned  to  his  care,  a  com- 
mission merchant  may  sell  in  his  own  name;  and  when 
the  purchaser  pays  him,  the  former  is  discharged  from  all 
liability  to  the  real  owner  of  the  goods.  "Whenever  the 
commission  merchant  sells  in  bis  own  name,  he  may  sue 
the  purchaser  in  his  own  name  for  the  price. 

Section  240. — TAKING  PROMISSORY  NOTE  IN  PAYMENT. — 

When  it  is  proper  for  a  commission  merchant  to  sell  on 

credit,  and  he  takes  the  promissory  note  of  the  purchaser 

in  payment,  payable  to  himself,  he  takes  it  in  trust  for 

.his  principal,  and  subject  to  his  order. 

Section  241. — LIEN  OF  COMMISSION  MERCHANT. — Hav- 
ing possession  of  the  goods,  and  a  special  property  in 
them,  the  commission  merchant  has  a  lien  upon  them  and 
their  proceeds,  and  the  securities  received  upon  their 
sale,  for  his  expenses  and  commissions,  for  his  advances 
to  his  principal,  and  usually  for  the  balance  of  his  general 
account  with  his  principal. 


266  BUSINESS  LAW  FOB  BUSINESS  MEN. 

Section  242. — AUTHOKITY  AS  GENERAL  AGENT. — Where 
general  authority  is  given  to  a  commission  merchant  to 
buy  and  sell  for  the  principal,  he  is  considered  as  a  gen- 
eral agent,  and  his  acts  will  be  binding  on  his  principal, 
even  where  he  has  violated  his  private  instructions. 

Section  243. — CAEE  TO  BE  TAKEN  OF  GOODS  CONSIGNED. 
A  commission  merchant  is  bound  to  keep  the  goods  in- 
trusted to  him  with  the  same  care  as  a  prudent  man 
would  bestow  upon  them,  if  they  were  his  own.  He  must 
use  ordinary  diligence  in  the  care  and  preservation  of 
the  property  while  it  is  in  his  hands ;  and  for  any  loss 
occasioned  by  his  neglect  of  his  duty  in  this  respect  he 
will  be  personally  liable  to  his  principal. 

Section  244. — MUST  NOT  Mix  GOODS  WITH  ANOTHER'S. 
A  commission  merchant  has  no  right  to  mix  the  goods 
received  from  one  person  with  the  goods  of  another. 

Section  245. — DUTY  TO  BENDER  ACCOUNTS. — A  com- 
mission merchant  is  bound  to  give  the  unbiased  use  of 
his  own  discretion  and  judgment  to  his  principal,  and  he 
must  keep  and  render  to  his  principal  true  accounts  of 
his  transactions,  and  he  must  keep  the  principal  informed 
of  all  facts  material  to  his  interests ;  and  if  losses  occur 
through  neglect  of  these  duties,  he  will  become  personally 
responsible  to  the  principal. 

The  Legislature  passed  a  law  providing  that  "  every, 
commission  merchant,  broker,  agent,  factor,  or  consignee, 
who  shall  wilfully  and  corruptly  make,  or  cause  to  be 
made  to  the  principal  or  consignor,  a  false  statement  as 
to  the  price  obtained  for  any  property  consigned  or  en- 
trusted for  sale,  or  as  to  the  quality  or  quantity  of  any 
property  so  consigned,  or  entrusted,  or  as  to  any  expendi- 
tures made  in  connection  therewith,  shall  be  deemed 
guilty  of  a  misdemeanor,  and  on  conviction  thereof,  shall 
be  punished  by  fine  not  exceeding  five  hundred  dollars 
and  not  less  than  two  hundred  dollars,  or  by  imprison- 


BUSINESS  CONTBACTS  AND  LEGAL  OBLIGATIONS.  267 

ment  in  the  county  jail  not  exceeding  six  months  and  not 

less  than  ten  days,  or  by  both  such  fine  and  imprisonment. 

Act  of  the  Legislature,  approved  March  20, 1909. 

Another  law  was  passed  relating  to  the  duty  of  a  com- 
mission merchant  to  render  an  account  to  the  consignor, 
as  follows : 

"It  is  hereby  made  the  duty  of  every  commission  mer- 
chant, broker,  factor,  or  consignee,  to  whom  any  prop- 
erty is  consigned  or  entrusted  for  sale,  to  make,  when 
accounting  therefor  or  subsequently,  upon  the  written 
demand  of  his  principal  or  consignor,  a  true  written  state- 
ment setting  forth  the  name  and  address  of  the  person 
or  persons  to  whom  a  sale  of  the  said  property,  or  any 
portion  thereof,  was  made,  the  quantity  so  sold  to  each 
purchaser,  and  the  respective  prices  obtained  therefor; 
provided,  however,  that  unless  separate  written  demand 
shall  be  made  as  to  each  consignment  or  shipment  regard- 
ing which  said  statement  is  desired,  prior  to  sale,  it  shall 
be  sufficient  to  set  forth  in  said  statement  only  so  many 
of  said  matters  above  enumerated  as  said  commission, 
merchant,  broker,  factor,  or  consignee  may  be  able  to 
obtain  from  the  books  of  account  kept  by  him;  and  that 
said  statement  shall  not  be  required  in  case  of  cash  sales 
where  the  amount  of  the  transaction  is  less  than  fifty 
dollars.  Any  person  violating  the  provisions  of  this  sec- 
tion is  guilty  of  a  misdemeanor. ' ' 

Act  of  the  Legislature,  approved  April  22,  1909. 

REAL  ESTATE  AGENTS 

Section  246. — EMPLOYMENT  MUST  BE  IN  WRITING. — 
The  employment  of  a  real  estate  agent,  giving  him 
authority  to  sell  land  for  another,  is  required  by  the  law 
of  this  state  to  be  in  writing.  The  contract  or  some 
memorandum  of  it  must  be  in  writing.  The  contract  or 
memorandum  need  not  state  that  the  agent  is  to  receive 
a  commission  for  his  service,  but  it  must  show  in  writing 
that  the  agent  was  employed. 

Civil  Code,  Section  1624. 


268  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Section  247. — VERBAL  CONTRACT  INVALID. — A  verbal 
contract  for  the  sale  of  real  property,  made  by  an  agent 
who  has  no  written  authority  from  another,  is  invalid. 
And  if  the  agent  without  authority  in  writing  allows  an 
intending  purchaser  to  take  possession  of  the  property, 
such  possession  will  only  be  held  at  the  will  of  the  owner, 
who  can  bring  an  action  for  unlawful  detainer  against 
the  party  in  possession.  Verbal  authority  given  by  one 
to  another,  to  contract  with  reference  to  his  land,  is  in 
law  no  authority.  (Decided  by  the  Supreme  Court  of 
California  in  the  case  of  Nason  vs.  Lingle,  which  decision 
is  printed  in  Volume  27,  California  Decisions,  page  970.) 

Section  248. — WHEN  LETTER  NOT  SUFFICIENT. — A  let- 
ter from  the  owner  of  real  estate  is  not  sufficient  to 
enable  the  agent  to  recover  a  commission,  unless  it  is 
clearly  seen  that  an  employment  was  intended,  from  the 
language  used  in  the  letter  itself.  A  real  estate  agent  in 
Oakland  received  a  letter  which  read  as  follows :  ' '  Walter 
E.  Logan :  Sir — If  you  can  purchase  N.  W.  corner  of  13th 
and  Franklin  streets,  75x100,  for  $42,000,  I  think  we 
would  be  ready  to  purchase  same  by  Monday  next.  J.  C. 
McMullen."  Logan  sued  for  a  commission,  producing 
the  above  letter  as  evidence  of  his  employment  in  writing. 
The  District  Court  of  Appeals  decided  that  the  letter  was 
not  sufficient  memorandum  of  employment,  under  the  law. 
The  Court  says  that  it  does  not  purport  to  be  an  employ- 
ment of  the  plaintiff  as  a  broker  or  agent  for  the  pur-r 
chase  of  the  real  estate,  but  is  rather  to  be  construed  as 
merely  a  proposition  to  him  to  ascertain  whether  it  could 
be  purchased  at  the  designated  price.  But  whatever  con- 
struction is  to  be  given  to  its  terms,  inasmuch  as  the 
plaintiff  did  not  purchase  the  property,  or  obtain  from 
the  owner  an  agreement  for  its  sale  which  could  be  en- 
forced by  the  defendant,  the  latter  did  not  become  liable 
to  him  for  any  service  as  broker  or  agent  in  the  matter. 
It  was  his  duty  to  procure  from  the  owners  and  deliver 
to  the  defendant  a  valid  contract  of  sale  which  could  be 


Section  249,  page  269,  "Business  Law  for  Business  Men" — NEW  PRO- 
VISIONS OF  LICENSE  LAW— On  page  279,  after  sub-division  (v),  add 
new  sub-divisions  as  follows: 

(w)  BROKER'S  SIGN — Each  individual,  firm  or  corporation  licensed  as 
a  broker  under  the  provisions  of  this  act  shall  erect  or  maintain  a  sign  on  the 
premises  wherein  is  located  his  place  of  business,  on  which  shall  be  plainly 
stated  that  he  is  a  real  estate  broker. 

(x)  FARM  ACREAGE  SUB-DIVISIONS— The  state  real  estate  com- 
missioner, upon  his  own  initiative  or  upon  written  application  of  the  owner  of 
any  agricultural  lands  being  offered  for  sale  or  proposed  to  be  offered  for  sale 
for  colonization  purposes  or  for  farm  acreage  subdivision  or  for  rural  settle- 
ment, shall  have  authority  to  investigate  and  make  public  report  upon  said  col- 
onization or  farm  acreage  subdivision  or  rural  settlement  enterprise,  with  ref- 
erence to  the  condition  of  title  to  said  lands  and  the  methods  of  sale  being 
used  or  proposed  to  be  used  in  effecting  the  sale  thereof  and,  in  case  said  land 
is  represented  to  have  a  water  supply  or  to  be  sold  with  a  water  right,  the 
truthfulness  of  such  representation. 

It  shall  be  unlawful  for  any  person,  copartnership,  or  corporation  to  issue, 
circulate  or  publish  any  advertisement,  pamphlet  or  circular  concerning  any 
agricultural  lands  being  offered  for  sale  or  proposed  to  be  offered  for  sale 
for  colonization  purposes  or  for  farm  acreage  subdivision  or  for  rural  settle- 
ment wherein  it  is  stated  that  the  real  estate  commissioner  has  made  a  report 
on  such  enterprise  unless  the  substance  of  said  report  shall  be  clearly  set 
forth  in  said  advertisement,  pamphlet  or  circular.  Any  person  or  corpora- 
tion violating  the  provisions  of  this  section  shall  upon  conviction  thereof,  if  a 
person,  be  punished  by  a  fine  not  to  exceed  two  thousand  dollars  or  by  im- 
prisonment in  the  county  jail  or  state  prison  for  a  term  not  to  exceed  one 
year,  or  by  both  fine  and  imprisonment,  in  the  discretion  of  the  court;  or  if 
a  corporation,  be  punished  by  a  fine  of  not  to  exceed  five  thousand  dollars. 

Act  of  the  Legislature  of  California,  approved  June  3,  1921;  in  effect 
August  3,  1921. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  269 

enforced  by  the  defendant;  or,  if  lie  could  obtain  from 
the  owners  a  verbal  agreement  to  make  the  sale,  he  should 
have  brought  the  owners  and  the  defendant  together,  thus 
giving  the  latter  an  opportunity  to  secure  a  written  con- 
tract. The  letter  alone  was  not  sufficient  to  show  an 
employment  of  the  agent,  or  to  give  him  any  right  to 
commissions.  (Decided  by  the  District  Court  of  Appeals, 
First  District,  in  the  case  of  Logan  vs.  McMullen,  which 
decision  is  printed  in  Volume  87  of  the  Pacific  Reporter, 
page  285.) 

Section  249. — LICENSE  OF  REAL  ESTATE  BBOKEES  AND 
SALESMEN. — It  shall  be  unlawful  for  any  person,  copart- 
nership or  corporation  to  engage  in  the  business,  or  act 
in  the  capacity  of  a  real  estate  broker,  or  a  real  estate 
salesman,  within  this  state  without  first  obtaining  a 
license  therefor. 

(a)  Real  Estate  Broker. — A  real  estate  broker  within 
the  meaning  of  this  act  is  a  person,  copartnership  or  cor- 
poration who,  for  a  compensation,  sells,  or  offers  for  sale, 
buys,  or  offers  to  buy,  or  negotiates  the  purchase  or  sale 
or  exchange  of  real  estate,  or  who,  for  compensation, 
negotiates  loans  on  real  estate,  leases,  or  offers  to  lease, 
rents,  or  places  for  rent,  or  collects  rent  from  real  estate, 
or  improvements  thereon,  for  others  as  a  whole  or  partial 
vocation. 

(b)  Real  Estate  Salesman. — A  real  estate  salesman 
within  the  meaning  of  this  act  is  one  who  for  a  compen- 
sation is  employed  by  a  licensed  broker  to  sell,  or  offer 
for  sale,  or  to  buy,  or  to  offer  to  buy,  or  to  negotiate  the 
purchase  or  sale  or  exchange  of  real  estate,  or  to  nego- 
tiate a  loan  on  real  estate,  or  to  lease,  or  offer  to  lease, 
rent,  or  place  for  rent,  any  real  estate,  or  improvements 
thereon,  as  a  whole  or  partial  vocation. 

(c)  Application  of  Act. — The  provisions  of  this  act 
shall  not  apply  to  any  person,  copartnership  or  corpora- 
tion who  shall  perform  any  of  the  acts  aforesaid  with 
reference  to  property  owned  by  such  person,  copartner- 


270  BUSINESS  LAW  FOR  BUSINESS  MEN. 

ship  or  corporation;  nor  shall  the  provisions  of  this  act 
apply  to  persons  holding  a  duly  executed  power  of  attor- 
ney from  the  owner,  nor  shall  this  act  be  construed  to 
include  in  any  way  the  services  rendered  by  an  attorney 
at  law  in  performing  his  duties  as  such  attorney  at  law ; 
nor  shall  it  be  held  to  include  any  receiver,  trustee  in 
bankruptcy,  or  any  person  acting  under  order  of  any 
court,  nor  to  a  trustee  selling  under  a  deed  of  trust. 

(d)  Act  Constituting  Person  a  Broker. — One  act,  for 
a  compensation,  of  buying  or  selling  real  estate  of  or  for 
another,  or  offering  for  another  to  buy  or  sell  or  ex- 
change real  estate,  or  negotiating  a  loan  on  or  leasing  or 
renting  or  placing  for  rent  real  estate,  or  collecting  rent 
therefrom  shall  constitute  the  person,  copartnership  or 
corporation  making  such  offer,   sale   or  purchase,   ex- 
change or  lease,  or  negotiating  said  loan,  or  so  renting  or 
placing  for  rent  or  collecting  said  rent  a  real  estate 
broker  within  the  meaning  of  this  act. 

(e)  State  Real  Estate  Department. — There  is  hereby 
created  a  state  real  estate  department.    The  chief  officer 
of  such  department  shall  be  the  real  estate  commissioner 
He  shall  be  appointed  by  the  governor  and  hold  office  at 
the  pleasure  of  the  governor.    He  shall  receive  an  annual 
salary  of  five  thousand  dollars,  to  be  paid  monthly  out  of 
the  state  treasury  upon  a  warrant  of  the  controller.    He 
shall  within  fifteen  days  from  the  time  of  notice  of  his 
appointment  take  and  subscribe  to  the  constitutional  oath 
of  office,  and  file  the  same  in  the  office  of  the  secretary  of 
state  and  execute  to  the  people  of  the  State  of  California 
a  bond  in  the  penal  sum  of  ten  thousand  dollars  executed 
by  two  or  more  sureties,  or  by  a  surety  company  duly 
authorized  to  do  business  in  this  state,  to  be  approved  by 
the  governor  of  the  state,  for  the  faithful  discharge  of 
the  duties  of  his  office.     The  real  estate  commissioner 
shall  have  full  power  to  regulate  and  control  the  issuance 
and  revocation,  both  temporary  and  permanent,  of  the 
licenses  to  be  issued  under  the  provisions  of  this  act,  and 
to  perform  all  other  acts  and  duties  provided  in  this  act 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  271 

and  necessary  for  its  enforcement.  The  real  estate  com- 
missioner shall  employ  such  deputies,  clerks  and  assist- 
ants as  he  may  need  to  discharge  in  proper  manner  the 
duties  imposed  upon  him  by  law.  Neither  the  real  estate 
commissioner,  nor  any  of  his  deputies,  clerks  or  assist- 
ants, shall  be  interested  in  any  real  estate  company  or 
real  estate  broker  as  director,  stockholder,  officer,  member, 
agent  or  employee.  Such  deputies,  clerks  and  assistants 
shall  perform  such  duties  as  the  real  estate  commissioner 
shall  assign  to  them.  The  real  estate  commissioner  shall 
fix  the  compensation  of  such  deputies,  clerks  and  assist- 
ants, which  compensation  shall  be  paid  monthly  on  a  cer- 
tificate of  the  real  estate  commissioner  and  on  the  warrant 
of  the  controller  out  of  the  state  treasury.  Each  deputy 
shall,  after  his  appointment,  take  and  subscribe  to  the 
constitutional  oath  of  office  and  file  the  same  in  the  office 
of  the  secretary  of  state. 

The  real  estate  commissioner  shall  have  his  principal 
office  in  the  city  of  Sacramento,  and  may  establish  branch 
offices  in  the  city  and  county  of  San  Francisco,  and  in  the 
city  of  Los  Angeles. 

(f)  Limitations  on  License. — No  real  estate  license 
shall  give  authority  to  any  person,  copartnership  or  cor- 
poration other  than  those  to  whom  said  license  is  issued ; 
provided,  however,  that  when  a  license  is  issued  to  a  cor- 
poration, the  officers  thereof,  other  than  the  president, 
shall  be  required  to  obtain  a  license  if  engaged  in  the  real 
ostate  business  as  a  whole  or  partial  vocation;  and  pro- 
vided, further,  that  when  a  license  is  granted  to  a  copart- 
nership the  members  of  said  copartnership  shall  each  be 
required  to  obtain  a  separate  license,  except  as  provided 
hereafter. 

(g)  Applications  for  License. — Application  for  license 
as  real  estate  broker  shall  be  made  in  writing  to  the  real 
estate  commissioner,  which  application  shall  be  accom- 
panied by  the  recommendation  of  two  real  estate  owners 
of  the  county  in  which  said  applicant  resides  or  has  his 
place  of  business,  certifying  that  the  applicant  is  honest, 


272  BUSINESS  LAW  FOB  BUSINESS  MEN. 

truthful  and  of  good  reputation,  and  recommending  that 
a  license  be  granted  the  applicant.  If  the  applicant  shall 
have  resided,  or  shall  have  engaged  in  business  for  less 
than  one  year  in  the  county  from  which  the  application 
is  made,  the  same  shall  also  be  accompanied  by  the  recom- 
mendation of  two  real  estate  owners  of  each  of  the  coun- 
ties where  he  has  formerly  resided  or  engaged  in  busi- 
ness during  said  period  of  one  year  prior  to  the  filing  of 
said  application,  certifying  that  the  applicant  is  honest, 
truthful  and  of  good  reputation  and  recommending  that 
a  license  be  granted  the  applicant.  Where  the  applicant 
for  a  real  estate  broker 's  license  maintains  more  than  one 
place  of  business  within  the  state  he  shall  be  required  to 
apply  for  and  procure  a  duplicate  license  for  each  branch 
offke  so  maintained  by  him.  Such  duplicate  license  shall 
be  issued  without  additional  charge.  Every  such  appli- 
cation shall  state  the  name  of  the  person,  copartnership 
or  corporation,  and  the  location  of  the  place  or  places  of 
business  for  which  such  license  is  desired. 

(h)  Licenses  for  Salesmen. — Application  for  license 
as  real  estate  salesman  shall  be  made  in  writing  to  the 
real  estate  commissioner,  signed  by  the  applicant,  setting 
forth  the  period  of  time  during  which  he  has  been  en- 
gaged in  the  business,  stating  the  name  of  his  last  em- 
ployer and  the  name  and  place  of  business  of  the  person, 
copartnership  or  corporation  then  employing  him,  or  in 
whose  employ  he  is  to  enter.  The  application  shall  be 
accompanied  by  the  recommendation  of  his  employer,  if 
employed,  certifying  that  the  applicant  is  honest,  truthful 
and  of  good  reputation,  and  recommending  that  the 
license  be  granted  to  the  applicant. 

The  real  estate  commissioner  may  require  such  other 
proof  as  he  may  deem  advisable  of  the  honesty,  truthful- 
ness and  good  reputation  of  any  applicant  for  a  license, 
or  of  the  officers  of  any  corporation,  or  of  the  members 
of  any  copartnership  making  such  application  before 
authorizing  the  issuance  of  a  license. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  273 

(i)  License  Fees. — The  fees  for  licenses  shall  be  as 
follows : 

(1)  For  a  broker's  license  the  annual  fee  shall  be  ten 
dollars.     If  the  licensee  be  a  corporation,  the  license 
issued  to  it  shall  entitle  the  president  thereof  to  engage 
in  the  business  of  real  estate  broker  within  the  meaning 
of  this  act.    For  officers  other  than  the  president  of  a 
licensed  corporation,  who  shall  engage  in  the  business  of 
real  estate  broker,  within  the  meaning  of  this  act,  the 
annual  fee  shall  be  two  dollars.     If  the  licensee  be  a 
copartnership,  the  license  issued  to  it  shall  entitle  one 
member  of  said  copartnership  to  engage  in  the  business 
of  real  estate  broker  within  the  meaning  of  this  act.    For 
each  other  member  of  such  copartnership  who  engages  in 
the  business  of  real  estate  broker  within  the  meaning  of 
this  act  the  annual  fee  shall  be  two  dollars. 

(2)  For  a  salesman's  license  the  annual  fee  shall  be 
two  dollars. 

(3)  If  application  for  a  license  is  made  during  the 
period  beginning  on  the  first  day  of  April  and  ending  on 
the  thirtieth  day  of  June,  in  any  year,  three-fourths  of 
the  annual  fee  shall  be  paid ;  if  application  is  made  during 
the  period  beginning  on  the  first  day  of  July  and  ending 
on  the  thirtieth  day  of  September,  one-half  of  such  annual 
fee;  if  application  is  made  during  the  period  beginning 
on  the  first  day  of  October  and  ending  on  the  thirty-first 
day  of  December,  one-fourth  of  such  annual  fee. 

(4)  All  applications  for  license  shall  be  accompanied 
by  the  license  fee  as  herein  provided,  and  all  licenses 
shall  expire  on  December  thirty-first  of  each  year. 

(j)  Display  of  Licenses  in  Offices. — The  licenses  of 
both  broker  and  salesman  shall  be  prominently  displayed 
in  the  office  of  the  real  estate  broker,  and  no  license  issued 
hereunder  shall  authorize  the  licensee  to  do  business  ex- 
cept from  the  location  stipulated  in  the  license.  Notice 
in  writing  shall  be  given  the  commissioner  of  change  of 
business  location  or  change  of  employer,  whereupon  the 
commissioner  shall  issue  a  new  license  for  the  unexpired 


274  BUSINESS  LAW  FOR  BUSINESS  MEN. 

period  without  charge.  The  change  of  business  location 
without  notification  to  the  commissioner  and  the  issuance 
by  him  of  a  new  license  shall  automatically  cancel  the 
license  heretofore  issued. 

Each  person,  firm  or  corporation  licensed  as  a  broker 
under  the  provisions  of  this  act  shall  be  required  to  have 
and  maintain  a  definite  place  of  business  in  the  State  of 
California  which  shall  serve  as  his  office  for  the  trans- 
action of  business. 

(k)  Revocation  of  Licenses. — The  real  estate  commis- 
sioner may  upon  his  own  motion,  and  shall  upon  the 
verified  complaint  in  writing  of  any  person,  investigate 
the  actions  of  any  person,  copartnership  or  corporation 
engaged  in  the  business  or  acting  in  the  capacity  of  a  real 
estate  broker,  or  a  real  estate  salesman,  within  this  state, 
and  shall  have  the  power  to  temporarily  suspend  or  per- 
manently revoke  licenses  issued  under  the  provisions 
of  this  act,  at  any  time  where  the  holder  thereof  is 
guilty  of- 

(1)  Making  any  substantial  misrepresentation,  or 

(2)  Making  any  false  promises  of  a  character  likely 
to  influence,  persuade  or  induce,  or 

(3)  A  continued  and  flagrant  course  of  misrepresenta- 
tion or  making  of  false  promises  through  agents  or  sales- 
men, or 

(4)  Acting  for  more  than  one  party  in  a  transaction 
without  the  knowledge  or  consent  of  all  parties  thereto,  or 

(5)  Any  other  conduct,  whether  of  the  same  or  a  dif- 
ferent character  than  hereinabove  specified,  which  con- 
stitutes dishonest  dealing. 

(1)  Appeal  from  Revocation  of  License. — Before  sus- 
pending or  revoking  any  license  the  said  commissioner 
shall  notify,  in  writing,  the  holder  of  such  license  of  the 
charges  against  him  and  afford  an  opportunity  to  be 
heard  in  person  or  by  counsel  in  reference  thereto.  The 
decision  of  the  said  commissioner  in  suspending  or  re- 
voking any  license  under  this  act  shall  be  subject  to 
review ;  and  any  party  aggrieved  by  such  decision  of  the 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  275 

commissioner  may  within  ten  days  from  the  date  of  said 
decision  appeal  therefrom  to  the  superior  court  of  the 
State  of  California,  in  and  for  the  county  in  which  the 
person  affected  by  such  decision  resides  or  has  his  place 
of  business  under  the  terms  of  this  act,  by  serving  upon 
the  commissioner  a  notice  of  such  appeal  and  a  demand 
in  writing  for  a  certified  transcript  of  all  the  papers  on 
file  in  his  office  affecting  or  relating  to  such  decision  and 
all  the  evidence  taken  on  the  hearing  and  paying  ten  cents 
for  each  folio  of  the  transcript  and  one  dollar  for  the 
certification  thereof.  Thereupon  the  commissioner  shall, 
within  thirty  days,  make  and  certify  such  transcript,  and 
the  appellant  shall,  within  five  days  after  receiving  the 
same,  file  the  same  and  the  notice  of  appeal  with  the  clerk 
of  said  court.  Upon  the  hearing  of  such  appeal,  the 
burden  of  proof  shall  lie  upon  the  appellant,  and  the 
court  shall  receive  and  consider  any  pertinent  evidence, 
whether  oral  or  documentary,  concerning  the  action  of 
the  commissioner  from  which  the  appeal  is  taken,  but 
shall  be  limited  to  a  consideration  and  determination  of 
the  question  whether  there  has  been  an  abuse  of  dis- 
cretion on  the  part  of  the  commissioner  in  making  such 
decision. 

The  decision  of  the  commissioner  shall  not  take  effect 
until  ten  days  after  its  date,  and  if  notice  of  appeal  and 
demand  for  transcript  are  served  upon  the  commissioner 
in  accordance  with  the  provisions  of  this  law,  then  such 
stay  shall  remain  in  full  force  and  effect  until  decision 
upon  appeal  by  said  superior  court.  But  if  said  ag- 
grieved party  shall  fail  to  perfect  his  appeal  as  herein 
provided,  said  stay  shall  automatically  terminate. 

(m)  Powers  of  Commissioner. — The  real  estate  com- 
missioner shall  have  power  to  administer  oaths,  certify 
to  all  official  acts,  and  to  issue  subpoenas  for  the  attend- 
ance of  witnesses  and  the  production  of  books  and  papers. 
In  any  hearing  in  any  part  of  the  state  the  process  issued 
by  the  commissioner  shall  extend  to  all  parts  of  the  state 


276  BUSINESS  LAW  FOE  BUSINESS  MEN. 

and  may  be  served  by  any  person  authorized  to  serve 
process  of  courts  of  record  or  by  any  person  designated 
for  the  purpose  by  the  commissioner.  The  person  serv- 
ing any  such  process  shall  receive  such  compensation  as 
may  be  allowed  by  the  commissioner,  not  to  exceed  the 
fees  prescribed  by  law  for  similar  service,  and  such  fees 
shall  be  paid  in  the  same  manner  as  provided  herein  for 
the  payment  of  the  fees  of  witnesses.  Each  witness  who 
shall  appear  by  order  of  the  commissioner  shall  receive 
for  his  attendance  the  same  fees  and  mileage  allowed  by 
law  to  a  witness  in  civil  cases,  which  amount  shall  be 
paid  by  the  party  at  whose  request  such  witness  is  sub- 
poenaed. When  any  witness  who  has  not  been  required 
to  attend  at  the  request  of  any  party  shall  be  subpoenaed 
by  the  commissioner  his  fees  and  mileage  shall  be  paid 
from  the  funds  appropriated  for  the  use  of  the  said  real 
estate  department  in  the  same  manner  as  other  expenses 
of  said  department  are  paid. 

(n)  Powers  of  Superior  Court. — The  superior  court 
in  and  for  the  county  in  which  any  hearing  may  be  held 
by  the  commissioner  shall  have  the  power  to  compel  the 
attendance  of  witnesses,  the  giving  of  testimony  and  the 
production  of  books  and  papers  as  required  by  any 
subpoena  issued  by  the  commissioner.  In  case  of  the 
refusal  of  any  witness  to  attend  or  testify  or  produce  any 
papers  required  by  such  subpoena  the  commissioner  may 
report  to  the  superior  court  in  and  for  the  county  in 
which  the  hearing  is  pending  by  petition,  setting  forth 
that  due  notice  has  been  given  of  the  time  and  place  of 
attendance  of  said  witness  or  the  production  of  said 
papers,  and  that  the  witness  has  been  summoned  in  the 
manner  prescribed  in  this  act,  and  that  the  witness  has 
failed  and  refused  to  attend  or  produce  the  papers  re- 
quired by  subpoena  before  the  commissioner  in  the  cause 
or  proceeding  named  in  the  subpoena,  or  has  refused  to 
answer  questions  propounded  to  him  in  the  course  of  such 
henring,  and  ask  an  order  of  said  court  compelling  the 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  277 

witness  to  attend  and  testify  or  produce  said  papers 
before  the  commissioner.  The  court  upon  petition  of  the 
commissioner  shall  enter  an  order  directing  the  witness 
to  appear  before  the  court  at  a  time  and  place  to  be  fixed 
by  the  court  in  such  order,  the  time  to  be  not  more  than 
ten  days  from  the  date  of  the  order,  and  then  and  there 
show  cause  why  he  has  not  attended  or  testified  or  pro- 
duced said  papers  before  the  commissioner.  A  copy  of 
said  order  shall  be  served  upon  said  witness.  If  it  shall 
appear  to  the  court  that  said  subpoena  was  regularly 
issued  by  the  commissioner,  the  court  shall  thereupon 
enter  an  order  that  said  witness  appear  before  the  com- 
missioner at  the  time  and  place  fixed  in  said  order  and 
testify  or  produce  the  required  papers,  and  upon  failure 
to  obey  said  order,  said  witness  shall  be  dealt  with  as  for 
contempt  of  court. 

(o)  Taking  of  Depositions. — The  commissioner  may 
in  any  hearing  before  him  cause  the  deposition  of  wit- 
nesses residing  within  or  without  the  state  to  be  taken  in 
the  manner  prescribed  by  law  for  like  depositions  in  civil 
actions  in  the  superior  courts  of  this  state,  and  to  that 
end  may  compel  the  attendance  of  witnesses  and  the  pro- 
duction of  books  and  papers. 

(p)  Right  to  Attendance  of  Witnesses. — Any  party 
to  any  hearing  before  the  commissioner  shall  have  the 
right  to  the  attendance  of  witnesses  in  his  behalf  at  such 
hearing  or  upon  deposition  as  set  forth  in  this  sec- 
tion upon  making  request  therefor  to  the  commissioner 
and  designating  the  person  or  persons  sought  to  be 
subpoenaed. 

(q)  When  Salesman  Is  Discharged. — When  any  sales- 
man shall  be  discharged  by  his  employer  for  a  violation 
of  any  of  the  provisions  of  section  twelve  hereof,  a 
written  statement  of  the  facts  in  reference  thereto  shall 
be  filed  forthwith  with  the  real  estate  commissioner  by 
the  employer. 

(r)  Employer's  License  Not  Affected  by  Employee's 
Violation. — No  violation  of  any  of  the  provisions  of  this 


278  BUSINESS  LAW  FOE  BUSINESS  MEN. 

act  on  the  part  of  any  salesman  or  employee  of  any 
licensed  broker  in  this  state  shall  cause  the  revocation  or 
suspension  of  the  license  of  the  employer  of  said  sales- 
man or  employee  unless  it  shall  appear  upon  a  hearing  to 
be  had  by  the  commissioner  that  said  employer  had  guilty 
knowledge  of  such  violation. 

(s)  Prosecution  of  Violations. — The  real  estate  com- 
missioner may  prefer  a  complaint  for  violation  of  this 
act  before  any  court  of  competent  jurisdiction,  and  said 
commissioner  and  his  counsel,  deputies  or  assistants  may 
assist  in  presenting  the  law  or  facts  at  the  trial.  It  shall 
be  the  duty  of  the  district  attorney  of  each  county  in  this 
state  to  prosecute  all  violations  of  the  provision  of  this 
act  in  their  respective  counties  in  which  such  violations 
occur. 

(t)  Penalty  for  Acting  Without  License. — Any  per- 
son or  corporation  acting  as  real  estate  broker  or  real 
estate  salesman  within  the  meaning  of  this  act  without  a 
license  as  herein  provided  shall,  upon  conviction  thereof, 
if  a  person,  be  punished  by  a  fine  of  not  to  exceed  two 
thousand  dollars,  or  by  imprisonment  in  the  county  jail 
or  state  prison  for  a  term  not  to  exceed  two  years,  or 
by  both  such  fine  and  imprisonment,  in  the  discretion  of 
the  court;  or  if  a  corporation,  be  punished  by  a  fine  of 
not  to  exceed  five  thousand  dollars. 

(u)  No  Commission  to  Unlicensed  Persons. — It  shall 
be  unlawful  for  any  licensed  broker  to  pay  a  commission 
for  performing  any  of  the  acts  herein  specified  to  any 
person  who  is  not  a  licensed  broker,  or  a  licensed 
salesman. 

(v)  Parti/  to  Action  Must  Be  Licensed. — No  person, 
copartnership  or  corporation  engaged  in  the  business  or 
acting  in  the  capacity  of  a  real  estate  broker  or  a  real 
estate  salesman  within  this  state  shall  bring  or  maintain 
any  action  in  the  courts  of  this  state  for  the  collection  of 
compensation  for  the  performance  of  any  of  the  acts  men- 
tioned without  alleging  and  proving  that  such  person, 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  279 

copartnership  or  corporation  was  a  duly  licensed  real 
estate  broker  or  real  estate  salesman  at  the  time  the 
alleged  cause  of  action  arose. 

Act  of  the  Legislature,  approved  May  27,  1919 ; 
in  effect  July  27,  1919. 

Section  250. — FALSE  ADVERTISEMENTS. — Any  person, 
firm,  corporation  or  association,  or  any  employee  or 
agent  therefor,  who  in  a  newspaper,  circular,  circular  or 
form  letter  or  other  publication  published  or  circulated 
in  any  language  in  this  state,  makes  or  disseminates  any 
statement  or  assertion  of  fact,  concerning  the  extent, 
location,  ownership,  title  or  other  characteristic,  quality 
or  attribute  of  any  real  estate  located  in  this  state  or 
elsewhere,  which  is  known  to  him  to  be  untrue  and  which 
is  made  or  disseminated  with  the  intention  of  misleading, 
is  guilty  of  a  misdemeanor ;  provided,  however,  that  noth- 
ing in  this  section  shall  be  construed  to  hold  the  publisher 
of  any  newspaper,  or  any  job  printer,  liable  for  any  pub- 
lication herein  referred  to  unless  such  publisher  or 
printer  has  an  interest  either  as  owner  or  agent,  in  such 
real  estate  so  advertised. 

Act  of  the  Legislature  of  California,  1915;  in 
effect  August  8,  1915. 

Section  251. — AUTHORITY  OF  AGENT  TO  MAKE  A  LEASE. 
The  written  authorization  from  the  owner,  to  be  sufficient 
to  permit  a  real  estate  agent  to  enter  into  a  binding  con- 
tract of  lease,  must  express  within  its  terms  the  inten- 
tion of  the  owner  to  confer,  upon  the  agent  complete 
authority  to  do  so.  The  mere  employment  by  the  owner 
of  an  agent  to  lease  his  property  does  not  give  the  agent 
authority  to  make  and  execute  a  binding  lease.  The 
words  "we  hereby  authorize  you  to  negotiate  a  lease," 
do  not  authorize  an  agent  to  execute  a  lease  in  the  name 
of  the  owner,  but  merely  empowers  him  to  procure  a 
tenant  for  the  property.  (Decided  by  the  Supreme  Court 
of  California  in  the  case  of  Salter  vs.  Ives,  which  decision 
is  printed  in  Vol.  155  of  the  Pacific  Eeporter,  page  84.) 


280  BUSINESS  LAW  FOB  BUSINESS  MEN. 

Section  252. — FOKM  OF  WBITTEN  AUTHOBITY  TO  AGENT. 
The  following  is  a  form  in  writing  authorizing  an  agent 
to  sell  land: 

San  Francisco,  Cal., ,  19 

In  consideration  of  services  to  be  performed  by  him, 

I  hereby  authorize  and  employ ,  of 

,  State  of  California,  to  sell  the  following- 
described  real  estate  belonging  to  me,  situate  in  the 
County  of ,  State  of  California,  to-wit : 

(Here  describe  property.) 

for  the  sum  of  $ 

This  authority  is  for  the  term  of days 

from  date,  and  shall  be  exclusive. 

I  agree  to  pay  to  said , 

as  his  commission  for  making  a  sale  of  said  property,  the 
sum  of per  cent  of  the  selling  price. 

Ten  days  to  be  given  for  examination  of  abstract  of 
title,  which  I  agree  to  furnish. 

Time  is  of  the  essence  of  this  instrument. 

Owner. 

Section  253. — RIGHT  OF  AGENT  TO  COMMISSIONS  WHEN 
PROPERTY  WITHDRAWN  FROM  SALE. — Where  the  contract 
of  employment  provides  that  if  the  owner  shall  before  the 
expiration  of  the  contract  withdraw  the  property  from 
sale  the  agent  will  be  entitled  to  his  commissions,  the 
agent  is  entitled  to  recover  his  commissions  as  a  debt  due 
from  the  owner,  upon  his  withdrawing  the  property  from 
sale  within  the  time  named  in  the  contract.  The  owner 
who  withdraws  the  property  from  sale  will  be  liable  for 
the  commissions,  even  though  the  agent  has  not  found  a 
purchaser  for  the  property.  For  by  his  contract  he  gives 
the  agent  the  opportunity  to  earn  the  commissions  within 
a  certain  time ;  and  if,  during  the  term,  he  withdraws  the 
property  from  sale,  he  thus  deprives  the  agent  of  the 
benefit  of  the  unexpired  time,  and  may  prevent  his  oppor- 
tunity for  making  a  sale. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  281 

Section  254. — WHEN  CONTRACT  FULFILLED  AND  COM- 
MISSION EARNED. — A  real  estate  agent  is  never  entitled  to 
commissions  for  unsuccessful  efforts.  When  he  under- 
takes to  find  a  purchaser,  the  risk  of  failure  is  wholly  his. 
The  reward  comes  only  with  his  success.  That  is  the 
plain  contract  and  contemplation  of  the  parties.  The 
agent  may  devote  his  time  and  labor  and  expend  his 
money  with  ever  so  much  devotion  to  the  interest  of  his 
employer,  and  yet  if  he  fails,  if,  without  effecting  an 
agreement  or  accomplishing  a  bargain,  he  abandons  the 
effort,  or  if  his  authority  is  fairly  and  in  good  faith  ter- 
minated, he  gains  no  right  to  commissions.  He  loses  the 
effort  which  was-staked  upon  success,  and  in  such  event  it 
matters  not  that  after  his  failure  and  the  termination  of 
his  agency,  what  he  has  done  proves  of  use  and  benefit  to 
the  principal.  But,  on  the  other  hand,  if  an  agent  author- 
ized to  negotiate  a  sale  produces,  within  the  time  limited 
by  his  contract,  a  purchaser,  ready,  willing,  and  able  to 
purchase  upon  the  terms  stated  in  the  contract,  his 
service  is  completed  and  he  is  entitled  to  his  commissions. 
He  is  entitled  to  his  commissions,  notwithstanding  the 
owner  backs  out,  and  refuses  to  sell  to  the  purchaser 
produced. 

Section  255. — WHAT  is  SUFFICIENT  AUTHORITY  FROM 
CORPORATION. — Where  an  individual  gives  authority  to  a 
real  estate  agent  to  sell  his  land,  any  writing,  in  any 
form,  whether  memorandum,  agreement,  or  letter,  or  tele- 
gram, which  expresses  on -its  face  the  employment  of  the 
agent  to  sell,  is  a  sufficient  authorization.  But  in  the  case 
of  a  corporation  the  law  is  entirely  different.  A  corpora- 
tion can  only  act  by  and  through  its  officers,  and  a  writing, 
though  signed  by  its  president,  cashier,  or  secretary,  or 
all  three  together,  stating  that  a  real  estate  agent  had 
been  employed  to  sell  lands  owned  by  the  corporation, 
would  not  give  any  authority  to  the  agent  whatever. 
Corporations  act  by  their  officers,  and  the  officers  must 
transact  their  business  in  the  manner  provided  by  law, 


282  BUSINESS  LAW  FOR  BUSINESS  MEN. 

and  in  no  other  way.  Therefore,  a  corporation  which  nas 
land  to  sell,  and  wishes  to  employ  an  agent  to  make  the 
sale,  can  only  act  upon  the  matter  through  its  Board  of 
Directors,  when  duly  assembled,  by  a  resolution  duly 
passed  and  recorded.  There  must  be  a  quorum  of  the 
Directors  present,  and  a  majority  of  the  Board  must  vote 
in  favor  of  the  resolution  to  employ  the  agent,  and  the 
"aye"  and  "no"  vote  must  be  entered  in  the  minutes. 
The  agent  should  then  be  furnished  with  a  copy  of  the 
resolution,  which  will  be  a  sufficient  indication  of  his 
authority.  When  the  by-laws  of  the  corporation  provide 
that  notice  to  Directors  of  meetings  of  the  Board  be  given 
in  a  certain  manner,  notice  must  be  given  strictly  in 
accordance  with  the  by-laws,  or  the  resolution  passed  will 
not  be  valid.  It  will  make  no  difference  that  all  the  Direc- 
tors, without  the  formality  of  a  meeting,  sign  their  names 
to  a  written  authorization  to  the  agent.  Such  writing 
would  be  worthless.  Under  it  the  agent  would  have  no 
legal  authority  to  deal  with  the  land.  Under  it,  he  could 
neither  make  a  valid  contract  of  sale,  nor  collect  any  com- 
missions from  the  corporation  for  his  services.  The  di- 
rectors, the  president,  the  secretary,  the  cashier,  the 
stockholders,  no  one  of  these  has  power,  by  virtue  of  his 
office  or  investment,  to  employ  an  agent  to  buy  or  sell  for 
the  corporation,  nor  have  all  together  the  power  which 
neither  has  separately.  The  powers  of  a  corporation 
must  be  exercised,  and  its  property  controlled,  by  its 
board  of  directors;  the  decision  of  the  majority  of  the 
directors,  made  when  duly  assembled,  being  valid  as  a 
corporate  act.  The  board  must  be  duly  assembled,  and 
their  transactions  should  be  recorded.  The  directors 
when  not  acting  as  a  board  have  not  the  necessary  power 
to  employ  an  agent.  The  absence  of  a  resolution  of  the 
board  renders  any  writing  purporting  to  employ  the 
agent,  though  signed  by  the  directors  or  other  officers, 
illegal  and  invalid. 

Civil  Code,  Section  305,  308,  377. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  283 

Section  256'. — RATIFICATION  OF  UNAUTHORIZED  EM- 
PLOYMENT BY  CORPORATION. — Where  an  agent  acts  for  a 
corporation,  without  having  received  proper  authoriza- 
tion by  resolution  of  the  board  of  directors,  the  corpora- 
tion may  yet  ratify  the  act  of  the  agent  in  making  a  sale ; 
provided,  the  ratification  must  be  in  the  same  form  and 
manner  as  the  original  authorization  should  have  been, 
that  is,  it  must  be  by  a  resolution  of  the  Board  lawfully 
adopted. 

Section  257. — OPTION  TO  AGENT  TO  SELL  FOR  COMMIS- 
SION ABOVE  A  FIXED  PRICE. — The  owner  of  land  may  law- 
fully make  a  contract  authorizing  real  estate  agents  to 
sell  the  land  for  a  special  sum  and  agreeing  to  pay  them 
a  commission  of  whatever  sum  they  realize  above  that 
amount.  Such  a  contract  is  binding  upon  both  parties. 
It  confers  an  option  upon  the  agents,  and  a  sale  by  the 
agents  under  such  a  contract  is,  as  the  law  regards  it,  a 
sale  made  by  them  in  the  capacity  of  vendors  upon  their 
own  account,  and  not  strictly  for  the  account  of  the  owner 
of  the  land.  If  the  agents  find  a  purchaser,  under  such  a 
contract  with  the  owner,  and  receive  a  deposit  to  bind  the 
bargain,  but  the  sale  does  not  go  through  because  a  title 
insurance  company  will  not  insure  the  title  to  the  land, 
the  owner  has  no  claim  on  the  deposit,  and  the  agents 
have  a  right  to  refund  the  money  to  the  intending  pur- 
chaser. Such  option  to  real  estate  agents,  with  relation, 
also,  to  a  deposit  received  upon  a  purchase  which  after- 
wards failed  to  go  through,  was  the  subject  of  a  Supreme 
Court  decision  in  this  state,  in  a  San  Francisco  case. 
C.  H.  Robinson  and  C.  B.  Hobson  executed  to  the  real 
estate  firm  of  Easton,  Eldridge  &  Co.  the  following  in- 
strument: "We  hereby  authorize  Easton  &  Eldridge,  for 
us  and  within  five  days  from  date  hereof,  and  until  this 
authority  is  canceled  in  writing  by  us,  to  sell  for  the  sum 
of  $10,000 — net  dollars — the  following  described  property 
situated  in  the  City  and  County  of  San  Francisco,  State 
of  California,  to-wit :  All  of  block  935,  outside  lands ;  and 


284  BUSINESS  LAW  FOR  BUSINESS  MEN. 

we  will  pay  the  said  Eastou  &  Eldridge  a  commission  of 
all  over  said  sum  of  $10,000,  net,  for  which  they  may  sell 
said  property  with  our  consent.  "Witness  our  hand  and 
seal  this  twenty-fourth  day  of  August,  A.  D.  1887,  C.  B. 
Hobson,  C.  H.  Robinson. ' '  The  real  estate  firm  found  a 
purchaser,  receiving  from  him  $1,050  as  a  deposit  on  the 
purchase  price  of  $10,500,  with  30  days  allowed  for 
search  of  title,  and  upon  the  condition  that  the  Title  In- 
surance Company  would  insure  the  title.  The  Title 
Insurance  Company  refused  to  insure  the  title,  and 
Easton  &  Eldridge  repaid  the  deposit  to  the  purchaser. 
Then  Hobson  and  Eobinson  commenced  a  suit  against  the 
agents  for  the  deposit,  claiming  that  the  money  was  re- 
ceived for  their  account,  and  that  the  agents  had  no  right 
to  pay  it  back  to  the  purchaser.  The  Supreme  Court 
decided  the  case  in  favor  of  Easton,  Eldridge  &  Co.,  the 
decision  of  the  Court  stating,  that  the  relation  of  the 
defendants  to  the  plaintiffs  was  not  that  of  a  mere  agent ; 
that  while  their  authority  to  sell  the  land  was  derived 
from  the  plaintiffs,  yet  the  sale  was  to  be  made  for  their 
own  account  and  benefit,  as  well  as  for  that  of  their  prin- 
cipals. By  the  terms  of  the  authorization  from  their 
principals,  Easton,  Eldridge  &  Co.  acquired  such  a  right 
to  a  portion  of  the  proceeds  of  sale  as  to  enable  them 
lawfully  to  make  a  contract  of  sale  upon  terms  of  their 
own  choosing.  The  principals,  in  effect,  said  the  Su- 
preme Court,  gave  to  Easton,  Eldridge  &  Co.  an  option 
for  five  days  to  endeavor  to  sell  the  block  of  land  for 
whatever  sum  they  could  obtain,  and  upon  whatever 
terms  they  might  make,  provided  they  should  receive 
therefor  the  sum  of  $10,000,  and  agreed  that  the  agents 
should  have  whatever  sum  they  could  realize  above  that 
amount.  The  relation  thus  created  between  them  was 
rather  that  of  a  vendor  and  purchaser  under  a  contract 
of  sale  than  one  of  principal  and  agent,  and  a  sale  by  the 
agents  under  such  a  contract  was  in  the  capacity  of  a 
vendor  upon  their  own  account,  and  not  solely  for  the 
account  of  their  principal.  The  agents  were  entitled  to 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  285 

all  the  proceeds  of  the  sale  in  excess  of  $10,000,  and  there- 
fore they  had  the  right  to  make  the  sale  upon  such  terms 
as  in  their  judgment  would  enable  them  to  realize  the 
highest  price  for  the  land.  Upon  a  sale  by  them,  the 
owners  were  entitled  to  the  immediate  payment  of  the 
$10,000,  but  the  agents  could  sell  the  land  either  for  cash 
or  upon  time,  as  they  might  choose,  so  long  as  the  owners 
received  their  money,  and  the  terms  of  sale  made  by  the 
agents  did  not  require  any  ratification  by  the  owners. 
And  upon  the  disapproval  of  the  title  by  the  Title  Insur- 
ance Company,  the  Supreme  Court  decided,  the  pur- 
chaser had  the  right  to  demand,  and  these  agents  had 
the  right  to  refund,  the  money  that  had  been  received  by 
them  as  a  deposit  upon  the  sale.  (Decided  by  the  Su- 
preme Court  of  California,  in  the  case  of  Eobinson  vs. 
Easton,  Eldridge  &  Co.,  reported  in  Volume  93  of  Cali- 
fornia Reports,  page  80.) 

Section  258. — FAILURE  OF  SALE  BY  DEFECTIVE  TITLE. 
Where  an  agent  is  employed  to  sell  land,  the  title  to  prove 
good  or  no  sale,  and  he  finds  a  purchaser,  ready,  able,  and 
willing  to  buy  upon  the  agreed  terms,  and  the  title  proves 
to  be  defective,  the  agent  is  nevertheless  entitled  to  his 
commissions.  The  failure  of  the  sale  by  reason  of  the 
defective  title  is  not  the  fault  of  the  agent,  but  is  the 
fault  of  the  owner,  and  he  must  pay  the  agent's  com- 
missions. (Decided  by  the  District  Court  of  Appeals,  in 
the  case  of  Justy  vs.  Erro,  which  decision  is  printed  in 
Volume  13,  California  Appellate  Decisions,  page  27.) 

Section  259. — FAILURE  OF  OWNER  TO  REMOVE  DEFECTS. 
Where  real  estate  agents  enter  into  a  contract  with 
an  intending  purchaser,  acknowledging  the  receipt  of 
a  deposit,  and  stipulating  that  the  title  is  to  prove  good 
or  no  sale,  in  which  case  the  deposit  is  to  be  returned,  and 
such  contract  is  ratified  by  the  owner  of  the  land,  even 
though  not  in  the  first  place  authorized,  the  owner  is 
bound  by  it;  and  if  it  appears  that  there  is  a  defect  in  the 


286  BUSINESS  LAW  FOR  BUSINESS  MEN, 

title,  it  is  the  duty  of  the  owner  to  remove  the  defect  and 
perfect  the  title  within  the  time  limited  by  the  contract, 
and  if  he  does  not  do  so,  the  purchaser  will  be  discharged 
from  his  obligation,  and  will  be  entitled  to  the  return  of 
his  money  paid  on  deposit. 

Section  260. — EVASION  OF  CONTRACT  BY  OWNER. — If, 
within  the  time  limited  in  a  contract  for  the  sale  of  real 
estate  on  commission,  the  broker  has  produced  a  pur- 
chaser, who  is  ready,  willing  and  able  to  purchase  up.on 
the  terms  prescribed,  the  principal  cannot  evade  pay- 
ment of  the  broker's  commission  by  then  refusing  or  neg- 
lecting to  consummate  the  sale,  or  by  changing  the 
terms,  or  by  selling  the  property  to  another,  or  by  negli- 
gently dealing  with  the  proposed  purchaser  so  as  to  lose 
the  benefit  of  the  sale. 

(a)  Refusal  of  Vendor's  Wife  to  Join  in  Conveyance. 
The  refusal  of  the  principal's  wife  to  join  in  the  convey- 
ance will  not  avoid  payment  of  the  commission. 

(b)  Refusal  of  Vendee  to  Purchase. — The  refusal  of 
the  purchaser  to  complete  the  sale  on  account  of  false  rep- 
resentations made  by  the  principal  will  not  defeat  pay- 
ment of  the  commission. 

(c)  Personal  Conduct  of  Sale  Unnecessary. — It  is  not 
necessary  that  the  broker  should  personally  have  con- 
ducted the  negotiations  between  his  principal  and  the 
purchaser  leading  to  the  sale,  nor  that  he  should  have 
been  present  when  the  bargain  was  completed,  or  even 
that  the  principal  should,  at  the  time,  have  known  that 
the  purchaser  was  one  found  by  the  broker. 

While  it  is  indispensable,  it  is  sufficient  that  the  brok- 
er's efforts  were  the  procuring  cause  of  the  sale;  that 
•through  his  agency,  the  purchaser  was  brought  into  com- 
munication with  the  seller,  although  the  parties  negoti- 
ated in  person. 

(Decided  by  the  District  Court  of  Appeals,  in  the 
case  of  Justy  vs.  Erro,  which  decision  is  printed  in  Vol- 
ume 13,  Calif ornial  Appellate  Decisions,  page  27.) 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  287 

Section  261 — RATIFYING  AUTHORITY  OF  BROKERS.— 
The  owner  may  ratify  by  his  subsequent  conduct  the  un- 
authorized act  of  the  brokers  in  stipulating  that  the  title 
shall  be  good  or  no  sale.  The  action  of  the  owner  of  tho 
land  in  agreeing  to  the  contract  of  his  brokers  with  the 
intending  purchaser,  and  in  accepting  him  as  the  pur- 
chaser of  the  property  upon  the  terms  of  such  contract, 
is  a  waiver  of  objection  that  the  brokers  exceeded  their 
authority  in  providing  in  the  contract  that  the  title  should 
prove  good,  or  that  there  would  be  no  sale.  And  in  this 
case  it  is  not  necessary  that  such  ratification  shall  be  in 
writing  as  between  the  owner  of  the  land  and  the  brok- 
ers, as  it  relates  to  no  interest  in  the  land,  in  so  far  as 
it  affects  the  brokers,  but  only  to  the  owner's  obligation 
to  pay  them  their  commission  when  earned. 

Section  262 — WHAT  Is  GOOD  TITLE. — A  title  to  land, 
to  be  good,  should  He  free  from  litigation,  palpable  de- 
fects, and  grave  doubts ;  and  it  should  consist  of  both 
legal  and  equitable  titles,  and  should  be  fairly  ascertain- 
able  from  the  records.  A  perfect  title  is  one  that  must 
be  good  and  valid  beyond  all  reasonable  doubt.  Whether 
the  title  in  any  particular  case  is  good  or  not  is  a  ques- 
tion which  it  is  often  difficult  to  determine,  and  one  upon 
which  lawyers  and  judges  often  disagree. 

Section  263. — SALE  BY  OWNER. — A  party  who  employs 
a  real  estate  broker  to  sell  his  land  may,  notwithstand- 
ing, negotiate  a  sale  himself;  and  if  he  does  so  without 
any  agency  of  the  broker,  and  before  the  latter  has  pro- 
cured a  purchaser,  he  is  not  liable  to  the  agent  for  com- 
missions. But,  as  already  stated,  the  commission  of  a 
real  estate  agent  is  earned  by  finding  a  purchaser  ready, 
willing,  and  able  to  enter  into  a  valid  contract  for  the 
purchase  upon  the  terms  fixed  by  the  owner ;  and  having 
introduced  such  a  one  to  the  owner,  the  agent  cannot  be 
deprived  of  his  right  to  commissions  by  the  owner  negoti- 
ating a  sale  himself. 


288  BUSINESS  LAW  FOE  BUSINESS  MEN. 

Section  264— COMMISSIONS  UPON  SALE  OR  EXCHANGE 
BY  OWNEE. — Where  by  the  terms  of  a  contract  for  the 
sale  of  real  estate  through  brokers,  they  are  authorized 
to  sell  the  property  for  the  owners  at  any  time  within  a 
year,  and  it  is  agreed  that  the  commission  shall  be  paid 
if  the  owners  should  withdraw  the  property  from  sale  or 
effect  a  sale  in  any  way  during  the  year,  the  brokers  are 
entitled  to  commissions  upon  sale  or  exchange  of  the  land 
by  the  owners  themselves,  and  need  not  show  that  they 
had  procured  or  could  have  procured  a  purchaser  within 
the  time  fixed  in  the  contract.  The  sale  or  exchange  of 
the  land  by  the  owner  himself  puts  it  beyond  the  power 
of  the  agent  to  thereafter  make  a  sale,  and  this  entitles 
the  agent  to  the  same  commissions  he  would  have  earned 
if  he  had  sold  the  land  for  the  amount  realized  by  the 
owners. 

Section  265. — SALE  BY  OWNEE  THROUGH  ANOTHEE 
AGENT. — Where  by  the  terms  of  an  agreement  conferring 
a  sole  agency  for  the  sale  of  land,  the  principal  agrees 
to  pay  to  the  agent  the  same  commission  as  if  he  had  pro- 
cured a  purchaser,  if  he  should  sell  or  agree  to  sell  the 
land  or  part  of  it  to  any  one  in  the  twelve  months  next 
ensuing,  an  immediate  obligation  to  pay  the  commission 
is  created  against  the  principal  by  virtue  of  the  contract, 
when  the  principal  himself  effects  a  sale  through  an- 
other agent  within  that  period.  The  agent  first  ap- 
pointed has  an  immediate  right  of  action  to  recover  his 
commissions.  And  the  owner  cannot  deduct  from  the 
commissions  agreed  to  be  paid  to  his  exclusive  agent  the 
amount  of  commissions  paid  by  him  to  another  agent  for 
effecting  a  sale. 

Section  266. — MISREPRESENTATION  BY  OWNER. — Where 
by  means  of  a  fraudulent  misrepresentation  of  the  prin- 
cipal that  he  had  not  sold  the  land,  and  had  changed  his 
intention  as  to  selling  it,  the  agent  having  an  exclusive 
right  of  sale  was  induced  to  accept  part  payment  of  his 
commission  in  satisfaction  of  the  obligation  of  the  prin- 


BUSINESS  CONTKACTS  AND  LEGAL  OBLIGATIONS.  289 

cipal,  he  is  entitled  to  rescind  the  agreement  for  satis- 
faction, and  recover  the  full  amount  of  commission  which 
had  previously  matured  in  his  behalf,  by  reason  of  a  sale 
effected  by  the  principal  of  which  he  was  ignorant. 

Section  267. — WHAT  CONSTITUTES  A  SALE  BY  OWNEK. 
It  is  not  necessary,  in  order  to  constitute  a  sale  by  the 
owner  sufficient  to  entitle  the  agent  to  his  commissions, 
that  the  owner  should  sell  for  cash,  or  upon  the  same 
terms  the  agent  was  authorized  to  effect,  or  that  he  should 
make  a  conveyance,  or  that  a  legal  title  should  pass  to 
his  purchaser.  In  a  case  decided  by  the  Supreme  Court 
of  California,  Shainwald,  Buckbee  &  Co.  sued  M.  K.  Cady 
for  commissions  on  the  sale  of  the  townsite  of  Agua  Cali- 
ente.  In  the  written  agreement  given  by  Cady  to  the 
agents,  authorizing  them  to  find  a  purchaser,  it  was  stip- 
ulated that  if  Cady  himself  made  a  sale  of  the  property 
within  the  term  of  the  agreement,  the  agents  were  to  be 
allowed  two  per  cent  commissions  upon  the  amount  of 
such  sale;  Cady  sold  the  land,  partly  on  credit,  and  the 
purchaser  afterwards  failed  to  make  stipulated  pay- 
ments, and  surrendered  the  contract  and  delivered  up 
possession  of  the  land ;  and  at  the  time  when  Shainwald, 
Buckbee  &  Co.  sued  Cady  for  their  commissions,  he  had 
again  possession  of  the  land.  The  Supreme  Court  de- 
cided that  Shainwald,  Buckbee  &  Co  were  entitled  to 
their  commissions,  because  Cady  had  absolutely  placed 
it  out  of  their  power  to  make  a  sale  of  the  property  at 
all.  Cady  had  received  a  portion  of  the  purchase  price, 
and  given  up  possession  of  the  property;  and  although 
the  purchaser  failed  to  keep  possession,  and  surrendered 
the  contract,  and  turned  the  possession  back  to  Cady,  the 
Supreme  Court  said  that  a  sale  was  consummated  suffi- 
cient in  law  to  make  Cady  liable  to  the  agents  under  their 
agreement.  (Decided  by  the  Supreme  Court  of  Califor- 
nia in  the  case  of  Shainwald,  Buckbee  &  Co.  vs.  M.  K. 
Cady,  reported  in  Volume  92,  California  Reports,  page 
83.)' 


290  BUSINESS  LAW  FOE  BUSINESS  MEN, 

Section  268. — LIABILITY  OF  AGENT  UNDER  CONTRACT  TO 
SELL  FOR  SPECIFIED  AMOUNT. — Where  an  agent  accepts 
real  property  for  sale,  and  binds  himself  in  writing  to 
sell  the  property  within  a  certain  time  for  a  certain 
amount,  and  to  accept  all  over  that  sum  as  his  compensa- 
tion, he  makes  himself  absolutely  liable  to  the  owner.  And 
if  he  fails  to  make  a  sale  for  the  amount  stated  in  his  con- 
tract, within  the  term  stipulated,  the  owner  can  sue  him 
for  damages.  The  owner  will  be  entitled  to  recover  from 
the  agent  as  damages  the  difference  between  the  actual 
market  value  of  the  land,  at  the  end  of  the  term  within 
which  it  was  to  be  sold,  and  the  amount  the  agent  bound 
himself  to  realize  from  it  for  the  owner. 

Section  269. — LIABILITY  OF  OWNER  TO  AUCTIONEER.-— 
One  representing  himself  as  the  owner  of  real  estate, 
who  employs  an  auctioneer  to  sell  the  same  under  an 
agreement  that,  in  the  event  of  a  sale,  the  auctioneer 
shall  receive  for  his  services  a  percentage  on  the  amount 
bid,  cannot,  after  a  sale  by  the  auctioneer,  avoid  paying 
him  for  his  services  because  the  purchaser  refuses  to 
take  the  property,  owing  to  a  real  or  alleged  defect  in 
the  title.  The  auctioneer  in  such  a  case  is  entitled  to 
compensation  for  his  services,  unless  there  is  a  special 
agreement  that  it  shall  depend  on  the  consummation  of 
the  sale. 

Section  270. — WHAT  AGENT  MUST  PROVE  IN  SUIT  TO 
RECOVER  COMMISSIONS. — Where  an  agent  is  compelled 
to  sue  for  his  commissions,  for  effecting  a  sale  of  real 
estate,  to  entitle  him  to  judgment  in  his  favor,  he  must 
show  that  he  was  employed  by  or  on  behalf  of  the  owner 
to  make  the  sale,  and  that  his  authority,  or  some  note 
or  memorandum  thereof,  was  in  writing,  subscribed  to  by 
the  party  to  be  charged,  or  by  his  authorized  agent.  And 
before  an  agent  can  be  said  to  have  earned  his  commis- 
sion, it  must  also  be  shown  that  he  produced  a  purchaser, 
who  was  ready  and  willing  and  able  to  make  the  pur- 
chase on  terms  satisfactory  to  his  employer,  and  that 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  291 

lie  was  the  efficient  agent  or  procuring  cause  of  the  sale. 
The  duty  assumed  by  the  broker  is  to  bring  the  minds 
of  the  buyer  and  seller  to  an  agreement  for  a  sale,  and 
the  price  and  terms  on  which  it  is  to  be  made,  and  until 
this  is  done,  his  right  to  commissions  does  not  accrue. 
It  must  further  appear  that  the  broker  performed  the 
duty  assumed  by  him  within  the  time  limited  in  his  con- 
tract, or  within  such  extension  of  time  as  may  have  been 
granted  by  his  employer.  If  he  failed  to  do  that,  he  is 
not  entitled  to  the  commission,  even  though  he  made  ef- 
forts to  sell  the  property,  and  first  called  it  to  the  atten- 
tion of  the  party  who  subsequently  made  the  purchase, 
unless  the  delay  was  caused  by  the  negligence,  fault  or 
fraud  of  the  owner. 

Civil  Code,  Section  1624. 

Section  271. — AGENT'S  MISTAKE  AS  TO  TITLE. — "When 
the  agent  has  received  a  deposit,  and  the  purchaser  af- 
terwards claims  that  the  title  is  not  good  and  demands 
the  deposit  back,  the  agent,  if  he  be  a  simple  agent  to  sell, 
will  take  his  own  chances  if  he  returns  the  deposit  to  the 
purchaser.  For  if  the  owner  insists  upon  the  purchaser 
taking  the  lands,  and  litigation  follows,  and  it  is  decided 
that  the  title  to  the  land  was  in  reality  good,  the  agent 
will  be  compelled  to  pay  the  amount  of  the  deposit  to 
the  owner,  less  his  commissions,  even  though  he  has  al- 
ready returned  the  deposit  to  the  purchaser ;  and  he  will 
not  be  protected  by  the  fact  that  he  obtained  the  opinion 
of  an  attorney,  and  acted  upon  it  in  good  faith,  that  the 
title  was  not  good,  before  returning  the  deposit.  His  lia- 
bility for  the  deposit  to  his  principal  will  depend  upon 
the  fact,  whether  the  title  was  or  was  not  good,  and  not 
upon  what  he  or  anybody  else  may  have  thought  about 
it,  and  the  only  way  to  determine  the  matter  definitely 
is  by  a  judgment  of  a  court. 

Section  272. — REPUDIATION  OF  CONTRACT  BY  VENDOR.— 
Real  estate  agents  may  recover  from  their  principal  the 
commission  agreed  upon  for  a  sale  secured  by  them,  if 


292  BUSINESS  LAW  FOR  BUSINESS  MEN. 

the  proposed  contract  of  sale  was  not  beyond  their  au- 
thority, though  the  vendor  refuses  absolutely  to  consum- 
mate the  purchase  or  to  negotiate  with  reference  to  it.  It 
is  immaterial  whether  the  power  conferred  upon  real 
estate  agents  is  to  sell  or  merely  to  secure  a  purchaser, 
so  far  as  their  right  to  recover  the  agreed  commission  is 
concerned,  if  they  comply  with  their  part  of  the  contract 
in  procuring  a  purchaser,  to  whom  the  vendor  refuses  to 
convey. 

Section  273. — TEEMS  OF  PAYMENT,  AND  EEFUSAL  TO 
ACCEPT  TENDER. — A  contract  between  a  vendor  and  a 
real  estate  agent,  providing  that  the  terms  of  payment 
are  to  be  as  buyer  and  seller  may  agree,  does  not  impose 
upon  the  agent  the  duty  of  selling  for  cash,  even  if  it  be 
construed  as  reserving  to  the  vendor  the  right  to  agree 
upon  the  terms  in  person ;  and  there  can  be  no  reasonable 
objection  to  the  terms  of  payment  as  a  defense  to  the 
recovery  of  commissions,  if  when  cash  was  tendered  by 
the  purchaser,  no  objection  was  made  on  account  of  the 
terms.  When  the  vendor  has  refused  to  accept  the  ten- 
der of  the  purchase  money,  and  repudiated  the  contract 
made  by  his  real  estate  agent  with  the  purchaser,  he 
cannot  defend  against  the  payment  of  commissions  on 
the  ground  that  the  purchase  money  was  not  paid. 

Section  274. — HUSBAND  GIVING  AGENT  PROPERTY  OF 
WIFE  TO  SELL. — Where  a  vendor  gives  to  real  estate 
agents  the  property  of  his  wife  to  sell  as  his  property, 
and  describes  it  in  the  contract,  and  they  procure  a  pur- 
chaser without  knowledge  that  the  title  was  not  in  the 
vendor,  his  want  of  title  cannot  affect  their  right  to  re- 
cover their  commissions  from  him. 

Section  275. — WHAT  CONSTITUTES  FINDING  A  PUR- 
CHASER.— To  find  a  purchaser  means  more  than  to  pro- 
cure some  one  who  will  offer  to  negotiate  for  the  pur- 
chase. It  implies  the  production  of  one  who  is  not  only 
ready  and  willing  to  comply  with  the  terms  of  the  pur- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  293 

chase,  but  who  has  also  the  present  ability  to  consum- 
mate it,  and  to  comply  with  all  of  its  terms,  and  who  is 
also  willing  and  ready  to  do  all  the  acts  that  may  be  re- 
quired to  make  an  actual  purchase  of  the  land.  To  pro- 
duce one  who  makes  an  offer  to  purchase,  and  who  is 
without  means,  or  who  is  not  in  condition  to  comply  with 
the  terms  of  the  sale,  and  against  whom  a  claim  for  dam- 
ages resulting  from  a  failure  to  perform  the  contract  of 
purchase  could  not  be  enforced,  does  not  constitute  the 
finding  of  a  purchaser  within  the  meaning  of  the  law; 
and  the  mere  statement  by  one  who  is  produced  that  he 
is  ready  and  willing  to  make  the  purchase,  is  not  suffi- 
cient, for  he  must  satisfy  the  owner  that  he  has  the  abil- 
ity to  do  so.  Upon  the  production  of  such  purchaser, 
if  the  transaction  is  not  to  be  consummated  by  an  imme- 
diate delivery  of  the  deed  and  payment  of  the  purchase 
price,  the  owner  has  the  right  to  demand  that  a  valid, 
enforceable  contract  for  the  purchase  of  the  land  shall 
be  executed  by  him.  The  owner  may,  however,  waive 
the  execution  of  such  contract ;  as,  if  after  the  broker  has 
introduced  the  purchaser  to  him,  he  himself  assumes  to 
prepare  a  contract,  or  to  deal  with  the  purchaser  upon 
other  terms,  or  accepts  a  verbal  obligation  from  him. 

Section  276. — OWNER  AND  PURCHASER  NEED  NOT  BE 
BROUGHT  FACE  TO  FACE. — It  is  not  essential,  to  entitle 
the  agent  to  his  commissions,  that  he  should  bring  the 
owner  and  purchaser  face  to  face.  If  the  agent  secures 
from  the  purchaser  a  valid  contract,  according  to  the 
terms  of  his  agreement  with  his  principal,  and  a  deposit 
of  money  if  required,  and  the  purchaser  is  really  ready, 
willing,  and  able  to  complete  the  purchase  according  to 
the  terms  proposed,  the  agent  has  performed  his  duty  as 
fully  as  though  the  parties  had  been  brought  together  in 
person. 

Section  277. — AMOUNT  or  COMMISSIONS. — The  amount 
of  compensation  or  commissions  which  a  real  estate 
agent  shall  receive  will  in  all  cases  depend  upon  his  con- 


294  BUSINESS  LAW  FOR  BUSINESS  MEN. 

tract  with  the  owner,  if  the  contract  makes  any  provision 
in  respect  to  it ;  and,  in  the  absence  of  any  agreement  on 
the  amount  of  commissions,  it  will  be  measured  by  the 
value  of  the  service  rendered,  and  the  agent  will  be  en- 
titled to  a  reasonable  compensation,  to  be  ascertained 
from  all  the  circumstances. 

Section  278. — PREVENTION  OF  SALE  BY  OWNER. — If 
the  owner  in  fact  has  a  good  title,  but  goes  to  the  pur- 
chaser, or  to  the  purchaser's  attorney,  and  makes  repre- 
sentations for  the  purpose  of  defeating  the  sale,  and 
makes  the  intended  purchaser  believe  that  the  title  is 
bad,  and  the  latter  refuses  to  proceed  with  the  transac- 
tion in  consequence,  the  broker  is  entitled  to  his  commis- 
sion. 

Section  279. — WHEN  PURCHASER  AND  OWNER  ARE  NOT 
BROUGHT  TOGETHER,  PURCHASER  MUST  SIGN  A  WRITTEN 
CONTRACT. — If  the  agent  does  not  produce  the  purchaser 
before  the  owner  in  person,  ready  and  willing  to  enter 
into  a  contract,  the  purchaser  must  sign  a  written  con- 
tract, and  this  written  contract  must  be  delivered  by  the 
agent  to  the  owner.  This  important  rule  as  to  the  duty 
of  the  agent  was  stated  by  the  Supreme  Court  of  Califor- 
nia in  a  case  where  B.  M.  Gunn,  a  real  estate  broker,  sued 
the  Bank  of  California  for  commissions.  The  Superior 
Court  of  San  Francisco  decided  that  Gunn  was  entitled  tc 
commissions,  but  the  Supreme  Court  set  the  judgment 
aside,  and  decided  that  upon  the  facts  the  broker  was 
not  entitled  to  commissions.  Gunn  had  a  contract  with 
the  bank,  by  which  he  was  to  sell  certain  property  within 
a  certain  time  for  $41,000,  and  was  to  receive  $1,000  as 
his  commission  for  making  the  sale;  he  found  one  Keat- 
ing, within  the  time,  who  was  ready,  able,  and  willing  to 
purchase  at  the  price  of  $41,000,  but  his  agreement  with 
Keating  was  oral  only,  and  Keating  signed  nothing,  al- 
though he  orally  agreed  to  buy  for  the  price  stated  and 
paid  $500  on  account,  and  took  a  receipt  signed  by  Gunn 
alone ;  the  receipt  recited  that  Keating  was  to  have  twenty 


BUSINESS  CONTEACTS  AND  LEGAL  OBLIGATIONS.  295 

days  within  which  to  examine  the  title  to  the  property. 
On  the  same  day  Gunn  sent  to  a  Mr.  Brown,  who  was 
acting  for  the  bank  in  the  matter,  the  following  letter: 
' '  Dear  Sir :  I  beg  leave  to  inform  you  that  I  have  this 
day  sold  the  lot  and  improvements  known  as  the  Golden 
Gate  Flour  Mill  Property  for  the  sum  of  forty-one  thou- 
sand dollars,  less  one  thousand  dollars  commission,  and 
have  given  purchaser  twenty  days  to  examine  title  to 
same.  Please  send  me  abstract  and  approval  of  sale,  and 
oblige."  This  letter  was  returned  by  Brown  with  this 
endorsement :  "I  herewith  approve  above  sale.  The 
Bank  of  California.  Thomas  Brown."  Keating  refused 
to  complete  the  sale  on  account  of  -a  defect  in  the  title. 
Keating  was  financially  able  to  pay  the  price  he  orally 
agreed  to  pay  for  the  land,  but  he  signed  no  contract 
which  bound  him  to  complete  the  purchase  in  case  the 
title  to  the  land  was  perfect,  and  Gunn  did  not  introduce 
him  to  Brown,  or  inform  Brown  who  was  the  purchaser 
referred  to  in  his  letter,  and  Brown  did  not  learn  the 
intended  purchaser's  name  until  about  the  time  the  title 
was  rejected  by  Keating 's  attorney.  In  the  suit  brought 
by  Gunn  for  the  $1,000  commission,  the  Supreme  Court 
held  that,  as  Keating  had  not  signed  any  contract,  and 
had  not  been  produced  before  Brown  as  the  purchaser, 
Gunn  had  not  "found  a  purchaser,"  as  the  law  reads, 
and  was  not  entitled  to  the  commissions.  And  the  Su- 
preme Court,  in  its  decision  of  the  case,  said :  *  *  The  ques- 
tion here  is,  What  is  'finding'  or  'producing'  a  pur- 
chaser within  the  meaning  of  the  law?  Is  it  sufficient 
for  a  broker  to  merely  find  a  person  financially  able,  and 
who  verbally  agrees  with  him  to  purchase  upon  the  terms 
of  the  vendor,  and  makes  a  deposit,  but  who  neither  signs 
a  binding  agreement  to  purchase  upon  the  terms  of  the 
vendor,  nor  is  produced  before  the  vendor  as  a  person 
ready  and  willing  to  enter  into  such  a  contract  ?  It  seems 
to  us  very  clear  that  this  question  must  be  answered  in 
the  negative.  The  contract  of  the  broker  is  to  negotiate 
a  sale,  that  is,  to  procure  a  valid  contract  to  purchase, 


296  BUSINESS  LAW  FOE  BUSINESS  MEN. 

which  can  be  enforced  by  the  vendor  if  his  title  is  per- 
fect ;  or  if  he  does  not  procure  such  contract,  to  bring  the 
vendor  and  the  proposed  purchaser  together,  that  the 
vendor  may  secure  such  a  contract,  unless  he  is  willing 
to  trust  to  an  oral  agreement.  This  contract  on  the  part 
of  the  broker  is  complete,  when  he  delivers  or  tenders 
to  the  owner  a  valid  written  contract,  containing  the 
terms  of  sale  agreed  on,  signed  by  a  party  able  to  comply 
therewith,  or  able  to  answer  in  damages  if  he  should  fail 
to  perform.  This  is  all  the  agent  can  do,  and  when  it  is 
done  he  is  entitled  to  his  commissions.  But  the  neces- 
sity of  a  written  contract  of  sale  may  be  rendered  un- 
necessary if  the  agent  bring  the  vendor  and  vendee  to- 
gether, and  the  latter  is  able  and  willing,  and  offers  to 
complete  the  contract,  provided  the  vendor  will  make 
the  conveyance.  In  such  a  case  the  agent  has  done  all 
that  he  can  do,  and  if  the  vendor  under  such  circum- 
stances refuses  to  complete  the  sale,  he  nevertheless  will 
be  compelled  to  pay  the  agent  his  commissions.  The  ob- 
ject of  the  vendor  is  to  effect  a  sale  of  his  property,  and 
when  the  real  estate  broker  produces  a  contract  executed 
by  a  solvent  purchaser,  he  is  then  entitled  to  pay  for  his 
services,  whether  the  trade  is  finally  consummated  or 
not,  because  if  the  vendee  refuses  to  take  the  property, 
the  vendor  holds  the  contract,  which  renders  the  vendee 
liable  for  all  damages  (including  commissions  paid  by 
the  vendor  to  the  broker)  for  a  failure  to  comply.  The 
right  of  Gunn  to  the  agreed  compensation  depends  upon 
the  performance  of  his  contract  to  procure  a  purchaser, 
and  as  he  did  not  do  this,  and  defendant  neither  waived 
nor  prevented  such  performance,  he  has  not  earned  his 
commission."  (Decided  by  the  Supreme  Court  of  Cali- 
fornia in  the  case  of  Gunn  vs.  Bank  of  California,  re- 
ported in  Volume  99,  California  Reports,  page  349.) 

Section  280. — WHEN  OWNEB  MUST  RETURN  MONEV 
PAID  ON  CONTRACT. — A  vendor  under  contract  for  the 
sale  of  land,  who  has  received  a  part  of  the  purchase  price 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  297 

at  the  time  of  the  execution  of  the  contract,  cannot  rescind 
the  contract  on  account  of  the  non-payment  of  the  balance 
of  the  purchase  price  on  the  day  stipulated  for  in  the 
agreement,  without  returning  or  offering  to  return  to 
the  vendee  the  money  that  he  has  received  on  account  of 
the  contract.  When  a  contract  of  sale  and  purchase  of 
lands  is  abandoned  or  rescinded  by  the  parties,  the 
vendee,  though  in  default,  may  recover  back  installments 
of  the  purchase-money  paid,  less  the  actual  damage  to 
the  vendor  occasioned  by  his  breach  of  the  contract. 

Section  281. — AGREEMENT  BETWEEN  AGENTS  TO  CO- 
OPERATE IN  SELLING. — Eeal  estate  agents  may  co-operate 
in  the  selling  of  land,  for  a  share  of  the  commissions, 
and  such  agreement  between  themselves  need  not  be  in 
writing.  The  agreement  will  be  sufficient,  if  made  orally, 
and  the  courts  will  enforce  it.  An  agreement  between 
brokers,  to  co-operate  in  making  sales  of  real  estate,  and 
to  share  the  commissions,  is  not  required  by  law  to  be  in 
writing.  The  authority  from  the  owner  to  sell  must  be 
in  writing,  but  the  agreement  between  the  brokers  to  co- 
operate in  making  the  sale  may  be  made  verbally.  (De- 
cided by  the  District  Court  of  Appeals  of  California,  in 
the  case  of  Saunders  vs.  Yoakum,  which  decision  is 
printed  in  Volume  X  of  the  California  Appellate  Deci- 
sions, page  243.) 

Section  282. — AUTHORITY  TO  SELL  ON  CREDIT. — When 
a  real  estate  agent  receives  authority  from  the  owner 
to  sell  land  on  credit,  the  time  of  credit  specified  in  their, 
agreement  is  the  measure  of  the  agent's  authority.  Where 
the  agreement  authorizes  the  agent  to  sell  on  credit,  but 
does  not  specify  the  time  of  credit,  the  agent  must  use 
his  discretion  in  the  matter,  and  has  authority  to  give  the 
purchaser  a  reasonable  credit;  and  the  credit  given,  to 
be  reasonable,  must  be  such  as  is  usual  and  customary 
on  sales  of  real  estate  in  the  particular  vicinity.  There 
is  no  set  rule  as  to  what  will  be  considered  a  reasonable 


298  BUSINESS  LAW  FOE  BUSINESS  MEN. 

credit,  but  the  question  must  be  determined  from  all  the 
circumstances  in  each  particular  case. 

Section  283. — POWER  OF  ATTORNEY  TO  AGENT  TO 
MAKE  DEED. — The  question  as  to  what  is  necessary  in  a 
power  of  attorney  for  the  sale  of  land,  to  authorize  the 
agent  to  execute  and  deliver  a  deed  to  the  purchaser,  must 
be  determined  in  each  case  upon  its  own  peculiar  circum- 
stances. As  between  the  parties  to  the  transaction,  it  is 
proper  to  consider  their  situation  at  the  time  of  the  exe- 
cution of  the  power  of  attorney,  and  their  intention  is  to 
be  gathered  from  the  words  of  the  instrument,  and  all  the 
circumstances  under  which  it  was  written.  A  power  of 
attorney  for  the  sale  of  land  is  sufficient  as  between  the 
parties  to  the  transaction,  whether  properly  acknowl- 
edged or  recorded,  or  not,  if  it  is  otherwise  valid. 

Section  284. — EISK  OF  PURCHASER  WHO  TAKES  LAW- 
YER 's  ADVICE  AS  TO  TITLE. — A  purchaser  of  land  is  not 
justified  in  refusing  to  accept  a  conveyance,  and  in  de- 
manding back  a  deposit  paid  by  him  on  account  of  pur- 
chase-money, merely  because  of  the  opinion  of  his  law- 
yer, though  given  in  good  faith,  that  the  title  is  not  safe, 
if  the  opinion  is  erroneous,  and  the  record  title  is  in  fact 
perfect.  The  purchaser  must  take  the  risk  of  the  sound- 
ness of  the  advice  upon  which  he  acts. 

Section  285. — LIABILITY  OF  AUCTIONEER  FOR  DE- 
POSIT AT  AUCTION  SALE. — Although  by  the  terms  of  an 
auction  sale  a  deposit  of  a  percentage  of  the  cash  pay- 
ment with  the  auctioneer  pending  the  examination  of  the 
title,  which  is  warranted  perfect,  makes  the  auctioneer  a 
stakeholder  for  the  parties;  yet  when  the  title  is  shown 
to  be  perfect,  the  deposit  then  becomes,  according  to  the 
terms  of  the  sale,  a  portion  of  the  cash  payment,  and  the 
property  of  the  owner  of  the  land,  less  the  charges  and 
commissions  of  the  auctioneer;  and  the  auctioneer  can- 
not thereafter  return  it  to  the  purchaser  except  at  his 
own  risk. 


BUSINESS  CONTEACTS  AND  LEGAL  OBLIGATIONS.  299 

Section  286. — AGENT'S  KNOWLEDGE  OF  TITLE. — A  real 
estate  agent  has  nothing  to  do  with  the  title  or  owner- 
ship of  the  property,  and  his  knowledge  as  to  the  title, 
or  the  equitable  estate  of  a  third  person  therein,  is  of 
no  consequence;  and  his  right  to  the  compensation  con- 
tracted for  does  not  in  any  way  depend  on  the  validity  or 
invalidity  of  the  owner's  title  to  the  property. 

Section  287. — INTEREST  ALLOWED  BY  LAW  ON  AGENT'S 
COMMISSIONS. — A    demand    for    broker's    commissions, 
which  is  capable  of  being  made  certain  by  computation, 
draws  interest  from  the  time  when  it  became  due. 
Civil  Code,  Section  3287. 

Section  288. — How  AUTHORITY  OF  AGENT  CAN  BE  EX- 
TENDED.— When  the  term  of  a  real  estate  agent's  employ- 
ment is  about  to  expire,  the  authority  of  the  agent  can- 
not be  extended  by  a  verbal  agreement.  The  extension 
of  the  term  of  his  employment,  like  the  original  agree- 
ment, must  be  in  writing. 

Section  289. — COSTS  IN  SUIT  FOR  COMMISSIONS.— 
Where  a  real  estate  agent  sues  in  the  Superior  Court 
for  commissions,  he  will  have  to  pay  the  costs  of  the 
court— Clerk's  fees,  Sheriff's  fees,  Reporter's  fees,  jury 
fees — if  the  verdict  in  his  favor  be  for  less  than  $300. 
In  other  words,  the  agent  must  secure  a  judgment  for  at 
least  $300,  or  he  will  not  be  entitled  to  costs.  If  the  agent 
sues  in  the  Justice  Court,  for  less  than  $300,  the  judg- 
ment in  his  favor  will  carry  the  costs. 

Code  of  Civil  Procedure,  Section  1022. 

Section  290. — COMMISSIONS  OUT  OF  PURCHASE-MONEY. 
Where  the  agreement  between  the  owner  and  the  agent 
is,  that  the  agent  is  to  receive  his  commissions  "out  of 
the  purchase-money,"  or  "out  of  the  first  money  re- 
ceived" on  the  sale,  the  agent  will  not  be  entitled  to  any 
commissions  at  all,  if  the  sale  does  not  go  through. 


300  BUSINESS  LAW  FOB  BUSINESS  MEN. 

Under  such  a  contract,  the  sale  must  be  completed,  and 
the  money  paid  by  the  vendee,  before  the  agent  is  entitled 
to  commissions. 

Section  291. — SELLING  LAND  ON  SHAKES. — Under  an 
agreement  between  a  land  owner  and  a  broker,  whereby 
the  latter  is  to  sell  the  land  for  a  share  of  the  proceeds 
above  the  cost  price  and  selling  expenses  after  all  the 
land  is  sold,  the  procuring  of  a  purchaser  for  all  the 
tract,  who  is  accepted  by  the  owner  and  with  whom  an 
executory  contract  is  made,  is  a  sufficient  performance 
of  the  agreement  to  entitle  the  broker  to  his  share  of  the 
profits. 

Section  292. — PUKCHASE  BY  AGENT  FROM  HIMSELF.— 
An  agent  or  sub-agent  employed  to  assist  in  the  con- 
summation of  a  sale  of  land  is  incapable  of  legally  pur- 
chasing the  property  from  himself  without  the  knowledge 
of  the  principal,  and  such  a  purchase  will  always  be  set 
aside,  at  the  option  of  the  principal.  The  reason  is,  that 
the  agent  should  not  unite  his  personal  and  his  repre- 
sentative characters  in  the  same  transaction;  he  cannot 
serve  two  masters;  and  the  law  will  not  permit  him  to 
be  exposed  to  the  temptation,  or  brought  into  a  situation 
where  his  own  personal  interests  conflict  with  the  inter- 
ests of  his  principal,  and  with  the  duties  which  he  owes 
to  his  principal.  The  fiduciary  relations  between  a  prin- 
cipal and  his  agent  preclude  the  latter  from  having  any 
interest  in  the  subject-matter  of  his  agency  adverse  to 
that  of  his  principal.  In  the  employment  of  an  agent 
the  principal  bargains  for  his  disinterested  skill  and  dili- 
gence, and  whenever  the  interests  of  the  agent  become 
antagonistic  to  those  of  his  employer  he  violates  his  obli- 
gation by  continuing  to  act  in  his  behalf  without  disclos- 
ing that  fact.  A  broker,  who  is  employed  by  the  owner 
to  sell  his  property,  is,  by  the  mere  fact  of  accepting 
such  employment,  precluded  from  acquiring  an  interest 
in  the  property  he  is  employed  to  sell.  He  cannot  act 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  301 

as  such  agent  in  making  a  sale  either  to  himself  or  where 
he  is  interested  in  the  purchase,  and  he  is  equally  pre- 
cluded from  having  a  personal  interest  in  the  result  of 
the  sale  of  which  his  principal  is  ignorant.  Whenever 
he  has  an  interest  in  making  the  sale  which  is  antagon- 
istic to  that  of  his  principal,  he  is  unable  to  discharge  his 
full  duty  to  the  latter,  and  by  continuing  to  act  as  his 
agent  without  disclosing  to  him  the  fact  of  such  interest 
he  commits  a  fraud  upon  him  which  will  deprive  him  of 
all  right  to  compensation  for  services.  (Decided  by  the 
District  Court  of  Appeals,  in  the  case  of  Eauer's  Law 
and  Collection  Co.  vs.  W.  B.  Bradbury,  which  decision 
is  printed  in  Volume  II  of  California  Appellate  Deci- 
sions, No.  86,  page  377.) 

Section  293. — PURCHASE  BY  AGENT  FROM  PRINCIPAL. 
While  an  agent  cannot  purchase  from  himself,  he  may, 
where  all  the  circumstances  show  fair  dealing  and  good 
faith,  purchase  land  from  his  principal,  although  it  was 
placed  in  his  hands  to  sell  to  others.  There  is  no  law 
against  a  purchase  by  an  agent  from  his  principal,  where 
the  facts  are  fully  disclosed  to  the  principal,  and  the 
agent  acts  in  good  faith,  taking  no  advantage  of  his  situ- 
ation. The  principal  may,  if  he  sees  fit,  deal  with  the 
agent  as  with  any  other  person.  The  agent  has  the  same 
right  to  deal  directly  with  his  principal  as  has  a  stranger. 
And  when  the  agent  deals  with  his  principal  at  arm's 
length,  and  after  a  full  disclosure  of  all  that  he  knows 
with  respect  to  the  property,  the  sale  will  be  as  valid  as 
though  the  purchase  had  been  made  by  a  stranger. 

Section  294. — AGENT  BUYING  IN  His  OWN  NAME. — 
When  the  agent  is  employed  by  his  principal  to  buy  real 
estate,  and  uses  the  principal's  money  in  making  a  pur- 
chase  of  the  land,  but  has  the  deed  made  in  his  own  name, 
the  law  will  not  permit  him  to  gain  any  advantage  by 
the  transaction.  He  will  be  held  as  a  trustee  for  the 
principal,  and  will  be  compelled  to  convey  the  land  to 
the  principal. 


302  BUSINESS  LAW  FOE  BUSINESS  MEN. " 

Section  295. — WHEN  AUTHORITY  OF  AGENT  REVOCABLE. 
Where  a  real  estate  agent  has  authority  to  sell  land,  if 
no  time  is  stated  within  which  the  sale  can  be  made,  the 
authority  is  revocable  at  the  will  of  the  owner,  at  any 
time  before  it  has  been  exercised. 

Section  296. — WHEN  OPTION  CAN  BE  REVOKED.— 
Where  an  option  to  sell  real  estate  is  without  considera- 
tion, the  owner  can  revoke  the  option  before  the  expira- 
tion of  the  time  given,  if  no  acceptance  has  been  com- 
municated to  him.  If  a  consideration  has  been  paid  for 
the  option,  the  owner  cannot  revoke  it  until  the  time  ex- 
pires. (Decided  by  the  California  Court  of  Appeals,  in 
the  case  of  Canty  vs.  Brown,  which  decision  is  printed 
in  Volume  IX  of  California  Appellate  Decisions,  page 
475.) 

Section  297. — WHICH  ONE  OF  Two  BROKERS  Is  ENTI- 
TLED TO  COMMISSIONS. — When  two  brokers  have  been  em- 
ployed by  an  owner,  and  one  of  them  in  fact  names  the 
property  to  the  purchaser,  and  the  purchaser  negotiates 
solely  with  him  and  at  his  instance  with  the  owner,  the 
other  broker  is  not  entitled  to  commissions,  notwithstand- 
ing he  casually  learns  that  such  purchaser  is  consider- 
ing the  expediency  of  making  the  purchase,  and  there- 
fore calls  upon  him  and  urges  the  purchase,  and  reports 
his  name  to  the  owner.  Only  the  broker  whose  efforts 
were  the  procuring  cause  of  the  sale  is  entitled  to  the 
commissions  from  the  principal. 

Section  298. — AUTHORITY  OF  AGENT  MAKING  LEASE 
FOR  TERM  LONGER  THAN  ONE  YEAR. — Where  a  real  estate 
agent  is  authorized  to  lease  land  of  his  principal,  he  can- 
not make  a  lease  for  a  term  longer  than  one  year,  un- 
less his  authority  to  make  the  lease  is  in  writing.  The 
authority  of  an  agent  to  make  a  lease  for  a  period  in 
excess  of  one  year  must  be  in  writing,  and  cannot  be  con- 
ferred by  oral  contract.  A  lease  by  an  agent  exceeding 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  303 

the  term  of  one  year  cannot  operate  as  a  valid  lease  for 
one  year,  the  agent's  authority  not  being  in  writ- 
ing. Where  the  owner  of  land,  without  knowledge  of  a 
lease  made  by  an  agent  without  authority,  has  rented 
the  land  to  another,  no  power  remains  in  him  to  ratify 
the  previous  unauthorized  act  of  his  agent. 
Civil  Code,  Section  1624. 

Section  299. — DEATH  OF  PRINCIPAL  KEVOKES  AUTHOR- 
ITY OF  AGENT. — The  death  of  the  principal  revokes  the 
authority  of  the  agent,  except  where  the  agent's  author- 
ity is  coupled  with  an  interest  in  the  land.  In  order  that 
the  agent's  authority  shall  survive  the  death  of  his  prin- 
cipal, it  is  necessary  that  such  an  interest  or  estate  shall 
have  passed  to  the  agent  as  will  entitle  him  to  execute 
the  authority  to  sell  in  his  own  name.  Sometimes,. the 
agent  will  hold  a  power  of  attorney,  from  which  it  can  be 
seen  that  he  has  an  interest  in  the  land,  and  that  it  was 
the  intention  of  his  principal  that  the  power  should  be 
irrevocable  by  death.  But,  whatever  form  the  agent's 
written  authority  may  be  in,  his  right  to  commissions,  or 
the  principal's  promise  to  pay  commissions  on  the  sale, 
will  not  of  themselves  be  sufficient  to  create  an  agency 
which  will  survive  the  principal's  death.  The  agent  must 
have  acquired  by  his  power  from  the  principal  an  interest 
in  the  land  itself.  What  constitutes  an  interest  in  the 
land,  sufficient  for  keeping  alive  an  agent's  authority 
after  the  principal's  death,  depends  very  much  upon  the 
circumstances  of  each  particular  case — so  much  so  that 
illustrations  of  the  rule  here  would  not  be  of  value. 

Section  300. — COMMISSIONS  ON  SALES  OF  REAL  PROP- 
ERTY UNDER  ORDER  OF  COURT. — In  the  settlement  of 'an 
estate,  in  any  order  of  sale  of  real  estate,  or  subsequent 
to  making  such  order,  the  court  may  authorize  any  execu- 
tor or  administrator  to  enter  into  a  contract  with  any 
bona  fide  real  estate  agent  to  secure  a  purchaser,  provid- 
ing for  the  payment  by  the  estate  to  said  agent  of  a  com- 


304  BUSINESS  LAW  FOB  BUSINESS  MEN.  *• 

mission,  the  amount  of  which  shall  be  specified,  payable 
out  of  the  proceeds  of  any  such  sale.  If  a  sale  to  a  pur- 
chaser obtained  by  such  agent  is  returned  to  the  court  for 
confirmation  and  said  sale  be  confirmed  to  such  pur- 
chaser, such  contract  will  be  binding  and  valid  as  against 
the  estate. 

By  the  execution  of  any  such  a  contract  no  personal 
liability  will  attach  to  the  executor  or  administrator,  and 
no  liability  of  any  kind  will  be  incurred  by  the  estate  un- 
less an  actual  sale  is  made  and  confirmed  by  the  court. 

Act  of  the  Legislature,  approved  March  10, 1909. 

Section  301. — PEKSONAL  PROPERTY  BROKERS. — A  per- 
sonal property  broker  may  charge,  receive,  and  collect, 
for  money  loaned  or  advanced  on  personal  property,  se- 
cured by  chattel  mortgage,  bill  of  sale,  or  other  contract, 
or  secured  by  an  assignment  of  power  of  attorney  respect- 
ing wages,  salary,  earnings  or  income,  the  sum  of  two  per 
cent  per  month,  and  no  more. 

Act  of  the  Legislature,  approved  April  16',  1909. 

No  further  or  other  charges,  either  for  recording,  in- 
suring or  examining  the  security  of  property,  or  for  the 
drawing,  executing  or  filing  of  papers,  or  for  any  services 
or  upon  any  pretext  whatsoever  beyond  the  aforesaid 
charge  for  interest  or  discount  shall  be  asked,  charged,  or 
in  any  way  received,  where  the  same  would  thereby  make 
a  greater  charge  for  the  money  or  thing  advanced  than 
the  aforesaid  rate  of  two  per  centum  per  month,  and 
where  made,  all  such  charges  shall  be  considered  and  be 
of  the  same  effect  as  so  much  added  interest;  provided, 
however,  that  with  the  consent  of  the  borrower  he  may 
be  required  to  pay  the  fees  or  charges  actually  expended 
where  the  same  are  made  necessary  by  law  to  give  full 
legal  effect  to  any  instrument  given  hereunder. 

No  contract  of  any  kind  or  nature  made  by  any  per- 
sonal property  broker  which  comes  within  the  scope  of 
business  as  set  forth  herein,  or  which  in  any  way  involves 


BUSINESS  CONTRACTS  AND  LEGAL,  OBLIGATIONS.  305 

any  security  given  to  secure  the  performance  of  suck  con- 
tract, shall  be  valid  or  of  any  force,  virtue  or  effect,  either 
at  law  or  in  equity,  if  there  is  therein  or  thereon  directly 
or  indirectly  charged,  accepted  or  contracted  to  be  re- 
ceived or  paid,  either  in  money,  goods,  discount,  or  thing 
in  action,  or  in  any  other  way,  a  greater  benefit,  rate  of 
discount,  or  interest  than  the  rate  of  two  per  centum  per 
month ;  and  if  a  greater  benefit,  rate  of  discount  or  inter- 
est than  two  per  centum  per  month  is  directly  or  indi- 
rectly advanced  or  paid  upon  any  such  contract  as  is  in 
this  section  designated,  the  excess  above  the  said  rate  of 
two  per  centum  per  month  so  advanced  or  paid  may  be 
demanded  and  recovered  by  the  person  or  his  legal  repre- 
sentatives or  assigns  who  advanced  or  paid  the  same  from 
the  person  or  corporation  either  to  whom  or  for  whose 
use  or  benefit  such*payment  or  advance  or  any  part  there- 
of was  made. 

The  failure  of  any  person  or  corporation,  or  any  em- 
ployee, employees,  agent,  agents,  representative  or  repre- 
sentatives making,  renewing  or  extending  a  loan  or  ad- 
vance properly  falling  within  the  scope  of  business  as  set 
forth  herein,  to  comply  with  any  part  of  the  provisions 
hereof,  shall  be  guilty  of  a  misdemeanor,  and  for  the  first 
offense  punished  by  imprisonment  in  a  county  jail  not 
exceeding  six  months,  or  by  a  fine  not  exceeding  $500,  or 
by  both,  and  for  each  subsequent  offense  by  a  fine  of  not 
less  than  $50  or  more  than  $500,  or  by  imprisonment  in 
the  county  jail  of  not  less  than  ten  days  and  not  to  exceed 
six  months,  or  by  such  fine  or  imprisonment. 
Penal  Code,  Section  19. 
Act  of  the  Legislature,  approved  April  21,  1911. 

FIEE  INSURANCE 

Section  302. — CONTRACT  BETWEEN  THE  PARTIES. — In- 
surance against  loss  by  fire  constitutes  one  of  the  common 
and  important  contracts  in  the  business  of  every  com- 
munity. In  California  the  fire  insurance  business  is  car- 


30G  BUSINESS  LAW  FOE  BUSINESS  MEN. 

ried  on  by  corporations,  nearly  all  having  ample  capital, 
and  fully  able  to  meet  such  losses  as  they  are  required  to 
pay.  Yet  so  many  and  so  varied  are  the  policies  issued, 
and  the  circumstances  and  causes  of  fires  and  losses,  and 
the  claims  and  adjustments  of  claims  after  fires  have  oc- 
curred, that  it  is  not  a  matter  for  wonder  that  conflicts 
are  continually  arising  between  the  insurer  and  the  in- 
sured, over  the  terms  and  conditions  of  the  contract  and 
the  rights  and  obligations  of  the  parties.  The  Legislature 
has  attempted  in  our  statute  law  to  fix  the  mutual  obli- 
gations and  liabilities  of  the  parties  to  the  contract  of  fire 
insurance,  and  the  Supreme  Court  of  California  has  in 
many  decisions  stated  definite  rules  of  construction  which 
must  be  applied  to  the  policies  issued  by  insurance  com- 
panies. The  contract  of  insurance  is  generally  defined 
by  the  statute  of  California  as  being  a*  contract  whereby 
one  undertakes  to  indemnify  another  against  loss,  dam- 
age, or  liability  arising  from  an  unknown  or  contingent 
event.  Insurance  against  fire  is  a  contract  whereby  the 
insurer  becomes  bound,  for  a  definite  premium  or  consid- 
eration, to  indemnify  the  insured  against  loss  or  damage 
to  the  property  named  in  the  policy.  The  policy,  and  the 
conditions  contained  in  it,  fix  the  relations  between  the 
parties  to  the  contract,  and  furnish  the  measure  of  their 
respective  rights  and  liabilities. 
Civil  Code,  Section  2527. 

.Section  303. — DESIGNATION  or  PARTIES. — The  party 
who  issues  the  policy  of  fire  insurance  is  called  the  in- 
surer, and  the  party  who  is  indemnified  is  called  the 
insured. 

Civil  Code,  Section  2538. 

Section  304. — INSURABLE  INTEREST. — Every  interest  in 
property,  or  relating  to  it,  or  liability  in  respect  to  it,  of 
such  a  nature  that  a  contemplated  peril  might  directly  in- 
jure the  insured,  is  an  insurable  interest,  in  the  law  of 
California.  The  contract  of  insurance,  being  one  of  in- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  307 

demriity,  the  insured  must  have  such  an  interest  in  the 
property  as  that  its  destruction  will  result  in  pecuniary 
loss  to  him.  But  it  is  not  necessary  he  shall  have  a  title, 
provided  his  interest,  whatever  it  may  be,  is  such  that  it 
would  be  impaired  or  injured  by  the  destruction  of  the 
property.  Nor  is  it  necessary  that  the  interes't  of  the  in- 
sured be  personal ;  for  if  he  has  an  interest  in  the  property 
as  trustee,  agent,  mortgagee,  commission  merchant,  com- 
mon carrier,  warehouseman,  administrator,  pledgee, 
lessor  or  lessee,  consignee,  or  judgment  creditor,  the 
courts  have  held  that  this  is  an  insurable  interest.  And  it 
has  been  held  that  even  one  who  has  no  title,  legal  or 
equitable,  in  the  property,  and  no  present  possession  or 
right  of  possession,  has  an  insurable  interest  if  he  will 
derive  benefit  from  the  continued  existence  of  the  prop- 
erty, or  will  suffer  loss  by  its  destruction. 
Civil  Code,  Section  2546. 

Section  305. — MEASURE  OF  INTEREST  IN  PROPERTY. — The 
measure  of  an  insurable  interest  in  property  is  the  extent 
to  which  the  insured  might  be  damaged  by  loss  of  or  in- 
jury to  the  property.  Therefore,  under  the  provisions  of 
our  law,  if  the  owner  of  a  building  insures  it  for  more 
than  it  is  worth,  he  will  not  be  entitled  to  the  full  amount, 
merely  because  the  company  has  issued  a  policy  and 
accepted  a  premium  on  a  fictitious  value ;  but  the  amount 
the  insured  will  be  liable  to  pay,  in  all  cases,  will  be 
the  amount,  to  the  extent  of  the  policy,  necessary  to 
reimburse  the  insured  for  the  pecuniary  loss  he  has  sus- 
tained, unless  the  insurer  has  agreed  in  the  policy  that  in 
case  of  loss  the  property  shall  be  valued  at  a  given  sum. 
Where  the  interest  of  the  insured  is  less  than  a  whole 
ownership,  as  where  he  has  an  interest  only  as  mortgagee, 
his  insurable  interest  in  the  property  is  measured  by  the 
amount  of  the  debt,  and  no  more ;  and  in  fact,  the  insured 
can  never  be  entitled  to  recover  more  than  his  actual  loss. 
Civil  Code,  Section  2550. 


308  BUSINESS  LAW  FOB  BUSINESS  MEN. 

Section  306. — WHEN  INSURABLE  INTEREST  MUST  EXIST. 
The  law  of  California  provides,  that  the  interest  insured 
must  exist  when  the  insurance  takes  effect,  and  when  the 
loss  occurs,  but  need  not  exist  between  those  two  dates. 
The  meaning  of  this  is,  that  where  the  policy  does  not  pro- 
hibit it,  the  insured  may  dispose  of  his  interest  in  the 
insured  property,  after  the  policy  has  been  issued,  and  if, 
before  the  term  of  the  policy  ends,  he  becomes  again  the 
owner  of  his  interest  in  the  property,  and  owns  it  at  the 
time  of  the  loss,  he  may  recover  on  the  policy.  The  inter- 
est of  the  party  in  the  insurance  is  simply  suspended, 
when  he  has  disposed  of  the  property  without  changing 
the  policy  to  another,  until  the  interest  in  the  property 
and  the  interest  in  the  insurance  are  again  vested  in  him- 
self. A  change  in  interest  in  a  thing  insured,  after  the 
loss,  does  not  affect  the  right  of  the  insured  to  collect  the 
insurance.  Where  a  person  holds  a  policy  which  includes 
several  articles  separately  insured,  and  transfers  some  of 
the  articles  only,  his  insurance  upon  the  articles  not  trans- 
ferred is  still  good.  A  policy  is  not  rendered  invalid  by 
the  death  of  the  insured ;  for  his  administrator  will  hold 
the  policy  for  the  benefit  of  those  who  succeed  to  his 
estate.  The  transfer  of  interest  by  one  of  several  part- 
ners, joint  owners,  or  owners  in  common,  who  are  jointly 
insured,  to  the  others,  does  not  avoid  an  insurance,  even 
though  it  has  been  agreed  that  the  insurance  shall  cease 
upon  an  alienation  of  the  thing  insured. 

Civil  Code,  Sections  2552,  2553,  2554,  2555,  2556, 
2557. 

Section  307. — INSURANCE  WITHOUT  INTEREST  ILLEGAL. 
The  sole  object  of  insurance  is  the  indemnity  of  the  in- 
sured, and  if  he  has  no  insurable  interest  when  the  policy 
takes  effect,  the  policy  is  void ;  and  if  he  has  no  insurable 
interest  when  the  loss  occurs,  he  cannot  collect  the  insur- 
ance. 

Civil  Code,  Section  2551. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  309 

Section  308. — WAGER  POLICIES  VOID. — Every  policy 
executed  by  way  of  gaming  or  wagering  is  void. 
Civil  Code,  Section  2558. 

Section  309. — DUTY  OP  PARTIES  IN  MAKING  THE  CON- 
TRACT.— Each  party  to  a  contract  of  fire  insurance,  if  they 
expect  the  policy  to  be  free  from  attack,  must  deal  fairly 
with  one  another,  and  must  not  be  guilty  of  misrepre- 
sentation or  concealment  of  material  facts,  upon  entering 
into  the  contract.  Insurance  companies  act  usually,  if  not 
always,  by  agents  sent  out  to  solicit  insurance,  or  by  local 
agents  residing  in  the  locality  where  the  property  to  be 
insured  is  situated.  The  company  is  bound  by  all  the  acts 
of  such  agents  done  within  the  scope  of  their  authority. 
The  insured  may  act  for  himself,  or  through  a  broker  or 
other  agent.  But  however  the  parties  come  together,  the 
law  requires  the  utmost  good  faith  on  the  part  of  both. 
The  law  of  California,  recognizing  this  principle,  provides 
that  each  party  to  a  contract  of  insurance  must  commun- 
icate to  the  other  in  good  faith  all  facts  within  his  knowl- 
edge which  are  or  which  he  believes  to  be  material  to  the 
contract,  and  which  the  other  has  not  the  means  of  ascer- 
taining; therefore,  it  is  the  duty  of  the  company's  agent 
to  disclose  fully  to  the  insured  all  the  conditions  and  re- 
quirements of  the  policy  which  his  company  proposes  to 
issue,  and  it  is  the  duty  of  the  insured  to  communicate  to 
the  agent  all  facts  within  his  knowledge  respecting  the 
situation  or  condition  of  the  property ;  but  neither  party 
to  a  contract  of  insurance  is  bound  to  volunteer  informa- 
tion of  matters  which  the  other  knows,  or  which  in  the 
exercise  of  ordinary  care  the  other  ought  to  know,  where 
there  is  no  reason  to  suppose  him  ignorant  of  them ;  and 
neither  party  is  bound  to  give  information  to  the  other  of 
facts  of  which  the  other  waives  communication;  and 
neither  party  is  bound  to  give  the  other  information  of 
matters  open  to  the  inspection  equally  of  both;  except, 
that  either  party  must  answer  the  inquiries  of  the  other, 
as  to  any  fact  affecting  the  insurance,  though  it  would  not 


310  BUSINESS  LAW  FOR  BUSINESS  MEN. 

have  been  necessary  to  say  anything  about  it  if  no  inquiry 
had  been  made.  Where  inquiries  are  made  by  either  party 
of  the  other,  he  is  bound  to  answer  truthfully  and  in  good 
faith.  Both  parties  will  be  responsible  for  any  false  repre- 
sentations made  during  the  negotiations,  and  for  any  false 
representation  on  a  material  matter  the  policy  will  be 
rescinded.  The  law  deems  a  representation  false  when 
the  facts  fail  to  correspond  with  its  assertions  or  stipu- 
lations. 

Civil  Code,  Sections  2563,  2564,  2566,  2579. 

* 

Section  310. — THE  POLICY  OF  INSURANCE. — The  written 
instrument  in  which  a  contract  of  insurance  is  set  forth  is 
called  the  policy  of  insurance.  The  policy  is  required  by 
the  law  of  California  to  specify,  the  parties  between  whom 
the  contract  is  made,  the  rate  of  premium,  the  property 
insured,  the  interest  of  the  insured  in  the  property,  if  he 
is  not  the  absolute  owner,  the  risks  insured  against,  and 
the  period  during  which  the  insurance  is  to  continue. 
When  an  insurance  is  made  by  an  agent  or  trustee,  the 
fact  that  his  principal  or  beneficiary  is  the  person  really 
insured  may  be  indicated  by  describing  him  as  agent  or 
trustee,  or  by  other  general  words  in  the  policy.  To 
render  an  insurance  effected  by  one  partner  or  part  owner 
applicable  to  the  interest  of  his  copartners  or  of  other 
part  owners,  it  is  necessary  that  the  terms  of  the  policy 
should  be  made  to  apply  to  the  joint  or  common  interest. 
When  the  description  of  the  insured  in  a  policy  is  so  gen- 
eral that  it  may  comprehend  any  person  or  any  class  of 
persons,  he  only  can  claim  the  benefit  of  the  policy  who 
can  show  that  it  was  intended  to  include  him.  A  policy 
may  be  so  framed  that  it  will  inure  to  the  benefit  of  whom- 
soever, during  the  continuance  of  the  risk,  may  become 
the  owner  of  the  interest  insured.  The  mere  transfer  of 
a  thing  insured  does  not  transfer  the  policy,  but  suspends 
it  until  the  same  person  becomes  the  owner  of  both  the 
policy  and  the  thing  insured. 

Civil  Code,  Sections  2587,  2589,  2590,  2591,  2592, 
2593. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  311 

Section  311. — OPEN  AND  VALUED  POLICIES. — A  policy  is 
either  open  or  valued.  An  open  policy  is  one  in  which  the 
value  of  the  thing  insured  is  not  agreed  upon,  but  is  left 
to  be  ascertained  in  case  of  loss.  A  valued  policy  is  one 
which  expresses  on  its  face  an  agreement  that  the  thing 
insured  shall  be  valued  at  a  specified  sum. 

Civil  Code,  Section  2594,  2595,  2596. 

Section  312. — RUNNING  POLICY. — A  running  policy  is 
one  which  contemplates  successive  insurances,  and  which 
provides  that  the  object  of  the  policy  may  be  from  time  to 
time  defined,  especially  as  to  the  subjects  of  insurance,  by 
additional  statements  or  indorsements.  The  general  rule 
is  that  the  property  insured  must  be  specified  in  the  pol- 
icy. But  open  and  running  policies  are  an  exception  to 
this  rule.  They  were  brought  into  use  to  enable  merchants 
to  insure  their  goods  shipped  at  distant  ports,  when  it  is 
impossible  for  them  to  know  the  precise  quantity  or  char- 
acter of  the  goods,  or  the  particular  vessel  in  which  they 
are  shipped,  and  thus  unable  to  describe  accurately  or 
particularly  the  subject  of  insurance.  These  policies  gen- 
erally, if  not  universally,  require  that  the  risk  shall  be 
declared  or  reported  to  the  company  as  soon  as  known  to 
the  insured. 

Civil  Code,  Section  2597. 

Section  313. — ACKNOWLEDGMENT  IN  POLICY  OF  RECEIPT 
OF  PREMIUM. — An  acknowledgment  in  a  policy  of  the  re- 
ceipt of  premium  is  conclusive  evidence  of  its  payment, 
so  far  as  to  make  the  policy  binding,  notwithstanding  any 
stipulation  therein  that  it  shall  not  be  binding  until  the 
premium  is  actually  paid. 

Civil  Code,  Section  2598. 

Section  314. — AGREEMENT  NOT  TO  TRANSFER. — An 
agreement,  made  before  a  loss,  not  to  transfer  the  claim 
of  a  person,  insured  against  by  the  insurer,  after  the  loss 
has  happened,  is  void. 

Civil  Code,  Section  2599. 


312  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Section  315. — CERTAIN  WARRANTIES. — A  warranty  is 
either  expressed  in  the  policy,  or  implied  from  circum- 
stances. A  statement  in  a  policy,  of  a  matter  relating  to 
the  person  or  thing  insured,  or  to  the  risk,  as  a  fact,  is  an 
express  warranty  of  the  fact.  A  statement  in  a  policy, 
which  imports  that  it  is  intended  to  do  or  not  to  do  a 
thing  which  materially  affects  the  risk,  is  a  warranty  that 
such  act  or  omission  shall  take  place ;  as  that  a  watchman 
will  be  kept  on  the  premises,  or  that  a  supply  of  water  will 
be  kept  on  the  building  ready  for  use. 
Civil  Code,  Sections  2607,  2608. 

Section  316. — WHAT  ACTS  AVOID  POLICY. — The  viola- 
tion of  a  material  warranty,  or  other  material  provision 
of  a  policy,  'on  the  part  of  either  party  thereto,  entitles 
the  other  to  rescind.  A  policy  may  declare  that  a  viola- 
tion of  special  provisions  shall  avoid  it,  otherwise  the 
breach  of  an  immaterial  provision  does  not  avoid  the 
policy. 

Civil  Code,  Sections  2610,  2611. 

Section  317. — EXONERATION  OF  INSURER. — An  insurer 
is  not  liable  for  a  loss  caused  by  the  wilful  act  of  the  in- 
sured ;  but  the  insurer  is  not  exonerated  by  the  mere  neg- 
ligence of  the  insured,  or  of  his  agents,  or  others. 
Civil  Code,  Section  2629. 

Section  318. — NOTICE  OF  Loss. — In  case  of  loss  by  fire, 
the  insured  must  give  notice  to  the  company  of  the  loss, 
without  unnecessary  delay.  If  the  policy  fix  the  time 
within  which  notice  of  loss  must  be  given  to  the  company, 
the  insured  must  give  notice  within  that  time ;  if  the  policy 
does  not  fix  the  time,  the  insured  must  give' notice  of  the 
loss  within  a  reasonable  time.  The  notice  may  be  given 
to  an  agent  of  the  company,  or  it  may  be  sent  to  the  office 
of  the  company,  and  it  may  be  sent  by  the  most  available 
means,  by  mail,  or  in  person.  If  the  policy  provides  that 
the  notice  must  be  in  writing,  it  must  be  so  given,  but 
verbal  notice  will  be  sufficient  without  such  provision. 
Civil  Code,  Section  2633. 


BUSINESS  CONTBACTS  AND  LEGAL  OBLIGATIONS.  313 

Section  319. — PRELIMINARY  PROOFS  OF  Loss. — When 
preliminary  proofs  of  loss  are  required  by  a  policy,  the 
insured  is  not  bound  to  give  such  proofs  as  would  be  nec- 
essary in  a  court  of  justice ;  but  it  is  sufficient  for  him  to 
give  the  best  evidence  which  he  has  in  his  power  at  the 
time.  All  defects  in  a  notice  of  loss,  or  in  preliminary 
proof  of  loss,  which  the  insured  might  remedy,  and  which 
the  insurer  omits  to  specify  to  him  without  unnecessary 
delay  as  grounds  of  objection,  are  waived.  Delay  in  the 
presentation  to  an  insurer  of  notice  or  proof  of  loss  is 
waived,  if  caused  by  an  act  of  the  insurer,  or  if  he  omits 
to  make  objection  promptly  and  specifically  upon  that 
ground.  If  a  policy  requires,  by  way  of  preliminary  proof 
of  loss,  the  certificate  or  testimony  of  a  Justice  of  the 
Peace,  or  other  person,  it  is  sufficient  for  the  insured  to 
use  reasonable  diligence  to  procure  it,  and  in  case  of  the 
refusal  of  such  person  to  give  it,  then  to  furnish  reason- 
able evidence  to  the  insurer  that  such  refusal  was  not 
induced  by  any  just  ground  of  disbelief  in  the  facts  neces- 
sary to  be  certified  to. 

Civil  Code,  Sections  2634,  2635,  2636,  2637. 

Section  320. — DOUBLE  INSURANCE. — A  double  insur- 
ance exists  where  the  same  interest  in  property  is  insured 
by  several  insurers  separately.  In  cases  of  double  insur- 
ance, the  several  companies  must  contribute  ratably  to- 
ward the  loss,  without  regard  to  the  dates  of  the  several 
policies. 

Civil  Code,  Section  2642. 

Section  321. — ALTERATION  INCREASING  RISK. — An  alter- 
ation in  the  use  or  condition  of  a  thing  insured  from  that 
to  which  it  is  limited  by  the  policy,  made  without  the  con- 
sent of  the  insurer,  by  means  within  the  control  of  the  in- 
sured, and  increasing  the  risk,  entitles  an  insurer  to  re- 
scind a  contract  of  fire  insurance. 
Civil  Code,  Section  2753. 


314  BUSINESS  LAW  FOB  BUSINESS  MEN. 

Section  322. — ALTERATION  WHICH  DOES  NOT  INCREASE 
KISK. — An  alteration  in  the  use  or  condition  of  a  thing  in- 
sured from  that  to  which  it  is  limited  by  the  policy,  which 
does  not  increase  the  risk,  does  not  affect  a  contract  of 
fire  insurance. 

Civil  Code,  Section  2754. 

Section  323. — VERBAL  CONTRACT  TO  ISSUE  POLICY. — A 
verbal  contract  to  issue  a  policy,  made  by  the  owner  of 
the  property  and  the  agent  of  the  company,  is  a  valid 
agreement.  Therefore,  if  the  owner  of  a  building  applies 
to  an  agent,  or  if  the  agent  solicits  the  insurance,  and  a 
verbal  agreement  is  made  for  a  consideration  that  a  pol- 
icy will  be  issued  for  a  certain  amount  covering  the  prop- 
erty, and  the  company  then  refuses  to  issue  the  policy,  it 
will  be  liable  for  the  loss,  whether  the  policy  is  issued  or 
not.  If  a  fire  occurs  and  destroys  the  property,  the  owner 
can  sue  the  company  for  damages,  for  its  failure  to  issue 
the  policy,  and  recover  his  loss  on  the  property,  not  ex- 
ceeding the  amount  of  insurance  verbally  agreed  upon. 

Section  324. — CERTIFICATE  OF  NOTARY. — Under  a  pro- 
vision of  a  fire  insurance  policy  requiring  that  in  case  of 
loss  by  fire  the  assured  must  obtain  the  certificate  of  the 
Notary  nearest  the  insured  building,  not  concerned  in  the 
loss  as  a  creditor  or  otherwise,  nor  related  to  the  assured, 
as  to  the  justice  of  the  claim,  where  it  appears  that  the 
nearest  Notary  refused  to  act,  on  the  ground  that  he  was 
employed  by  the  insurance  company  in  ascertaining  the 
facts  and  taking  affidavits  concerning  the  fire,  the  assured 
is  relieved  of  the  necessity  of  obtaining  his  certificate,  and 
need  not  inform  the  company  of  the  reason  for  obtaining 
the  certificate  of  another  Notary.  (Decided  by  the  Su- 
preme Court  in  the  case  of  Noone  vs.  Transatlantic  Fire 
Insurance  Co.,  which  decision  is  printed  in  Volume  88  of 
the  California  Eeports,  page  152.) 

Section  325. — FALSITY  OF  MATERIAL  REPRESENTATIONS 
BY  INSURED. — One  who  makes  an  application  for  fire  insur- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  315 

ance  must  not  make  false  representations,  as  to  any  ma- 
terial fact  upon  which  the  insurance  depends,  for  if  he 
does  the  company  may  cancel  the  policy.  This  the  com- 
pany may  do  by  making  a  tender  of  the  premium  back  to 
the  insured,  and  notifying  him  that  the  policy  is  canceled 
on  account  of  the  false  representation.  And  if  the  com- 
pany, where  a  false  representation  has  been  really  made, 
tenders  the  premium  back  and  gives  the  insured  notice  of 
the  cancellation  of  the  policy,  before  the  commencement 
of  a  suit  on  the  policy,  this  will  operate  as  a  rescission  of 
the  policy  and  will  defeat  the  suit.  As  an  illustration,  it 
may  be  cited,  that  a  condition  in  a  policy  of  insurance  upon 
a  mill,  that  during  such  time  as  the  mill  is  idle  a  watch- 
man shall  be  employed  by  the  insured  ' '  to  be  in  and  about 
the  premises  day  and  night,"  is  broken  if  during  the  time 
the  mill  is  idle  but  one  watchman  is  employed,  who  was 
not  instructed  to  watch  the  mill  at  night,  and  who  slept 
every  night  in  a  building  three  or  four  hundred  feet  from 
the  mill.  A  man  employed  to  watch  in  the  daytime,  and 
who  is  permitted  to  sleep  at  night,  is  not  a  watchman  at 
night.  And  to  entitle  the  insured  to  recover  upon  such  a 
policy  it  must  be  shown  that  he  has  in  good  faith  employed 
a  watchman  to  perform  the  duties  required  by  the  terms 
of  the  policy.  (Decided  by  the  Supreme  Court  in  the  case 
of  Eankin  vs.  Amazon  Insurance  Co.,  which  decision  is 
printed  in  Volume  89  of  the  California  Eeports,  page 
203.) 

Section  326. — STATEMENTS  AS  TO  VALUATIONS. — A  pro- 
vision in  the  policy  that  the  application  shall  be  considered 
a  warranty,  and  if  the  property  is  overvalued  in  it,  the 
policy  shall  be  void,  applies  only  where  the  statements  as 
to  value  are  intentionally  false. 

If  there  is  no  valuation  in  the  policy,  the  measure  of 
indemnity  in  an  insurance  against  fire  is  the  expense  it 
would  be  to  the  insured,  at  the  time  of  the  commencement 
of  the  fire,  to  replace  the  thing  lost  or  injured  in  the  con- 
dition in  which  it  was  at  the  time  of  the  injury. 

Act  of  the  Legislature,  approved  April  15,  1909. 


316  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Section  327. — RIGHTS  or  MORTGAGEE — EFFECT  OF  SALE 
UNDER  FORECLOSURE. — A  mortgagee  of  insured  property, 
to  whom  the  loss  is  made  payable,  is  entitled  to  recover 
the  loss  to  the  full  extent  of  the  mortgage  debt,  although 
the  fire  occurs  after  a  foreclosure  sale  and  purchase  by 
the  mortgagee,  but  before  the  time  for  redemption  has 
expired  and  before  the  execution  of  a  sheriff's  deed  to 
the  mortgage.  (Decided  by  the  Supreme  Court  in  the 
case  of  National  Bank  vs.  Union  Insurance  Co.,  which 
decision  is  reported  in  Volume  88  of  the  California  Re- 
ports, page  497.) 

Section  328. — INSURANCE  BY  COMMISSION  MERCHANT- 
INCORRECT  STATEMENT  AS  TO  OWNERSHIP. — The  Springfield 
Fire  and  Marine  Insurance  Co.  inusred  against  loss  by 
fire  a  stock  of  goods,  the  property  of  a  corporation  in 
which  F.  H.  McCormick  and  F.  N.  Delanoy  were  stock- 
holders ;  McCormick  and  Delanoy  held  the  goods  as  se- 
curity for  advances  made  to  the  corporation,  but  in  the 
application  for  the  insurance  they  described  the  property 
as  their  own.  The  policy  referred  to  the  application,  and 
made  it  a  part  of  the  policy,  and  provided  that  if  the  in- 
sured were  not  the  sole,  absolute,  and  unconditional  own- 
ers of  the  property,  and  if  their  interest  was  not  truly 
stated  in  the  policy,  then  the  policy  should  be  void.  Mc- 
Cormick and  Delanoy  sued  the  company  for  the  insurance 
but  the  Supreme  Court  decided  that  the  policy  was  in- 
valid, because  the  ownership  was  not  truly  stated  in  the 
application.  (Decided  by  the  Supreme  Court  in  the  case 
of  McCoriniek  vs.  The  Springfield  Fire  and  Marine  Insur- 
ance Co.,  which  decision  is  printed  in  Volume  66  of  the 
California  Reports,  page  361.) 

Section  329. — RIGHT  OF  ARBITRATION. — When  a  policy 
of  fire  insurance  provides  for  arbitration  upon  the  written 
request  of  either  party,  in  case  of  difference  touching  any 
loss  or  damage  after  the  proof,  the  arbitration  is  not  a 
condition  precedent  to  the  right  of  action,  unless  demand- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  317 

ed  after  proof  of  loss ;  and  if  no  demand  for  arbitration  is 
made  within  a  reasonable  time,  or  until  after  a  right  of 
action  has  become  complete  by  the  lapse  of  sixty  days 
from  the  proofs  of  loss,  the  right  to  demand  arbitration 
is  waived.  No  right  of  arbitration  exists  under  a  fire  in- 
surance policy  when  the  stipulation  for  arbitration  does 
not  definitely  fix  the  number  of  arbitrators  nor  provide  a 
mode  of  selection.  (Decided  by  the  Supreme  Court  in 
the  case  of  Case  vs.  Manufacturers'  Insurance  Co.,  which 
decision  is  printed  in  Volume  82  of  the  California  Ee- 
ports,  page  263.) 

Section  330. — WAIVER  OF  PROOF  OF  Loss  BY  ARBITRA- 
TION.— A  provision  in  a  policy  of  fire  insurance,  requiring 
the  assured  in  case  of  loss  to  forthwith  give  notice  thereof 
to  the  insurer,  and  produce  a  certificate  of  preliminary 
proof  from  a  notary  or  magistrate,  is  waived,  if  the  insur- 
er, after  learning  of  the  loss,  makes  no  objections  to  the 
absence  of  the  notice  and  preliminary  proof,  but  joins  in 
proceedings  for  determining  the  loss  by  arbitration,  which 
proceedings  are  required  by  the  policy  to  be  taken  after 
proof  of  the  loss  has  been  received  in  due  form.  In  such 
a  case  the  company  cannot  deny  the  authority  of  its 
agents  to  waive  the  provision  of  the  policy  as  to  notice 
and  preliminary  proof,  when  it  adopts  their  acts  in  that 
regard,  and  relies  on  the  award  as  a  defense  to  an  action 
to  recover  for  the  loss.  (Decided  by  the  Supreme  Court 
in  the  case  of  Carroll  vs.  Girard  Fire  Insurance  Co.,  which 
decision  is  printed  in  Volume  72  of  the  California  Re- 
ports, page  297.) 

Section  331. — -WAIVER  OF  CONDITION  AS  TO  PREPAYMENT 
OF  PREMIUM. — An  express  provision  in  a  policy  of  insur- 
ance that  the  company  shall  not  be  liable  on  the  policy 
until  the  premium  is  actually  paid  is  waived  by  the  un- 
conditional delivery  of  the  policy  to  the  assured,  as  a  com- 
pleted and  executed  contract,  under  an  agreement  that  a 
credit  shall  be  given  for  the  premium,  and  the  company 


318  BUSINESS  LAW  FOR  BUSINESS  MEN. 

is  liable  for  a  loss  which  may  occur  during  the  period  of 
credit.  If  an  insurance  policy  contains  a  formal  receipt 
of  premium,  its  unconditional  delivery  is  conclusive  evi- 
dence of  payment,  so  far  as  to  estop  the  company  issuing 
it  from  denying  the  validity  of  the  policy,  notwithstanding 
a  declaration  in  the  policy  that  it  shall  not  be  binding  until 
the  premium  is  actually  paid.  (Decided  by  the  Supreme 
Court  in  the  case  of  Farnum  vs.  Phoenix  Insurance  Co., 
which  decision  is  printed  in  Voume  83  of  the  California 
Reports,  page  246.) 

Section  332. — REMEDY  FOE  UNAUTHORIZED  TERM  OF 
CREDIT. — The  giving  of  any  credit  by  authority  of  the  in- 
surance company  being  a  waiver  of  actual  payment  as  a 
condition  precedent  to  liability,  the  only  remedy  for  an 
unauthorized  term  of  credit  is  for  the  company  to  per- 
sonally notify  the  assured,  who  is  obliged  to  pay  the  pre- 
mium, that  he  must  pay  at  the  end  of  the  authorized  term 
of  credit,  or  that  the  policy  will  be  canceled  for  non-pay- 
ment of  premium.  If  the  notice  is  sent  by  mail,  and  is 
not  received,  the  cancellation  for  non-payment  of  pre- 
mium is  ineffective. 

Section  333. — INSURANCE  OF  UNOCCUPIED  BUILDING. — 
Insurance  companies  may  by  their  acts  and  conduct  be 
estopped  from  availing  themselves  of  a  defense  which 
they  might  otherwise  interpose  to  an  action  upon  their 
policies,  or  may  waive  their  right  to  avail  themselves  of 
such  defense.  If  a  building  is  insured  against  loss  by  fire 
under  a  policy  containing  a  proviso  that  it  shall  be  or 
become  void  in  case  the  building  is  or  shall  become  vacant 
or  unoccupied  when  it  was  well  known  to  the  company's 
agents  at  the  date  of  the  policy  and  subsequently  that  it 
was  and  remained  unoccupied,  the  company  will  be  pre- 
sumed to  have  waived  the  clause  as  to  occupancy.  (De- 
cided by  the  Supreme  Court  in  the  case  of  West  Coast 
Lumber  Co.  vs.  State  Investment  and  Insurance  Co., 
which  decision  is  printed  in  Volume  98  of  the  California 
Reports,  page  502.) 


BUSINESS  CONTEACTS  AND  LEGAL  OBLIGATIONS.  319 

Section  334. — LIABILITY  OF  INSURANCE  COMPANY  FOR 
FIRES  CAUSED  BY  EARTHQUAKES. — The  property  of  the  in- 
sured was  consumed  in  a  general  conflagration  in  San 
Francisco  which  had  its  origin  in  the  earthquake  of  1906. 
The  fire  was  started  at  several  points  in  the  city  and 
spread  to  the  insured  property.  The  policy  provided  that 
the  company  should  not  be  liable  for  loss  caused  directly 
or  indirectly  by  invasion,  or  for  loss  or  damage  occasioned 
by  or  through  any  earthquakes.  In  "Williamsburgh  City 
Fire  Ins.  Co  vs.  Willard,  Volume  164,  Federal  Eeporter, 
page  404,  it  was  decided  by  the  Circuit  Court  of  Appeals 
that  although  the  words  "directly  or  indirectly"  applied 
to  invasions,  they  could  not  be  made  to  embrace  earth- 
quakes; "occasioned"  was  equivalent  to  "caused";  and 
a  loss  indirectly  caused  by  the  progress  of  a  fire  from  a 
distance,  originally  started  by  an  earthquake,  is  a  loss 
which  the  insurance  company  must  pay.  The  Supreme 
Court  of  the  United  States  affirmed  the  decision  of  the 
Circuit  Court  of  Appeals. 

Section  335. — CONDITION  AS  TO  CHANGE  OCCURRING  IN 
BUILDING. — If  a  policy  of  insurance  against  fire  contains 
a  clause,  that  if  the  building  shall  fall  except  by  fire,  the 
insurance  shall  immediately  cease,  and  the  walls  of  the 
building  are  of  brick,  and  a  portion  falls,  leaving  more 
than  three-fourths  standing,  the  building  is  not  a  fallen 
building  within  the  condition  of  the  policy,  and  if  de- 
stroyed by  fire  in  that  condition  the  insurance  company  is 
liable  for  the  loss.  A  clause  in  an  insurance  policy  that  it 
shall  be  void  if  any  change  occurs  in  the  building  by  which 
the  risk  is  increased  without  the  consent  of  the  company, 
has  reference  only  to  a  change  produced  by  the  act  of  the 
insured.  It  does  not  mean  a  change  occasioned  by  acci- 
dent, or  by  any  cause  over  which  the  insured  had  no  con- 
trol. (Decided  by  the  Supreme  Court  in  the  case  of 
Brenner  vs.  Liverpool  and  London  and  Globe  Insurance 
Co.,  which  decision  is  printed  in  Volume  51  of  the  Cali- 
fornia Reports,  page  101.) 


320  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Section  336. — EULES  FOR  INTERPRETING  CONTRACT  OF 
INSURANCE. — A  contract  of  insurance  must  be  interpreted 
by  the  same  rules  as  apply  to  any  other  contract.  It  must 
be  so  interpreted  as  to  give  effect  to  the  mutual  intention 
of  the  parties  as  it  existed  at  the  time  of  contracting,  so 
far  as  that  intention  can  be  ascertained.  If  the  contract 
for  insurance  is  in  writing,  as  where  an  application  has 
been  signed  and  a  policy  issued,  the  intention  of  the 
parties  is  to  be  ascertained  from  the  application  and  the 
policy  alone,  if  possible.  The  whole  contract  is  to  be  taken 
together.  When  it  is  partly  written  and  partly  printed, 
the  written  parts  control  the  printed  parts,  and,  if  there 
is  any  conflict  between  the  two,  the  printed  part  must  be 
disregarded.  The  contract  may  be  explained  by  reference 
to  the  circumstances  under  which  it  was  made,  and  in 
cases  of  uncertainty  it  is  to  be  interpreted  most  strongly 
against  the  party  who  caused  the  uncertainty  to  exist. 
Where  the  policy  provides  for  the  forfeiture  of  the  con- 
tract, upon  failure  to  perform  conditions  named,  the  pol- 
icy is  to  be  interpreted  most  strongly  in  favor  of  the  in- 
sured. The  law  does  not  favor  forfeitures,  and  the  insur- 
ance company  must  make  out  a  very  strong  case  showing 
that  a  condition  has  not  been  complied  with,  before  a  court 
will  declare  the  policy  forfeited.  The  suit  of  Yoch  vs. 
Home  Mutual  Insurance  Company,  decided  by  our  Su- 
preme Court  in  1896,  illustrates  the  rules  which  are  to  be 
applied  to  the  interpretation  of  contracts  of  insurance, 
where  the  effort  is  to  ascertain  the  intention  of  the  parties 
at  the  time  of  contracting.  The  policy  contained  a  printed 
condition  that,  unless  otherwise  provided  by  agreement 
indorsed  thereon,  it  should  be  void  if  (any  usage  of  trade 
to  the  contrary)  gasoline  was  kept  on  the  premises.  Testi- 
mony was  given  at  the  trial  of  the  case  tending  to  show 
that  gasoline  is  one  of  the  articles  of  merchandise  usually 
kept  in  country  stores,  but  that  it  is  customary  to  keep  it 
in  a  room  or  building  by  itself.  It  was  also  shown  that, 
during  the  month  prior  to  the  fire,  the  insured  would,  in 
the  daytime,  bring  small  quantities  of  gasoline — one  or 


BUSINESS  CONTKACTS  AND  LEGAL  OBLIGATIONS.  321 

two  cans — from  a  building  on  another  lot,  which  was  used 
for  storing  it,  into  a  room  within  the  insured  building 
and  adjacent  to  the  store,  for  the  purpose  of  selling  it  at 
retail  to  her  customers.  The  Supreme  Court  decided  the 
case  against  the  insurance  company,  and  said:  "It  must 
be  held  that  it  was  the  intention  of  the  defendant  to  insure 
gasoline,  if  it  was  an  article  usually  kept  in  the  country 
stores,  and  that,  if  such  was  its  intention,  it  was  no  viola- 
tion of  the  policy  for  the  insured  to  keep  gasoline  upon 
the  premises  as  a  part  of  the  stock  of  merchandise.  When 
the  defendant  agreed  to  insure  a  stock  of  merchandise 
'such  as  is  usually  kept  in  country  stores,'  it  must  be  pre- 
sumed to  have  known  the  character  of  the  merchandise 
which  is  usually  kept  in  country  stores,  and  that  gasoline 
is  one  of  these  articles,  and,  consequently,  that  the  policy 
covered  all  such  merchandise.  When  it  was  shown  that 
gasoline  is  one  of  the  articles  which  is  usually  kept  in 
country  stores,  the  court  correctly  held  that  it  was  a  part 
of  the  subject  of  the  insurance,  and  that  the  insured  did 
not  violate  the  policy  by  keeping  it  in  stock.  The  defend- 
ant, when  it  issued  the  policy  in  question,  knew  the  char- 
acted  of  country  stores,  and  that  Mrs.  Brooks  kept  for 
the  purpose  of  retailing  to  her  customers  all  of  the  articles 
kept  by  her,  and  that  the  gasoline  which  she  kept  was  to  be 
disposed  of  by  retail  in  the  same  way  as  the  other  por- 
tion of  her  stock.  To  give  the  policy  the  construction  now 
claimed  by  the  defendant  would  be  to  hold  that,  although 
it  agreed  with  her  to  insure  all  the  stock  she  usually  kept 
in  her  store,  yet,  if  she  continued  to  keep  that  stock,  she 
forfeited  all  rights  under  the  policy.  The  clause  in  the 
policy  above  quoted,  and  which  is  relied  on  by  the  appel- 
lant, cannot  be  construed  as  having  this  effect.  The  quali- 
fication therein  which  excepts  the  policy  from  becoming- 
void,  viz.,  'unless  otherwise  provided  by  agreement  in- 
dorsed thereon,'  is  found  in  the  policy  itself.  The  subject 
matter  of  the  risk — the  stock  of  merchandise  'such  as  is 
usually  kept  in  country  stores* — was  written  in  the  policy 
by  the  insurer ;  and,  as  the  defendant  must  be  deemed  to 


322  BUSINESS  LAW  FOE  BUSINESS  MEN. 

have  intended  thereby  to  insure  all  such  articles  as  are 
usually  kept  in  a  country  store,  it  must  be  held  that  this 
was  an  'agreement  indorsed'  upon  the  policy,  which  re- 
moved the  exemption  from  liability  that  would  otherwise 
have  existed.  If  there  be  any  repugnance  between  the 
written  phrase,  'such  as  is  usually  kept  in  country  stores,' 
and  the  printed  clause,  'any  usage  or  custom  of  trade  or 
manufacture  to  the  contrary  notwithstanding,'  the  former 
controls  the  latter,  as  being  the  more  deliberate  expres- 
sion of  the  contracting  parties."  (Decided  by  the  Su- 
preme Court  in  the  case  of  Yoch  vs.  Home  Mutual  Insur- 
ance Co.,  which  decision  is  printed  in  Volume  107  of  the 
California  Eeports,  page  327.) 

Section  337. — TIME  WHEN  POLICY  TAKES  EFFECT.— 
The  general  rule  is  that  a  policy,  if  delivered,  takes  effect 
from  its  date,  unless  it  be  otherwise  stated  in  the  policy,  or 
unless  there  is  evidence  of  a  contrary  intent.  If  the  pre- 
mium be  paid,  and  the  policy  be  not  delivered  till  after- 
ward, the  policy  yet 'takes  effect  as  of  its  date,  even 
though  a  loss  intervenes.  The  circumstances  and  the  in- 
tent of  the  parties  are  to  control.  Where  the  exact  time 
of  the  commencement  and  termination  of  the  risk  are 
specified  in  the  policy,  or,  if  no  policy  has  been  written, 
in  the  contract,  such  specification  governs  in  all  cases; 
where  no  time  has  been  expressly  indicated,  the  circum- 
stances of  the  case  will  be  considered  for  the  purpose  of 
determining  it;  if  there  are  no  circumstances  indicating 
the  intention  of  the  parties,  and  no  time  is  specified  in 
the  contract,  the  risk  will  be  deemed  to  have  commenced 
at  the  date  of  the  contract.  In  the  case  last  mentioned,  if, 
before  the  contract  of  insurance  is  made,  the  property  has 
ceased  to  exist,  although  unknown  to  the  parties,  the  risk 
never  attaches. 

Section  338. — CONTRACT  OF  REINSURANCE — EFFECT  OF 
PRIOR  Loss. — Where  an  insurance  company,  which  has  in- 
sured the  property  of  a  lumber  company  against  loss  by 


BUSINESS  CONTEACTS  AND  LEGAL  QBLIGATIONS.  323 

fire,  contracts  for  reinsurance  by  way  of  partial  indemnity 
with  another  insurance  company,  in  the  absence  of  any 
circumstances  indicating  the  mutual  intention  of  the  par- 
ties to  give  to  the  contract  of  reinsurance  a  retrospective 
effect,  the  company  agreeing  to  insure  is  not  liable  if  the 
property  insured  had  been  destroyed  by  fire  prior  to  the 
agreement,  though  at  the  time  of  the  application  and 
agreement  neither  of  the  insurance  companies  knew  of 
the  prior  destruction  of  the  property.  (Decide^  by  the 
Supreme  Court  in  the  case  of  Union  Insurance  Company 
vs.  American  Fire  Insurance  Company,  which  decision  is 
printed  in  Volume  107  of  the  California  Eeports,  page 
327.) 

Section  339. — WARRANTIES. — Warranties,  in  insurance, 
are  distinguished  into  two  kinds:  Affirmative,  or  those 
which  allege  the  existence  at  the  time  of  the  insurance  of 
a  particular  fact,  and  avoid  the  contract  if  the  allegation 
be  untrue;  and  promissory,  or  those  which  require  that 
something  shall  be  done  or  omitted  after  the  insurance 
takes  effect  and  during  its  continuance,  the  doing  or  omis- 
sion of  which  will  avoid  the  contract.  An  express  war- 
ranty is  a  stipulation  inserted  in  writing  on  the  face  of  the 
policy,  on  the  literal  truth  or  fulfilment  of  which  the  valid- 
ity of  the  entire  contract  depends.  By  a  warranty  the  in- 
sured stipulates  for  the  absolute  truth  of  the  statement 
made,  and  the  strict  compliance  with  some  promised  line 
of  conduct,  upon  penalty  of  forfeiture  for  non-compliance 
with  the  warranty.  A  warranty  must  be  strictly  complied 
with.  Whether  the  fact  stated  or  the  act  stipulated  for 
]>e  material  to  the  risk  or  not  is  of  no  consequence,  the  con- 
tract being  that  the  matter  is  as  represented,  or  shall  be 
as  promised ;  and  unless  it  prove  so,  whether  from  fraud, 
mistake,  negligence,  or  other  cause,  not  proceeding  from 
the  insurance  company,  and  not  caused  by  the  interven- 
tion of  the  law  or  act  of  God,  the  insured  can  have  no 
claim .  One  of  the  very  objects  of  the  warranty  is  to  pre- 
clude all  controversy  about  whether  the  statement  was 


324  BUSINESS  LAW  FOR  BUSINESS  MEN. 

material  or  not.  The  only  question  in  such  cases  is,  Has 
the  warranty  been  kept  ?  If  the  warranty  be  a  statement 
of  facts,  it  must  be  literally  true;  if  a  stipulation  that  a 
certain  act  shall  or  shall  not  be  done,  it  must  be  literally 
performed.  Illustrating  the  law,  it  may  be  said,  that  if  a 
house  be  insured  against  fire,  and  the  language  of  the  pol- 
icy is,  "Warranted,  during  the  policy,  to  be  covered  with 
thatch,"  the  insurance  company  will  be  discharged  from 
liability  .if  during  the  insurance  the  house  should  be  cov- 
ered with  wood  or  metal,  although  the  risk  is  diminished ; 
for  a  warranty  excludes  all  argument  in  regard  to  its 
reasonableness,  or  the  probable  intent  of  the  parties. 
Parties  may  contract  as  they  please.  "When  a  warranty 
is  adopted  by  them  in  their  contract,  the  courts  will  not 
inquire  as  to  its  wisdom  or  folly,  but  must  exact  its  ob- 
servance as  agreed  to.  The  Supreme  Court  of  California 
construed  a  "watchman  clause"  in  a  policy  issued  by  the 
Scottish  Union  and  National  Insurance  Co.,  which  read : 
"Warranted  by  the  insured  that  during  such  times  as  the 
within  buildings  or  works  are  idle  or  not  in  operation, 
whether  closed  for  repairs  or  during  the  absence  of  work- 
men, or  otherwise  (except  as  otherwise  herein  stated), 
one  or  more  watchmen  shall  be  on  duty  constantly,  day 
and  night,  in  and  immediately  about  said  buildings  or 
works,  or  this  policy  shall  be  null  and  void. ' '  The  insur- 
ance was  on  a  sawmill,  which  was  destroyed  by  fire.  The 
watchman  of  the  insured  worked  about  the  mill  during  the 
day,  and  slept  at  night  in  a  house  about  350  yards  distant, 
and  visited  the  buildings  several  times  during  the  night. 
The  Supreme  Court  held  that  this  was  not  a  sufficient 
compliance  with  the  warranty  in  the  policy  that  a  watch- 
man should  be  kept  on  duty  * '  constantly  day  and  night  in 
and  immediately  about"  the  insured  buildings.  There 
was  also  a  controversy  in  the  case  as  to  whether  the  mill 
was  "shut  down,"  within  the  meaning  of  the  warranty 
in  the  policy,  and  the  Supreme  Court  held  that  a  sawmill 
which  had  stopped  running  for  the  winter  is  shut  down, 
within  the  meaning  of  such  term  in  a  policy,  though  men 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  325 

are  employed  about  the  premises  shipping  lumber,  and 
though  the  machinery  has  not  been  dismantled  and  put  in 
shape  for  the  winter.  (Decided  by  the  Supreme  Court  of 
California  in  the  case  of  McKenzie  vs.  Scottish  Union  and 
National  Insurance  Co.,  which  decision  is  printed  in  Vol- 
ume 112  of  the  California  Eeports,  page  548.) 

Section  340. — PROVISION  AS  TO  BRINGING  SUIT. — The 
policies  of  very  many  insurance  companies  have  provi- 
sions similar  to  the  following :  "No  suit  or  action  on  this 
policy  for  the  recovery  of  any  claim  shall  be  sustainable 
in  any  court  of  law  or  equity  until  after  a  full  compliance 
by  the  insured  with  all  the  requirements  of  this  policy,  nor 
unless  commenced  within  twelve  months  next  after  the 
fire."  And,  also,  that  "proof  of  loss  be  made  to  the  com- 
pany within  sixty  days  after  the  fire."  Where  a  policy 
contains  these  provisions,  a  suit  on  a  policy  cannot  be 
maintained  if  the  proofs  of  loss  were  made  after  sixty 
days,  and  there  is  no  evidence  of  a  waiver  by  the  company 
of  the  condition. 

Section  341. — PROOFS  OF  Loss  TO  REINSURING  COMPANY. 
Where  the  risks  of  a  fire  insurance  company  are  rein- 
sured in  another  company,  under  a  contract  whereby  the 
latter  assumes  the  management  and  control  of  the  busi- 
ness of  the  original  insurer,  and  agrees  to  make  adjust- 
ment and  prompt  payment  of  its  losses,  proofs  of  loss 
under  a  policy  issued  by  the  original  insurer  may  be  made 
to  the  reinsuring  company.  (Decided  by  the  Supreme 
Court  of  California  in  the  case  of  Whitney  vs.  American 
Insurance  Co.,  which  decision  is  printed  in  Volume  128 
of  the  California  Reports,  page  121.) 

Section  342. — LIABILITY  OF  HEIR  FOR  PREMIUM. — A  pol- 
icy procured  by  an  heir,  "on  the  estate"  of  deceased,  pro- 
tects the  interest  of  the  heir  in  the  property,  though  the 
administrator  of  the  estate  repudiates  the  contract  and 
has  nothing  in  fact  to  do  with  it.  Having  procured  the 


326  BUSINESS  LAW  FOR  BUSINESS  MEN. 

policy,  the  heir  is  liable  for  the  premiums,  and  will  be 
compelled  to  pay  them,  no  matter  what  action  the  admin- 
istrator may  take  with  regard  to  them.  (Decided  by  the 
Supreme  Court  of  California  in  the  case  of  Phoenix  Insur- 
ance Co.  vs.  Hancock,  which  decision  is  printed  in  Volume 
123  of  the  California  Reports,  page  222.) 

Section  343. — INSURANCE  ON  HARVESTER  WHILE  IN  USE. 
A  policy  of  insurance  on  a  harvester  "while  in  use"  does 
not  cover  a  loss  occurring  while  it  is  stored  in  a  shed,  and 
is  not  being  actually  used  for  harvesting  purposes.  (De- 
cided by  the  Supreme  Court  of  California  in  the  case  of 
Slinkard  vs.  Manchester  Fire  Assurance  Co.,  which  de- 
cision is  printed  in  Volume  122  of  the  California  Reports, 
page  595.) 

Section  344. — LIABILITY  OF  COMPANY  ON  POLICY  WRIT- 
TEN BUT  NOT  DELIVERED  UNTIL  AFTER  FIRE. — A  liability 
may  attach  to  an  insurance  company,  when  the  policy  has 
been  written  but  not  delivered  until  after  the  fire.  If  the 
policy  is  the  memorial  of  a  contract,  which  in  its  essen- 
tials has  been  agreed  upon  verbally  before  the  fire,  and 
which  the  parties  intended  should  take  effect  according  to 
its  terms,  the  fact  that  the  policy  was  not  delivered  to  the 
insured  until  after  the  fire  will  make  no  difference  in  the 
company's  liability;  and  if  the  terms  of  the  contract  to 
insure,  as  verbally  entered  into,  and  afterwards  embraced 
in  the  undelivered  policy,  are  clearly  shown,  the  company 
would  be  liable  without  any  delivery  of  the  policy  at  all. 
If,  however,  there  has  not  been  any  verbal  agreement,  be- 
fore the  fire,  that  the  company  should  insure  the  building 
and  issue  its  policy  accordingly,  then  delivery  of  the  pol- 
icy after  the  building  has  been  destroyed,  to  the  knowl- 
edge of  the  parties,  will  not  give  to  the  policy  a  binding- 
effect.  It  is  therefore  in  all  such  cases  a  very  important 
question,  whether  the  insurance  company  considered  or 
admitted  at  any  time  that  the  contract  was  complete,  and 
the  risk  had  attached ;  and  in  this  connection,  the  courts 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  327 

will  always  consider  as  strong  evidence  in  favor  of  the 
insured  the  declarations  and  admissions  of  the  agents  of 
the  insurance  company,  while  engaged  in  the  transaction 
with  the  insured,  and  up  to  the  time  the  policy  is  deliv- 
ered. Such  statements  and  admissions  of  the  agents,  to 
bind  the  company,  must  be  made  at  the  very  time  of  the 
negotiations  and  transactions  for  the  insurance,  and  whilo 
acting  in  the  business  with  the  insured.  (Decided  by  the 
Supreme  Court  of  California  in  the  case  of  Crawford  vs. 
Transatlantic  Fire  Insurance  Co.,  which  decision  is  print- 
ed in  Volume  25  of  the  California  Eeports,  page  609.) 

Section  345. — AUTHORITY  OF  AGENTS. — It  is  not  neces- 
sary that  the  agent  of  a  fire  insurance  company  should 
have  or  produce  a  written  appointment,  for  his  agency 
may  be  shown  in  many  other  ways.  The  fact  of  his  agency 
may  be  inferred  from  the  relations  he  sustains  to  the  com- 
pany, from  the  course  of  prior  dealings  and  transactions 
connected  with  it,  and  from  the  acts  of  the  company  with 
reference  to  the  particular  policy  in  question.  The  agent's 
authority  may  be  actual  or  ostensible.  He  may  possess  or 
show  an  appointment  in  writing,  or  the  company  may  ac- 
cept the  fruits  of  his  labors,  and  knowingly  permit  him  to 
hold  himself  out  publicly  as  the  company's  agent.  In 
either  case  the  company  will  not  be  allowed  to  shield  it- 
self behind  the  defense  that  he  was  not  really  an  agent. 
The  powers  of  the  agent  are  prima  facie  coextensive  with 
the  business  intrusted  to  his  care,  and  will  not  be  nar- 
rowed by  limitations  not  communicated  to  the  person  with 
whom  he  deals.  An  insurance  company,  establishing  a 
local  agency,  must  be  held  responsible  to  the  parties  with 
whom  it  transacts  business  for  the  acts  and  declarations 
of  the  agent  within  the  scope  of  his  employment. 

Section  346. — BROKERS  OR  AGENTS. — The  question 
arises  as  to  the  difference  between  a  broker  and  an  agent, 
in  suits  where  a  company  makes  defense  that  the  person 
claimed  to  have  acted  as  its  agent  was  not  such  in  fact, 


328  BUSINESS  LAW  FOB  BUSINESS  MEN. 

but  did  act  for  the  owner  of  the  property.  Where  it  is 
shown  that  the  owner  of  the  property  solicits  an  insurance 
agent  to  procure  insurance  for  him,  and  himself  pays  the 
commission,  such  agent  will  be  deemed  not  the  agent  of 
the  company  but  of  the  insured.  He  will  be  deemed  a 
mere  broker,  making  a  bargain  for  the  insured,  and  re- 
ceiving a  commission  from  him  for  so  doing.  But  where 
the  company  employs  a  person  to  solicit  insurance,  and 
provides  him  with  blanks  and  other  papers,  and  pays  him 
a  commission  on  the  business  he  brings  in,  he  will  be 
deemed  the  agent  of  the  company,  and  not  of  the  insured. 
In  following  sections  will  be  found  illustrations  of  some 
leading  principles  of  agency  in  fire  insurance,  as  decided 
by  the  Supreme  Court  of  California. 

Section  347. — AGENT  WAIVING  FOKFEITUBE. — Simon 
Silverberg  sued  the  Phoenix  Insurance  Company  upon  a 
policy  of  fire  insurance.  When  the  case  was  tried,  it  ap- 
peared that  soon  after  the  occurrence  of  the  fire,  the  com- 
pany being  notified  of  the  fact,  directed  the  proofs  to  be 
made  out,  which  was  done,  and  subsequently  required 
Silverberg  to  present  witnesses  and  vouchers.  After  these 
witnesses  and  vouchers  had  been  examined  at  length,  the 
company  said  the  proofs  were  satisfactory,  instructed 
Silverberg  to  make  out  formal  proofs  of  loss,  and  said 
that  the  money  would  be  paid  at  the  expiration  of  the 
sixty  days  allowed  by  the  policy  for  the  payment  of  the 
loss.  Upon  the  expiration  of  sixty  days,  a  demand  being 
made  for  the  money,  the  company  declared  that  the  policy 
had  been  avoided  by  a  breach  of  its  conditions,  and  re- 
fused to  pay.  The  question  was  whether  the  company's 
agents  had  waived  the  condition  of  the  policy  of  which  it 
was  claimed  there  had  been  a  breach.  The  facts  were,  that 
the  agents  of  the  company  had  full  knowledge  of  all  the 
facts  upon  which  the  forfeiture  was  based,  and  with  this 
knowledge  informed  Silverberg  that  the  insurance  would 
be  paid,  and  then  refused  to  pay  and  claimed  forfeiture. 
The  Supreme  Court  held  that  the  acts  of  the  company's 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  329 

agents  in  examining  witnesses  and  vouchers,  and  then 
expressing  satisfaction  and  a  willingness  to  pay,  after  full 
knowledge  of  all  the  facts,  constituted  a  waiver  of  any 
forfeiture  by  Silverberg  resulting  from  a  breach  of  the 
conditions  of  the  policy.  The  agents  of  the  company  were 
authorized,  there  being  no  provision  in  the  policy  to  the 
contrary,  to  modify  or  altogether  waive  a  condition  of  the 
policy.  (Decided  in  the  case  of  Silverberg  vs.  Phoenix 
Insurance  Company,  which  decision  is  printed  in  Volume 
67  of  the  California  Reports,  page  36.) 

Section  348. — AUTHORITY  OF  LOCAL  AGENT. — A  local 
agent  of  a  fire  insurance  company,  who  has  authority  to 
make  a  consummated  and  binding  contract  of  insurance 
by  countersigning  and  delivering  its  policy,  and  to  extend 
a  limited  credit  for  the  premium,  has  the  power  of  the 
company  to  waive  a  condition  in  the  policy  that  it  shall  not 
be  binding  until  the  premium  is  actually  paid,  and  does 
waive  such  condition  by  delivering  the  policy  uncondi- 
tionally under  an  agreement  for  credit,  though  the  term 
of  credit  given  be  in  excess  of  his  actual  authority. 

Section  349. — OSTENSIBLE  GENERAL  POWER  OF  LOCAL 
AGENT. — A  local  agent  of  a  fire  insurance  company  who 
is  clothed  with  ostensible  general  authority  to  solicit  ap- 
plications, receive  proposals,  make  contracts  for  insur- 
ance, receive  first  premiums,  and  to  countersign  and  de- 
liver policies  within  certain  limits,  is  presumed  to  have 
the  general  power  of  the  company  within  those  limits  to 
waive  conditions  precedent  to  the  liability  of  the  company 
upon  policies  which  he  is  authorized  to  countersign  and 
deliver.  Such  local  agent  is  presumed  to  have  power  co- 
extensive with  the  business  intrusted  to  his  care,  and  his 
powers  will  not  be  narrowed  by  limitations  not  commun- 
icated to  the  person  with  whom  he  deals ;  and  he  may  bind 
his  principal  by  any  acts  or  contracts  within  the  general 
scope  of  his  apparent  authority. 


330  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Section  350. — KNOWLEDGE  OF  AGENT  Is  THE  KNOWL- 
EDGE OF  COMPANY. — Whether  an  agent  has  general  or  only 
particular  powers  is  not  determined  by  simply  calling  him 
an  agent.  Where  any  fact  which  would  constitute  a 
breach  of  a  condition  precedent  to  any  liability  of  the  com- 
pany on  the  policy  is  fully  known  to  an  agent  of  the  com- 
pany, local  or  general,  who  is  authorized  to  consummate 
the  contract  of  insurance,  the  knowledge  of  such  agent 
is  the  knowledge  of  the  company;  and  if  the  agent,  with 
a  knowledge  of  the  breach  of  the  condition,  still  recognizes 
the  validity  of  the  policy,  this  constitutes  a  waiver  by  the 
company  of  the  forfeiture,  and  also  a  waiver  of  the  gen- 
eral requirement  that  conditions  can  only  be  waived  in 
writing  indorsed  on  the  policy  itself.  (Decided  by  the 
Supreme  Court  of  California  in  the  case  of  Farnum  vs. 
Phoenix  Insurance  Company,  which  decision  is  printed  in 
Volume  83  of  the  California  Reports,  page  260.) 

Section  351. — ORAL  WAIVER  OF  INDORSEMENT  BY  LOCAL 
AGENT. — A  local  agent  who  is  clothed  with  general  power 
to  consummate  contracts  of  insurance  within  a  certain  ter- 
ritory stands  in  the  stead  of  the  insurance  company,  and 
represents  its  whole  power  to  give  validity  to  the  con- 
tracts which  he  is  authorized  to  execute  and  deliver,  and 
to  waive  conditions  precedent  to  its  liability  by  oral 
agreement,  so  far  as  to  estop  the  company  from  question- 
ing its  original  liability  by  reason  of  non-indorsement  of 
the  waiver  upon  the  policy  when  delivered. 

Section  352. — APPLICATION  MADE  OUT  BY  AGENT  OF 
COMPANY. — Insurance  companies  who  do  business  through 
the  medium  of  agents  are  responsible  for  their  acts  with- 
in the  general  scope  of  the  business  intrusted  to  their 
care,  and  no  limitations  of  their  authority  will  be  binding 
on  parties  with  whom  they  deal,  which  are  not  brought 
to  their  notice.  When  the  agent  undertakes  to  prepare  the 
application  for  the  insured,  he  will  be  regarded  in  doing 
so  as  the  agent  of  the  insurance  company,  and  not  of  the 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  331 

insured ;  and  any  misstatements  contained  in  the  appli- 
cation, of  which  the  insured  is  ignorant,  will  not  be  fatal 
to  the  policy.  (Decided  by  the  Supreme  Court  of  Cali- 
fornia in  the  case  of  Wheaton  vs.  North  British  and  Mer- 
cantile Insurance  Company,  which  decision  is  printed  in 
Volume  76  of  the  California  Reports,  page  415.) 

Section  353. — FRAUD  OF  AGENT — DISOBEDIENCE  OF  IN- 
STRUCTIONS.— A  fire  insurance  company  is  bound  by  the 
acts,  omissions,  or  frauds  of  its  agent  when  acting  within 
the  scope  of  his  employment,  though  he  may  have  dis- 
obeyed the  instructions  received;  and  the  company  can- 
not be  permitted  to  derive  any  advantages  from  the  fraud 
of  the  agent  in  the  manner  of  transacting  its  business, 
upon  the  claim  that  the  agent's  fraudulent  conduct  was 
not  authorized.  Therefore,  fraudulent  concealment  of 
facts,  or  fraudulent  representations  of  an  agent  to  the  in- 
sured, binds  the  company  he  represents,  when  the  insured 
has  no  notice  of  any  limitations  upon  the  authority  of  the 
agent  in  the  transaction.  (Decided  by  the  Supreme  Court 
of  California  in  the  case  of  Stockton  Harvester  Works  vs. 
Glenn's  Falls  Insurance  Co.,  which  decision  is  printed  in 
Volume  98  of  the  California  Eeports,  page  557.) 

Section  354. — WAIVER  OF  PETROLEUM  CLAUSE  BY  AGENT. 
A  condition  in  a  policy  for  loss  occurring  while  petroleum 
is  kept  or  used  on  the  insured  premises  is  waived,  if  the 
general  agent  of  the  insurer,  having  knowledge  at  the 
time  the  insurance  was  effected  that  petroleum  was  kept 
and  used,  consented  thereto,  and  represented  to  the  in- 
sured that  such  use  would  not  vitiate  the  policy.  (De- 
cided by  the  Supreme  Court  of  California  in  the  case  of 
Herman  Kruger  vs.  Western  Fire  and  Marine  Insurance 
Company,  which  decision  is  printed  in  Volume  72  of  the 
California  Eeports,  page  91.) 

Section  355. — WAIVER  CONTINUES  DURING  RENEWAL  or 
POLICY. — A  waiver  of  conditions  in  the  policy,  made  by 


332  BUSINESS  LAW  FOE  BUSINESS  MEN. 

the  agent  of  the  company  at  the  time  the  insurance  was 
originally  effected,  continues  during  the  subsequent  re- 
newals of  the  policy. 

Section  356. — AUTHORITY  or  SPECIAL  AGENT. — Power 
given  to  a  special  agent  of  a  fire  insurance  company  to 
receive  proposals  for  insurance,  and  to  receive  premiums; 
subject  to  the  rules  of  the  company  and  instructions  given 
by  its  general  agent,  includes  power  to  make  a  verbal  con- 
tract for  insurance,  sanctioned  by  instructions  from  the 
general  agent. 

Section  357. — ORAL  PROMISE  or  POLICY. — A  declaration 
by  the  special  agent  to  the  insured,  made  at  the  time  of  his 
application  for  insurance,  that  it  was  unnecessary  for  him 
to  make  a  written  application,  as  the  general  agent  was 
asking  for  the  insurance,  and  a  promise  by  the  special 
agent  that  a  policy  should  be  given  to  the  insured  which 
would  cover  the  insurance  applied  for  to  the  date  of  the 
oral  application,  taken  in  connection  with  letters  from  the 
general  agent  asking  if  the  insurance  would  be  required, 
is  sufficient  proof  of  the  special  agent's  authority  to  bind 
the  company  for  insurance  from  the  date  of  the  oral  appli- 
cation. (Decided  by  the  Supreme  Court  of  California  in 
the  case  of  Harron  vs.  City  of  London  Fire  Insurance  Co., 
which  decision  is  printed  in  Volume  88  of  the  California 
Reports,  page  16.) 

Section  358. — AGENT'S  KNOWLEDGE  OF  FORMER  INSUR- 
ANCE.— Many  policies  contain  the  provision,  that  "if  any 
other  insurance  has  been  or  shall  hereafter  be  made  upon 
the  said  property  and  not  consented  to  by  this  company  in 
writing  hereon,  this  policy  shall  be  null  and  void."  But 
notwithstanding  this  provision,  where  there  is  former  in- 
surance, which  is  not  noted  on  the  policy  in  question,  if 
the  agent  of  the  company  knows  of  the  former  insurance, 
and  the  policy  is  issued,  such  knowledge  of  the  agent  is 
knowledge  of  the  company,  and  the  policy  is  valid. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  333 

Section  359. — OFFER  TO  RENEW  POLICY. — Where  the 
local  agent  of  a  fire  insurance  company  has  no  actual  or 
ostensible  authority  to  contract  for  the  renewal  of  a  pol- 
icy, a  proposal  made  to  such  agent  for  a  renewal  is,  until 
communicated  to  and  accepted  by  the  insurance  company, 
nothing  more  than  a  mere  offer  to  renew  the  policy ;  and 
the  fact  that  the  agent  promised  to  communicate  the  offer 
to  the  company,  and  did  not  do  so  until  after  the  loss, 
does  not  create  a  binding  contract  of  renewal.  (Decided 
by  the  Supreme  Court  of  California  in  the  case  of  Stew- 
art vs.  The  Helvetia  Swiss  Fire  Insurance  Co.,  which  de- 
cision is  printed  in  Volume  102  of  the  California  Reports, 
page  218.) 

Section  360. — UNAUTHORIZED  CONTRACT  OF  LOCAL 
AGENT. — The  local  agent  of  the  New  Zealand  Insurance 
Company  at  Fresno  was  not  authorized  to  make  contracts, 
but  sent  all  applications  to  the  company  at  San  Francisco 
for  acceptance ;  he  received  an  application,  however,  and 
told  the  insured  that  the  insurance  would  begin  at  that 
time;  before  the  application  was  mailed  from  Fresno  the 
building  was  burned ;  the  company  was  sued  for  the  loss, 
but  the  Supreme  Court  said,  that  as  the  local  agent  had  no 
actual  or  ostensible  authority  to  make  a  contract  of  insur- 
ance, and  the  building  being  a  saloon,  which  class  of  risks 
the  company  did  not  take,  the  company  was  not  liable  for 
loss  and  it  made  no  difference  that  at  the  time  when  the 
application  was  made  the  special  agent  of  the  company, 
who  had  no  authority  to  enter  into  contracts,  was  present 
and  approved  of  it.  (Decided  by  the  Supreme  Court  of 
California  in  the  case. of  O'Brien  vs.  New  Zealand  Insur- 
ance Company,  which  decision  is  printed  in  Volume  108 
of  the  California  Reports,  page  227.) 

Section  361. — WAIVER  FROM  KNOWLEDGE  OF  AGENT.— 
The  act  of  the  agent  of  a  fire  insurance  company,  in  issu- 
ing a  policy  on  an  application  alleging  unconditional  own- 


334  BUSINESS  LAW  FOE  BUSINESS  MEN. 

ership,  is  a  waiver  of  such  condition,  where  the  agent 
knows  at  the  time  that  the  property  is  mortgaged,  and 
that  a  foreclosure  suit  is  pending.  (Decided  by  the  Su- 
preme Court  of  California  in  the  case  of  Breedlove  vs. 
Norwich  Union  Fire  Insurance  Co.,  which  decision  is 
printed  in  Volume  24  of  the  California  Beports,  page 
164.)  A  is  the  true  owner  of  property  which  stands  in 
the  name  of  B.  A  informs  the  insurance  company  of  the 
condition  of  the  title,  and  has  the  property  insured  in  the 
name  of  B,  and  the  loss  made  payable  to  A  "  as  his  inter- 
est may  appear. ' '  It  was  stipulated  in  the  policy  that  it 
should  be  void  if  the  interest  of  the  insured  should  be 
other  than  unconditional  and  sole  ownership.  Held  by 
the  District  Court  of  Appeals,  that  the  issuance  of  the 
policy  upon  the  known  facts  was  a  waiver  of  all  conditions 
inconsistent  therewith,  and  the  true  owner  was  entitled  to 
recover  the  amount  of  the  policy,  although  the  title  to  the 
property  stood  in  the  name  of  another.  The  company 
was  informed  of  this  before  the  policy  was  issued,  and 
was  bound  by  that  knowledge.  (Decided  by  the  California 
District  Court  of  Appeals  in  the  case  of  Loring  vs. 
Duchess  Insurance  Company,  which  decision  is  printed  in 
Volume  I,  California  Appellate  Decisions,  page  128.) 

LIFE  INSUEANCE. 

Section  362. — INSUEABLE  INTEEEST. — The  contract  of 
life  insurance  must  be  based  upon  the  insurable  interest, 
and  this  insurable  interest  must  arise  from  the  relation  of 
the  party  taking  the  insurance  to  the  insured,  either  as 
surety  or  debtor,  or  from  the  ties  of  blood  or  marriage,  so 
that  from  the  relation  thus  established  there  may  be  some 
expectation  of  benefit  or  advantage  in  the  continuance  of 
the  insured  life.  Every  person  has  an  insurable  interest 
in  the  life  of  himself;  and  in  the  life  of  any  person  on 
whom  lie  depends  wholly  or  in  part  for  education  or  sup- 
port ;  and  in  the  life  of  any  person  under  a  legal  obligation 
to  him  for  the  payment  of  money,  or  respecting  property 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  335 

or  services,  of  which  death  might  delay  or  prevent  the 
performance;  and  in  the  life  of  any  person  upon  whose 
life  any  estate  or  interest  vested  in  him  depends.  A  per- 
son who  is  not  related  to  another  has  no  insurable  interest 
in  his  life,  unless  the  latter  is  his  debtor,  or  in  some  other 
pecuniary  way  so  connected  with  him  as  to  afford  reason- 
able ground  for  expecting  some  relief  or  advantage  from 
the  continuance  of  the  life  of  the  insured.  The  result  of 
this  rule  is,  a  person  cannot  take  insurance  upon  the  life 
of  a  mere  stranger,  not  related,  or  under  obligation  in 
some  pecuniary  way ;  for  such  a  policy  would  be  nothing 
more  nor  less  than  a  wager  or  gambling  policy,  which  the 
law  does  not  allow.  Husband  and  wife  have  an  insurable 
interest  in  the  lives  of  each  other,  and  so  do  father  and 
child.  It  has  been  held  by  the  courts  that  a  stepson  has 
no  insurable  interest  in  the  life  of  his  stepfather,  where  he 
has  a  separate  home  and  family  of  his  own,  and  is  not  a 
creditor,  nor  in  any  way  dependent  upon  or  responsible 
for  the  support  of  the  stepfather.  An  interest,  to  be  in- 
surable, must  be  an  interest  in  favor  of  the  continuance 
of  the  life,  and  not  an  interest  in  its  loss  or  destruction. 
Public  policy  does  not  allow  any  one  having  no  insurable 
interest  to  be  the  owner  of  a  policy  of  insurance  upon  the 
life  of  a  human  being.  The  public  has  an  interest,  inde- 
pendent of  the  consent  and  concurrence  of  the  parties, 
that  no  inducement  shall  be  offered  to  one  man  to  take  the 
life  of  another. 

A  person  has  such  an  insurable  interest  in  his  own  life 
that  he  may  insure  it  for  the  benefiit  of  his  heirs,  or  even 
for  the  benefit  of  a  stranger. 

Civil  Code,  Section  2763. 

Section  363. — CREDITOR'S  INTEREST. — A  creditor  may 
lawfully  take  out  a  policy  on  the  life  of  his  debtor  in  an 
amount  sufficient  to  cover  the  debt,  with  interest. 

Section  364. — DELIVERY  OF  POLICY. — Actual  delivery 
of  the  policy  into  the  hands  of  the  insured  is  not  necessary 
in  order  to  bind  the  company.  If  the  first  premium  is 


336  BUSINESS  LAW  FOB  BUSINESS  MEN. 

paid  to  and  accepted  by  the  company,  and  a  policy  issued 
with  intent  to  deliver  to  the  insured,  it  is  valid  and  binding- 
even  though  the  insured  dies  before  the  policy  reaches 
him.  An  unconditional  delivery  of  a  policy  by  the  com- 
pany to  its  agent,  for  delivery  to  the  insured,  binds  the 
company,  although  the  agent  never  parts  with  possession 
of  his  policy.  Possession  of  the  policy  by  the  insured,  at 
his  death,  is  prima  facie  proof  that  it  was  duly  delivered 
to  him. 

Section  365. — PLACE  OF  CONTRACT. — It  is  sometimes 
important  to  determine  where  the  law  puts  the  location  of 
a  contract,  the  place  where  it  is  deemed  to  have  been 
made.  The  rule  on  this  subject  is,  that  the  contract  is 
deemed  to  have  been  made  where  the  policy  is  issued. 
For  instance,  if  the  application  is  sent  to  the  office  of  the 
company  in  New  York,  and  the  policy  is  executed  and  is- 
sued there,  it  is  a  New  York  contract,  to  be  construed 
according  to  the  laws  of  New  York.  If,  on  the  other  hand, 
the  policy  is  executed  and  issued  from  the  office  of  the 
company  in  the  State  of  California,  it  is  a  California  con- 
tract, to  be  construed  according  to  the  laws  of  California. 
It  is  to  be  understood,  in  this  connection,  however,  that 
it  is  within  the  power  of  the  contracting  parties,  by  the 
express  terms  of  their  contract,  "to  establish  the  place 
where  it  shall  have  effect,  and  under  what  laws  it  shall  be 
construed.  If  anything  appears  in  the  application  upon 
which  the  policy  is  issued,  or  in  the  policy  itself,  that  dis- 
closes an  intention  that  the  policy  shall  be  construed  ac- 
cording to  the  laws  in  force  in  any  other  state  than  the  one 
in  which  it  was  actually  made  and  delivered,  such  inten- 
tion must  govern,  and  will  have  the  effect,  so  far  as  the 
construction  of  the  contract  is  concerned,  to  change  the 
place  of  its  execution  so  as  to  correspond  with  the  inten- 
tion of  the  parties. 

Section  36C. — INTERPRETATION  OF  POLICY. — A  policy  of 
life  insurance  must  be  interpreted  and  construed  accord- 
ing to  the  principles  which  govern  other  contracts.  The 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  337 

intention  of  the  parties  is  the  first  thing  to  be  considered, 
and  that  intention  is  to  be  ascertained  from  the  policy  it- 
self, if  possible.  The  courts  do  not  favor  forfeitures,  and 
a  policy  of  insurance  will  always  be  construed  in  favor  of 
upholding  the  contract,  if  such  construction  is  possible 
from  the  language  used.  All  conditions  involving  for- 
feitures will  be  construed  strictly  as  against  the  company, 
and  most  favorably  for  the  insured.  When  a  policy  is 
capable  of  two  meanings,  that  which  is  most  favorable  to 
the  insured  will  be  adopted  by  the  courts. 

Section  367. — CONDITIONS  IN  POLICY. — The  conditions 
in  a  life  insurance  policy,  to  be  observed  by  the  insured— 
as,  for  payment  of  premiums,  or  against  use  of  alcoholic 
beverages,  and  other  stipulations — must  be  adhered  to 
by  the  insured,  at  the  risk  of  rendering  the  policy  void  if 
he  does  not  observe  them.  But  the  courts  construe  the 
conditions  named  in  a  policy  most  strongly  against  the 
company,  and  in  favor  of  the  insured.  There  are  con- 
ditions stated,  too,  the  violation  of  which  does  not  render 
the  policy  absolutely  void,  but  only  make  it  voidable,  at 
the  option  of  the  insurance  company.  Of  these,  the  con- 
ditions prohibiting  the  insured  from  traveling,  or  living 
in  certain  places,  may  be  cited  as  illustrations  of  the  kind 
of  conditions  the  breach  of  which  renders  the  policy  void- 
able, and  not  void.  The  company,  upon  the  breach  of 
such  conditions,  may  proceed  to  declare  a  forfeiture,  and 
cancel  the  policy;  or  it  may,  by  accepting  further  pre- 
miums, or  recognizing  the  continued  life  of  the  policy,  evi- 
dence a  waiver  on  its  part  of  the  voidable  conditions. 

Section  368. — WAIVER  OF  CONDITIONS. — A  waiver  of 
the  conditions  in  a  policy  may  be  either  verbal  or  in 
writing.  If  in  writing,  the  writing  speaks  for  itself.  •  But 
a  waiver  may  be  shown  by  acts  and  circumstances. 
Where  the  agent  of  a  life  insurance  company,  having 
knowledge  of  some  act  on  the  part  of  the  insured  con- 
stituting a  breach  of  condition,  proceeds  to  treat  the 


338  BUSINESS  LAW  FOR  BUSINESS  MEN. 

policy  as  valid,  by  accepting  premiums,  or  in  some  other 
way  ignoring  the  breach,  the  breach  of  condition  will  be 
considered  as  having  been  waived  by  the  company.  If  an 
insurance  company,  having  knowledge  of  facts  rendering 
its  policy  voidable,  deliberately  claims  and  exercises  a 
right  under  the  policy,  it  waives  all  right  to  avoid  it  be- 
cause of  such  facts.  An  insurance  company  is  not  per- 
mitted to  collect  premiums  with  full  knowledge  of  facts 
which  might  avoid  the  policy  (and  knowing  that  the  in- 
sured continues  to  disregard  a  provision  working  a  for- 
feiture), and  then  to  deny  the  validity  of  the  policy  when 
a  loss  occurs.  The  company  will  always  be  bound  by  its 
waiver  of  the  conditions  in  a  policy.  If  an  insurance  com- 
pany, after  knowledge  of  any  default  for  which  it  might 
terminate  the  policy,  enters  into  negotiations  or  trans- 
actions with  the  insured  which  recognize  the  continued 
validity  of  the  policy  and  treat  it  as  still  in  force,  the 
right  to  claim  a  forfeiture  for  such  previous  default  is 
waived. 

Section  369. — BEPRESENTATION  BY  INSURED. — A  person 
who  makes  an  application  for  life  insurance  must  not 
make  false  representations  about  any  material  matter, 
for  if  he  does  do  so  the  policy  can  be  canceled.  False 
answers  about  the  health  of  the  applicant  will  render  a 
policy  voidable.  Concealing  the  truth,  as  when  the  appli- 
cant states  that  he  is  in  good  health,  when  in  fact  he  is 
suffering  from  disease,  will  be  good  reason  for  canceling 
a  policy. 

The  law  presumes  that  all  the  answers  to  questions 
contained  in  an  application  are  true  and  correct,  and  it 
is  for  the  company  to  show  that  the  statements  which  it 
claims  as  false  really  are  so,  if  it  seeks  to  avoid  a  policy 
on  the  ground  of  false  representations  by  the  insured. 

Section  370. — EFFECT  OF  DISEASE  OF  APPLICANT  ON 
POLICY.— A  disease  known  to  the  applicant  for  a  policy, 
but  not  discovered  by  the  agents  of  a  company,  and  con- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  339 

cealed  by  the  applicant,  will  be  ground  for  forfeiture. 
But,  if  the  applicant  is  afflicted  with  a  disease  and  does 
not  know  it,  his  failure  to  communicate  the  fact  will  not 
be  regarded  as  a  fraud  upon  the  insurance  company. 

Section  371. — MEANING  OF  "Gooo  HEALTH/' — The 
health  of  body  required  at  the  time  of  making  applica- 
tion for  life  insurance  is  not  perfect  and  absolute  health, 
nor  is  it  necessary  that  it  should  exclude  all  disorders 
and  infirmities  which  may  possibly  shorten  life.  Only  an 
ordinary  and  reasonable  degree  of  health  is  required,  in 
order  to  make  the  insurance  effective.  The  term  "good 
health,"  when  used  in  an  application  for  a  policy  of  life 
insurance,  means  that  the  applicant  has  no  grave,  impor- 
tant, or  serious  disease,  and  is  free  from  any  ailment  that 
seriously  affects  the  soundness  and  healthfulness  of  the 
system.  A  mere  temporary  indisposition,  which  does  not 
tend  to  weaken  or  undermine  the  constitution  of  the  per- 
son at  the  time  of  insuring,  does  not  render  a  policy  void. 

Section  372. — MALT  AND  SPIRITUOUS  BEVERAGES. — The 
question,  "Do  you  use  malt  or  spirituous  beverages'?" 
asked  of  an  applicant  for  life  insurance  refers  to  a  cus- 
tomary and  habitual  use,  and  not  to  a  single  or  occa- 
sional act  or  use;  and  the  question,  "Have  you  always 
been  temperate!"  means  moderation,  and  an  abstinence 
from  excessive  or  injurious  use,  and  not  total  abstinence 
from  the  use  of  malt  or  sprituous  liquors. 

Section  373. — PAYMENT  OF  PREMIUMS. — Notice  must 
be  given  to  the  insured  of  the  time  when  premiums  be- 
come due,  and  the  premiums  must  be  paid  promptly,  in 
order  to  save  the  policy  from  forfeiture,  unless  the  com- 
pany waives  payment  when  due  and  extends  the  time. 

Section  374. — CREDIT  FOR  PREMIUMS. — A  provision  in 
a  policy  of  insurance,  that  the  company  shall  not  be 
liable  until  the  premium  is  actually  paid,  is  waived  by  an 


340  BUSINESS  LAW  FOR  BUSINESS  MEN. 

unconditional  delivery  of  the  policy  to  the  insured  as  a 
completed  contract  under  an  express  or  implied  agree- 
ment that  credit  shall  be  given. 

Section  375. — FORFEITURE  FOR  NON-PAYMENT  OF  PRE- 
MIUM.— If  the  premium  is  not  paid,  after  notice  from  the 
company,  the  policy  will  be  forfeited.  But  when  an  in- 
surance company  receives  payments  of  premiums  when 
they  are  overdue,  and  when  it  might  refuse  payment  and 
declare  the  policy  forfeited  under  its  "by-laws,"  it 
cannot  accept  and  keep  the  money,  and  still  insist  upon  a 
forfeiture. 

Forfeiture  of  a  life  insurance  policy  for  non-payment 
of  premium  when  it  becomes  due  cannot  be  insisted  upon 
by  the  company,  when  by  the  terms  of  the  policy  the  in- 
sured is  entitled  to  share  in  the  profits,  and  therefore 
cannot  know  without  notice  what  amount  he  is  required  to 
pay,  and  no  notice  has  been  given  to  him  of  what  sum  the 
company  claims  to  be  due  on  the  policy. 

Section  376.— REVIVAL  OF  FORFEITED  POLICY. — A  policy 
of  life  insurance,  forfeited  for  non-payment  of  premium 
at  maturity,  can  only  be  revived,  as  far  as  the  insured  is 
concerned,  by  the  actual  payment  and  acceptance  of  tho 
overdue  premium,  or  by  a  contract  with  the  company 
based  upon  a  sufficient  consideration  to  revive  and  rein- 
state the  insurance. 

A  reinstatement  of  the  insurance  after  a  forfeiture  is 
not  the  making  of  a  new  contract,  where  no  different 
terms  are  agreed  upon.  It  simply  restores  the  old  policy. 

Section  377. — PROOF  OF  DEATH. — The  requirements  of 
the  policy  as  to  proof  of  death  must  be  complied  with  by 
the  beneficiary  before  he  can  collect  the  insurance.  If  the 
policy  states  the  proof  which  must  be  furnished,  and  the 
time,  its  directions  must  be  obeyed.  If  the  policy  does 
not  state  the  particular  proof,  or  the  manner  of  making 
proof,  the  fact  of  death  must  be  shown  to  the  company 


BUSINE.SS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  '  341 

with  reasonable  definiteness  and  certainty,  in  any  reason- 
able manner. 

Failure  to  furnish  proof  of  death  within  the  time 
limited  by  a  life  insurance  policy  is  waived,  when  the  com- 
pany makes  a  proposal  to  settle,  or  absolutely  refuses  to 
pay,  or  denies  all  liability,  or  asks  for  additional  proof 
without  making  objection  that  the  proof  given  was  not 
furnished  in  time. 

Section  378. — SUICIDE. — In  the  law  of  insurance, 
suicide  is  not,  as  a  rule,  recognized  as  a  ground  of  exemp- 
tion from  liability,  or  for  the  forfeiture  of  a  policy  issued 
for  the  benefit  of  a  third  person,  unless  it  is  expressly  so 
provided  in  the  policy.  Where  a  policy  of  life  insurance 
contains  a  condition  that  in  case  the  insured  shall  die  by 
his  own  hand,  whether  sane  or  insane,  the  policy  shall 
become  null  and  void,  the  suicide  of  the  insured  will  pre- 
vent a  recovery  on  the  policy.  But  the  presumption  is 
against  the  suicide  of  the  insured,  and  the  company,  if  it 
refuses  to  pay  on  that  ground,  must  itself  furnish  satis- 
factory proof  that  the  insured  did  die  by  his  own  hand. 
Nothing  appearing  to  the  contrary,  the  legal  presumption 
is  that  a  man  died  from  a  natural  cause,  and  not  from  an 
act  of  self-destruction.  The  mere  fact  of  death  in  an 
unknown  manner  creates  no  presumption  of  suicide. 

Section  379. — ASSIGNMENT  OF  POLICY. — A  policy  of 
life  insurance  may  be  assigned  and  transferred,  and  the 
assignee  will  stand  in  the  place  of  the  insured,  be  subject 
to  his  liabilities,  and  entitled  to  his  benefits.  The  assign- 
ment may  be  an  absolute  sale  and  transfer,  or  the  policy 
may  be  assigned  as  security  for  a  debt.  Notice  of  the 
assignment  is  not  required  to  be  given  to  the  company, 
unless  the  policy  contains  a  condition  requiring  such 
notice  to  be  given. 

A  policy  on  the  life  of  the  insured  payable  to  his  legal 
representatives  may  be  assigned  by  him,  with  the  consent 
of  the  company;  and  in  such  case  the  rights  of  the  as- 


342  BUSINESS  LAW  FOE  BUSINESS  MEN. 

signee  are  paramount  to  the  claims  of  the  heirs  or  per- 
sonal representatives  of  the  insured. 

The  assignment  may  be  to  relatives  of  the  insured,  or 
it  may  be  to  a  stranger  who  has  no  insurable  interest  in 
the  life  of  the  insured. 

If  a  policy  of  insurance  expressly  stipulates  that  no 
assignment  shall  be  valid  without  the  consent  of  the  com- 
pany, an  assignment  without  such  consent  is  without 
effect.  The  insured,  in  this  case,  is  presumed  to  have 
taken  out  the  insurance  with  knowledge  of  the  stipula- 
tion, and  is  bound  by  it. 

Assignment  of  a  policy,  made  payable  to  certain 
described  beneficiaries,  should  be  with  the  consent  of  the 
beneficiaries. 

Civil  Code,  Section  2764,  2765. 

Section  380. — BENEFICIAEIES  OF  LIFE  INSURANCE. — The 
insured  may  have  the  policy  made  payable  to  his  es- 
tate, or  to  particular  persons  named  in  the  policy  as 
beneficiaries. 

A  policy  of  life  insurance  creates  vested  interests  in 
the  beneficiaries  named  therein,  and  although  the  con- 
tract may  be  canceled  by  the  company  in  case  the  in- 
sured fails  to  keep  the  stipulations,  the  insured  himself 
cannot  revoke  the  contract  without  the  consent  of  the 
beneficiaries. 

The  proceeds  of  a  policy  of  life  insurance  made  pay- 
able to  the  heirs  of  an  insured  husband  go  to  his  widow 
and  children,  in  the  proportion  provided  by  the  laws  of 
the  state  for  distribution  of  estates. 

Section  381. — DEDUCTION  OF  UNPAID  PREMIUMS. — The 
insurance  company  is  entitled  to  have  the  amount  of 
premium  remaining  due  for  the  current  year,  after  the 
death  of  the  insured,  deducted  from  the  amount  of  the 
policy  before  paying  it. 

Section  382. — PAID-UP  LIFE  INSURANCE. — Every  con- 
tract or  policy  of  life  insurance  hereinafter  made  by  any 


BUSINESS  CONTEACTS  AND  LEGAL  OBLIGATIONS.  343 

person  or  corporation,  with  or  upon  the  life  of  a  resident 
of  this  state,  and  delivered  within  this  state,  shall  pro- 
vide, in  event  of  default  of  any  premium  payment  after 
three  full  annual  premiums  shall  have  been  paid  on  such 
policy,  that  without  any  action  on  the  part  of  the  insured, 
the  net  value  of  such  policy  based  upon  the  reserve  basis 
used  in  computing  the  premiums  and  values  thereunder 
(the  policy  to  specify  the  mortality  table  and  rate  of 
interest  so  adopted),  which  net  value  shall  be  at  least 
equal  to  its  entire  net  reserve  at  the  date  of  default,  in- 
cluding that  of  dividend  additions,  if  any,  based  upon  a 
standard  not  lower  than  the  American  experience  tables 
of  mortality  with  interest  at  three  and  one-half  per  cent 
yearly,  less  a  surrender  charge  of  not  more  than  two  and 
one-half  per  cent  of  the  face  amount  of  the  policy  and  of 
any  existing  dividend  additions  thereto  and  less  any  in- 
debtedness to  the  company  on  or  secured  by  the  policy, 
shall  be  applied  as  a  single  premium  to  the  purchase  of 
one  of  the  following  stipulated  forms  of  insurance. 

First. — Paid-up  non-participating  term  insurance  in 
the  amount  of  the  face  of  the  policy,  plus  dividend  addi- 
tions, if  any,  for  such  a  period  as  the  net  value  outlined 
above  will  purchase  at  the  net  single  premium,  at  the 
attained  age  of  the  insured  at  the  time  of  the  lapse,  based 
upon  the  reserve  basis  described  in  the  policy;  provided, 
however,  that  under  endowment  contracts  the  term  shall 
not  extend  beyond  the  endowment  period  named  in  the 
original  contract,  and  the  excess  value,  if  any,  shall  be 
applied  as  a  net  single  premium  to  purchase  in  the  same 
manner  paid-up  pure  endowment  insurance,  payable  at 
the  end  of  the  endowment  period  named  in  the  contract 
if  the  insured  be  then  living;  or 

Second. — Paid-up  non-participating  term  insurance  in 
the  amount  of  the  face  of  the  policy,  plus  dividend  addi- 
tions, if  any,  and  less  any  outstanding  indebtedness,  for 
such  a  period  as  the  net  value  outlined  above  will  pur- 
chase at  the  net  single  premium,  at  the  attained  age  of  the 
insured,  based  upon  the  reserve  basis  described  in  the 


344  BUSINESS  LAW  FOR  BUSINESS  MEN. 

policy;  provided,  however,  that  under  endowment  eon- 
tracts  the  term  shall  not  extend  beyond  the  endowment 
period  named  in  the  original  contract,  and  the  excess 
value,  if  any,  shall  be  applied  as  a  net  single  premium  to 
purchase  in  the  same  manner  paid-up  pure  endowment 
insurance,  payable  at  the  end  of  the  endowment  period 
named  in  the  contract  if  the  insured  be  then  living ;  or 

Third. — Paid-up  non-participating  insurance  payable 
at  the  time  and  on  the  conditions  named  in  the  policy  for 
such  an  amount  as  the  net  value  outlined  above  will  pur- 
chase at  the  net  single  premium,  at  the  attained  age  of 
the  insured,  based  upon  the  reserve  basis  described  in 
the  policy. 

Provided,  however,  that  the  policy  may  be  surren- 
dered to  the  company,  at  its  home  office,  upon  due  appli- 
cation by  the  legal  owner  thereof,  within  one  month  after 
date  of  premium  default,  for  a  specified  cash  value  which 
shall  be  at  least  equal  to  the  sum  which  would  be  other- 
wise available  for  the  purchase  of  the  automatic  form  of 
insurance  provided  therein;  and  provided  further  that 
the  company  may  defer  payment  of  such  cash  value  for 
not  more  than  six  months  after  application  therefor  is 
made.  -  .<  **; 

No  agreement  between  the  company  and  the  policy- 
holder  or  applicant  for  insurance  contrary  to  the  fore- 
going shall  be  held  to  waive  any  of  the  provisions  pro- 
vided above. 

Any  life  insurance  policy  issued  upon  the  life  of  a 
resident  of  this  state,  and  delivered  within  this  state, 
which  does  not  contain  an  automatic  non-forfeiture  value 
in  conformity  with  the  foregoing  shall  be  construed  as 
granting  non-participating  term  insurance,  as  provided  in 
paragraph  first  of  this  section,  and  such  a  benefit  shall 
be  read  into  the  contract. 

The  provisions  of  this  section  shall  not  apply  to 
annuities,  industrial  policies,  or  to  term  contracts  issued 
for  periods  of  twenty  years  or  less. 

Act  of  the  Legislature,  approved  May  1,  1911. 


BUSINESS  CONTEACTS  AND  LEGAL  OBLIGATIONS.  345 


Section  383. — THE  POLICY. — A  policy  of  accidental 
insurance  is  issued  and  accepted  for  the  purpose  of  fur- 
nishing indemnity  against  accidents  and  death  caused  by 
accidental  means,  and  the  language  of  the  policy  must  be 
construed  with  reference  to  the  subject  to  which  it  is 
applied.  In  the  construction  of  an  accident  insurance 
policy,  however,  its  provisions  will  be  usually  interpreted 
most  favorably  for  the  insured,  in  case  of  doubt  or  un- 
certainty in  their  terms.  If  a  stipulation  or  exception  in 
a  policy  of  accident  insurance  is  capable  of  two  meanings, 
that  will  be  adopted  which  is  most  favorable  to  the  in- 
sured. In  other  words,  if  there  is  doubt  or  uncertainty  as 
to  the  meaning  of  terms  employed  in  a  policy  of  accident 
insurance,  the  language  must  be  liberally  construed  in 
favor  of  the  insured,  so  as  not  to  defeat,  without  a  plain 
necessity,  his  claim  to  indemnity,  which,  in  effecting  the 
insurance,  it  was  his  object  to  secure. 

Section  384. — DEFINITION  OF  ACCIDENT. — Some  diffi- 
culty has  been  experienced  by  the  courts  in  arriving  at 
a  satisfactory  and  comprehensive  definition  of  the  word 
"accident"  as  used  in  insurance  policies.  Worcester 
defines  "accident"  to  be  "an  event  proceeding  from  an 
unknown  cause,  or  happening  without  the  design  of  the 
agent."  Webster's  definition  is,  "An  event  that  takes 
place  without  one's  foresight  or  expectation;  an  event 
which  proceeds  from  an  unknown  cause,  or  is  an  unusual 
effect  of  a  known  cause,  and  therefore  not  expected." 

The  definition  of  "accident"  generally  adopted  is,  an 
event  happening  without  any  human  agency,  or,  if  hap- 
pening through  human  agency,  an  event  which,  under  the 
circumstances,  is  unusual,  and  not  expected  by  the  person 
to  whom  it  happens. 

Disease,  produced  by  the  action  of  a  known  cause, 
cannot  be  considered  accidental.  In  the  term  "accident" 
is  necessarily  involved  some  violence,  some  unusual  and 
unforeseen  cause. 


346  BUSINESS  LAW  FOE  BUSINESS  MEN. 

Section  385. — DEATH  BY  ACCIDENTAL  MEANS. — "Deatli 
by  accident"  means  death  from  an  unexpected  event 
which  proceeds  from  an  unknown  and  unforeseen  cause, 
happening  without  the  design  of  the  person  to  whom  the 
accident  occurs.  Unnatural  death,  the  result  of  accident 
of  any  kind,  imports  an  external  and  violent  agency  as 
the  cause. 

Section  386. — HANGING  ONE'S  SELF  WHILE  INSANE.— 
It  has  been  held  that  it  is  accidental  death,  where  one 
hangs  one's  self  while  insane,  unconscious  of  the  act,  and 
incapable  of  an  intelligent  intention  to  take  one's  own  life. 

Section  387. — BEING  KILLED  BY  BOBBERS. — Death  by 
being  waylaid  and  assassinated  by  robbers  makes  the 
company  liable,  under  a  policy  insuring  the  person  so 
killed  against  death  through  "external,  violent,  or  acci- 
dental means." 

Section  388. — DEATH  BY  DROWNING. — Drowning  is  a 
death  from  external  violence,  in  the  meaning  of  an  acci- 
dent insurance  policy. 

Section  389. — DEATH  FROM  FRIGHT. — "Where  the  in- 
sured was  driving  upon  a  public  street,  and  his  horse 
became  frightened  by  an  unsightly  object,  without  up- 
setting the  carriage  or  coming  in  contact  with  anything, 
and  was  at  length  brought  under  control,  but  the  insured 
was  apparently  greatly  endangered  at  the  time,  and  suf- 
fered so  severely,  either  from  fright  or  strain  caused  by 
physical  exertion  in  restraining  the  horse,  that  he  died 
within  an  hour  afterward ;  it  was  held  that  his  death  was 
caused  by  "bodily  injuries  effected  through  external,  vio- 
lent, and  accidental  means." 

Section  390. — DEATH  BY  FALLING. — Where  the  insured 
while  traveling  by  rail,  during  a  stoppage  of  a  train  on  a 
bridge,  went  to  the  front  platform  of  the  coach  in  which 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  347 

he  was  riding  and  stepped  off,  falling  through  a  hole  in 
the  floor  of  the  bridge  and  meeting  his  death,  this  was 
held  to  be  death  by  accident  in  the  meaning  of  the  policy. 
If  a  temporary  and  unexpected  physical  disorder 
causes  the  insured  to  fall  and  injure  himself,  the  injury 
is  received  through  violent,  external,  and  accidental 
means,  and  the  insurance  company  is  liable  therefor. 

Section  391. — TAKING  POISON  BY  MISTAKE. — The  words 
''taking  poison,"  as  employed  in  a  clause  of  an  accident 
policy,  exempting  the  company  from  liability  for  death 
from  "taking  poison,"  mean  the  voluntary,  intentional 
taking  of  poison,  and  do  not  include  cases  of  accidental 
poisoning.  Hence,  the  company  is  liable  for  the  death  of 
one  who,  by  mistake,  drinks  carbolic  acid  for  pepper- 
mint, which  he  wishes  to  take  for  some  ailment,  and  dies 
from  the  effects  of  the  poison. 

Section  392. — DEATH  BY  MURDER. — Whether  the  com- 
pany will  be  liable  for  death  by  murder,  in  any  case, 
depends  upon  the  wording  of  the  policy.  If  the  policy 
exempts  the  company  from  liability  for  "intentional  in- 
jury inflicted  by  the  insured  or  any  other  person,"  then 
the  company  will  riot  be  liable  for  the  murder  of  the  in- 
sured. If,  however,  the  policy  covers  merely  "injuries 
from  external  violence  and  accidental  means,"  without 
the  exception  above  noted,  the  company  will  be  liable 
when  the  insured  is  murdered. 

Section  393. — DEATH  BY  INHALING  GAS. — The  inhaling 
of  gas,  within  the  exemption  of  insurance  policies,  means 
a  voluntary  and  intelligent  act  of  the  insured,  and  not  an 
involuntary  and  unconscious  act.  Therefore,  if  the  in- 
sured while  he  sleeps  is  accidentally  overcome  by  inhaling 
gas  without  intention  or  connivance  on  his  part,  the  com- 
pany will  be  liable. 

Section  394. — Loss  OF  HAND. — Under  a  policy  making 
the  company  liable  for  "loss  of  hand"  it  is  not  necessary 


348  BUSINESS  LAW  FOR  BUSINESS  MEN. 

to  show  that  the  entire  hand  is  gone.  If  the  hand  is  so 
injured  as  to  become  useless  as  a  hand,  the  company  is 
liable  as  for  an  entire  loss. 

Section  395. — Loss  OF  FEET. — Under  a  policy  agree- 
ing to  pay  an  indemnity  for  loss  of  * '  two  entire  feet, ' '  it 
is  not  necessary  to  show,  in  order  to  make  the  company 
liable,  that  the  legs  or  feet  were  severed  from  the  body. 
It  is  only  necessary  to  show  that  the  insured  has  lost  the 
use  of  the  feet  as  members  of  his  body ;  as,  where  through 
accident  the  lower  part  of  the  body  has  become  totally 
paralyzed,  and  thus  the  use  of  the  feet  destroyed. 

Section  396. — Loss  OF  BUSINESS. — If  a  policy  provides 
that  the  insured  shall  be  paid  a  certain  sum  per  week,  for 
the  immediate,  continuous,  total  loss  of  such  business 
time  as  may  result  from  an  accidental  injury,  he  is  en- 
titled to  recover  if  his  injury  is  such  that  he  loses  his 
time  in  the  business  in  which  he  was  engaged  when  in- 
sured, though  there  are  other  business  pursuits  from 
which  the  accident  would  not  incapacitate  him. 

Section  397. — TOTAL  DISABILITY. — The  insured  suffers 
a  total  disability,  if  his  injuries  are  of  such  character  that 
common  care  and  prudence  require  him  to  desist  from 
the  transaction  of  any  business  pertaining  to  his  occupa- 
tion, so  long  as  it  is  reasonably  necessary  to  effect  a  cure. 
Ability  to  occasionally  perform  some  single  and  trivial 
act  of  business  does  not  render  his  disability  partial  in- 
stead of  total,  provided  he  is  unable  substantially,  to  a 
material  extent,  to  transact  any  kind  of  business  pertain- 
ing to  his  occupation. 

Section  398. — "DISEASE"  AND  "BODILY  INFIRMITY."— 
The  words  "disease"  and  "bodily  infirmity,"  as  used  in 
an  accident  insurance  policy,  exempting  the  company 
from  liability  for  injury  from  such  cause,  mean,  prac- 
tically, the  same  tiling.  They  refer  to  some  ailment  or 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  349 

disorder  of  a  somewhat  established  and  settled  character, 
some  physical  disturbance  to  which  the  insured  is  subject, 
and  of  which  an  attack  causing  him  an  injury  is,  in  some 
measure,  a  recurrence;  and  they  have  no  reference  to 
some  temporary  disorder,  new  and  unusual,  arising  from 
some  sudden  and  unexpected  derangement  of  the  system. 

Section  399. — DISEASE  PRODUCED  BY  KNOWN  CAUSE.— 
Disease  produced  by  the  action  of  a  known  cause  cannot 
be  considered  as  accidental.  Thus,  disease,  or  death,  en- 
gendered by  exposure  to  heat,  cold,  damp,  the  vicissitudes 
of  climate,  or  atmospheric  influences,  cannot  properly  be 
said  to  be  accidental. 

Section  400. — CONDITION  AGAINST  CHANGE  OF  OCCUPA- 
TION.— Where  there  is  a  condition  in  a  policy  against 
change  of  occupation  by  the  insured,  the  word  "occupa- 
tion" has  reference  to  the  vocation,  trade,  or  calling 
which  he  is  engaged  in  for  hire  or  for  profit ;  and  the  con- 
dition does  not  preclude  him  from  the  performance  of 
acts  and  duties  which  are  incidentally  connected  with  the 
life  of  men  in  any  or  all  occupations,  or  from  engaging  in 
mere  acts  of  exercise,  diversion,  and  recreation. 

Section  401. — VOLUNTARY  EXPOSURE  TO  DANGER. — -The 
insured  cannot  recover  upon  an  accident  insurance  policy 
if  he  has  voluntarily  and  intentionally  exposed  himself  to 
danger  from  which  the  injury  resulted.  Voluntary  ex- 
posure to  unnecessary  danger,  within  the  meaning  of  an 
accident  insurance  policy,  is  a  conscious  or  intentional 
exposure  involving  gross  or  wanton  negligence  on  the 
part  of  the  insured.  The  intention  of  the  insured  to 
voluntarily  expose  himself  to  unnecessary  danger  may  be 
inferred  from  his  acting  so  recklessly  and  carelessly  as 
to  show  an  utter  disregard  of  known  danger,  or  from  his 
taking  the  risk  of  a  danger  which  is  so  obvious  that  a 
prudent  man,  exercising  reasonable  forethought,  would 
not  have  taken  it. 


350  BUSINESS  LAW  FOK  BUSINESS  MEN. 

Section  402. — PROOF  OF  INJURY  OR  DEATH. — Proof  of 
injury  or  death  must  be  given  in  the  manner  and  at  the 
time  specified  in  the  policy.  The  company  may  waive  the 
proof,  either  expressly,  or  by  conduct  and  acts  which 
amount  to  a  waiver ;  but,  if  there  is  no  waiver  on  the  part 
of  the  company,  proof  of  injury  or  death  must  be  made 
as  required  by  the  policy. 

MARINE  INSURANCE 

Section  403. — THE  POLICY. — Marine  insurance,  though 
upon  property  and  against  risks  unknown  on  land,  is  to 
be  construed  by  the  same  principles  which  apply  to  other 
insurance  policies.  In  the  construction  of  a  marine 
policy,  as  in  the  construction  of  other  policies,  the  inten- 
tion of  the  contracting  parties  is  the  first  thing  to  be 
determined.  The  courts  will  enforce  the  contract  as  the 
parties  intended  it  to  be,  provided  this  can  be  done  with- 
out violation  of  law  and  in  accordance  with  a  reasonable 
construction  of  the  policy.  Premiums  must  be  paid,  and 
other  conditions  observed,  as  faithfully  in  marine  as  in 
other  forms  of  insurance.  Conditions  may  be  waived 
also,  in  like  manner  as  in  other  insurance,  by  express 
consent,  or  by  conduct  and  circumstances  from  which  a 
waiver  is  inferred. 

Section  404. — DEFINITION  OF  MARINE  INSURANCE. — 
Marine  insurance  is  an  insurance  against  risks  connected 
with  navigation,  to  which  a  ship,  cargo,  freightage, 
profits,  or  other  insurable  interests  in  movable  property, 
may  be  exposed  during  a  voyage  or  a  fixed  period  of  time. 
Civil  Code,  Section  2655. 

Section  405. — INSURABLE  INTEREST. — The  owner  of  a 
ship  has  in  all  cases  an  insurable  interest  in  it,  even  when 
it  has  been  chartered  by  one  who  covenants  to  pay  him 
its  value  in  case  of  loss. 

The  insurable  interest  of  an  owner  who  has  hypothe- 
cated the  ship  as  security  for  a  loan,  to  be  repaid  only  in 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  351 

case  the  ship  survives  a  particular  risk,  voyage,  or  period, 
is  only  the  excess  of  the  value  of  the  ship  over  the  amount 
secured  as  a  loan. 

Freightage,  in  the  sense  of  a  policy  of  marine  insur- 
ance, means  all  the  benefits  derived  by  the  owner  either 
from  the  chartering  of  the  ship  or  its  employment  for  the 
carriage  of  his  own  goods  or  those  of  others. 

The  owner  of  a  ship  has  an  insurable  interest  in  ex- 
pected freightage,  which  he  would  have  certainly  earned 
had  it  not  been  for  the  happening  of  a  peril  insured 
against.  This  interest  in  expected  freightage  exists,  in 
the  case  of  a  charter-party,  when  the  ship  has  broken 
ground  on  the  charter  voyage ;  or  if  a  price  is  to  be  paid 
for  the  carriage  of  goods,  when  they  are  actually  on 
board,  or  there  is  some  contract  for  putting  them  on  board 
and  both  ship  and  goods  are  ready  for  the  specified 
voyage. 

One  who  has  an  interest  in  the  things  from  which 
profits  are  expected,  has  an  insurable  interest  in  the 
profits. 

The  charterer  of  a  ship  has  an  insurable  interest  in 
it  to  the  extent  that  he  is  liable  to  be  damaged  by  its  loss. 
Civil  Code,  Sections  2659,  2660,  2661,  2662,  2663, 
2664,  2665,  3017. 

Section  406. — PEKILS  OF  THE  SEA. — The  definition  of 
perils  of  the  sea,  covered  by  marine  insurance,  is  very 
extensive.  Perils  of  the  sea  are  all  perils,  losses,  and  mis- 
fortunes of  a  marine  character,  or  of  a  character  incident 
to  a  ship  as  such.  They  include  storms  and  waves ;  rocks, 
shoals,  and  rapids ;  and  other  obstacles,  though  of  human 
origin,  such  as  floating  logs,  abandoned  vessels,  or  other 
derelicts  of  the  sea.  They  also  include  changes  in  cli- 
mate ;  the  confinement  necessary  at  sea ;  animals  peculiar 
to  the  sea ;  and  all  other  dangers  met  with  only  upon  the 
sea.  An  injury  resulting  from  a  defective  condition  of 
the  ship  itself,  or  negligent  operation  of  the  machinery, 
is  not  a  peril  of  the  sea.  Thus,  it  has  been  held  that  the 


352  BUSINESS  LAW  FOE  BUSINESS  MEN. 

bursting  of  a  steam  boiler  is  not  a  peril  of  the  sea,  as 
understood  in  the  law  of  marine  insurance.  A  peril  oi 
the  sea  is  one  associated  with  the  peculiar  character  and 
nature  of  the  ocean,  suggesting  its  winds  and  storms  and 
tides,  its  tempestuous  waves,  its  obscuring  fogs,  and  other 
dangers  inevitably  incident  to  its  navigation. 

Section  407. — DUTY  OF  PARTIES. — In  effecting  a  con- 
tract of  marine  insurance,  it  is  the  duty  of  the  parties, 
the  insurer  and  the  insured,  to  reveal  to  each  other  all 
information  materially  affecting  the  risk ;  unless  the  same 
facts  are  known  to  both,  or  which  in  the  exercise  of  ordi- 
nary care  either  party  has  the  means  of  ascertaining. 
Neither  party  can  withhold  from  the  other  any  informa- 
tion peculiarly  within  his  own  knowledge,  material  to  the 
risk,  and  he  is  required  to  state  the  exact  and  whole  truth 
in  relation  to  all  matters  about  which  he  makes  repre- 
sentations, voluntarily,  or  in  answer  to  inquiries  made 
of  him. 

(a)  Presumption  of  Knowledge  of  Loss. — A  person 
insured  by  a  contract  of  marine  insurance  is  presumed  to 
have  had  knowledge,  at  the  time  of  insuring,  of  a  prior 
loss  of  the  thing  insured ;  provided,  it  must  appear  that 
the  information  might  possibly  have  reached  him  in  the 
usual  mode  of  transmission  and  in  the  usual  time. 

(b)  Concealments   Which   Only  Affect   the  Risk   in 
Question. — If  a  party  applying  for  a  policy  of  marine 
insurance  conceals  facts,  in  respect  to  any  of  the  follow- 
ing matters,  such  concealment  does  not  make  the  entire 
contract  void,  but  does  release  the  insurance  company 
from  a  loss  resulting  from  the  risk  concealed:  (1)  The 
national  character  of  the  insured ;  (2)  The  liability  of  the 
insured  property  to  capture  and  detention;  (3)  The  lia- 
bility to  seizure  from  breach  of  foreign  laws  of  trade; 
(4)  The  want  of  necessary  documents;  and  (5)  The  use 
of  false  and  simulated  papers. 

(c)  Effect  of  Intentional  False  Representations. — If 
the  party  applying  for  a  policy  intentionally  makes  false 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  353 

representations  about  any  matter  respecting  the  risk, 
whether  material  or  immaterial,  the  insurance  company 
may  rescind  the  entire  contract. 

Civil  Code,  Sections  2563,  2564,  2669,  2671,  2672, 
2676. 

Section  408. — WARRANTY  OF  SEAWORTHINESS. — In  every 
marine  insurance  upon  a  ship,  or  freight,  or  freightage, 
or  upon  anything  which  is  the  subject  of  marine  insur- 
ance, a  warranty  is  implied  that  the  ship  is  seaworthy. 

(a)  Seaworthiness    Defined. — A    ship    is    seaworthy 
when  reasonably  fit  to  perform  the  services  and  to  en- 
counter the  ordinary  perils  of  the  voyage  contemplated 
by  the  parties  to  the  policy.    A  warranty  of  seaworthi- 
ness extends  not  only  to  the  condition  of  the  structure  of 
the  ship  itself,  but  requires  that  it  be  properly  laden,  and 
provided  with  a  competent  master,  a  sufficient  number  of 
competent  officers  and  seamen,  and  the  requisite  appur- 
tenances and  equipments,  such  as  ballast,  cables,  anchors, 
cordage,  sails,  food,  water,  fuel,  lights,  and  other  neces- 
sary or  proper  stores  and  implements  for  the  voyage. 

(b)  Different  Degrees  of  Seaworthiness  at  Different 
Stages  of  the  Voyage. — Where  different  portions  of  the 
voyage  contemplated  by  a  policy  differ,  in  respect  to  the 
things  requisite  to  make  the  ship  seaworthy  therefor,  a 
warranty  of  seaworthiness  is  complied  with  if,  at  the  com- 
mencement of  each  part  of  the  voyage,  the  ship  is  sea- 
worthy with  reference  to  that  portion. 

(c)  Delay  in  Making  Repairs. — When  a  ship  becomes 
unseaworthy  xluring  the  voyage,  an  unreasonable  delay 
in  making  repairs  will  exonerate  the  insurance  company 
from  liability. 

(d)  Seaworthiness  for  Cargo. — A  ship  which  is  sea- 
worthy for  the  purpose  of  an  insurance  upon  the  ship 
may  nevertheless,  by  reason  of  being  unfitted  to  receive 
cargo,  be  unseaworthy  for  the  purpose  of  insurance  upon 
the  cargo.    To  be  seaworthy  for  cargo,  the  vessel  must  be 
properly  equipped,  with  competent  master  and  officers 


354  BUSINESS  LAW  FOR  BUSINESS  MEN. 

and  men,  and  all  necessary  and  proper  stores  and  imple- 
ments for  the  voyage. 

(e)  Neutral  Papers. — "Where  the  nationality  or  neu- 
trality of  a  ship  or  cargo  is  expressly  warranted,  it  is 
implied  that  the  ship  will  carry  the  requisite  documents 
to  show  such  nationality  or  neutrality,  and  that  it  will  not 
carry  any  documents  which  cast  reasonable  suspicion 
thereon. 

(f)  At  What  Time  Seaworthiness  Must  Exist. — An 
implied  warranty  of  seaworthiness  is  complied  with  if  the 
ship  be  seaworthy  at  the  time  of  the  commencement  of 
the  risk,  except  in  the  following  cases :  When  the  insur- 
ance is  made  for  a  specified  length  of  time,  the  implied 
warranty  is  not  complied  with  unless  the  ship  be  sea- 
worthy at  the  commencement  of  every  voyage  she  may 
undertake  during  that  time;  and,  when  the  insurance  is 
upon  the  cargo,  which,  by  the  terms  of  the  policy,  or  the 
description  of  the  voyage,  or  the  established  custom  of 
the  trade,  is  to  be  transshipped  at  an  intermediate  point, 
the  implied  warranty  is  not  complied  with,  unless  each 
vessel  upon  which  the  cargo  is  shipped  or  transshipped 
be   seaworthy  at  the  commencement   of   its   particular 
voyage. 

Civil  Code,  Sections  2681,  2682,  2683.  2684,  2685, 
2686,  2687,  2688. 

Section  409. — DEVIATION  FROM  VOYAGE. — In  order  to 
hold  the  insurance  company  liable  in  the  event  of  a  loss, 
it  must  appear  that  no  material  deviation  from  the 
voyage  named  in  the  policy  was  made.  Where,  for  in- 
stance, a  cargo  of  wheat  was  insured  from  San  Francisco 
to  Hong  Kong,  the  transshipment  of  the  wheat  at  Yoko- 
hama was  a  deviation,  even  though  the  bill  of  lading 
authorized  it,  because  the  insurance  had  not  been  effected 
with  reference  to  that  part. 

(a)  What  Constitutes  Deviation. — Deviation  is  de- 
fined by  the  law  to  be  a  departure  from  the  course  of  the 
voyage  insured,  or  an  unreasonable  delay  in  pursuing  the 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  855 

voyage,  or  the  commencement  of  an  entirely  different 
voyage.  When  the  voyage  contemplated  by  a  policy  is 
described  by  the  places  of  beginning  and  ending,  the 
voyage  insured  is  one  which  conforms  to  the  course  of 
sailing  fixed  by  mercantile  usage  between  those  places. 
If  the  course  of  sailing  is  not  fixed  by  mercantile  usage, 
the  voyage  insured  by  a  policy  is  the  way  between  the 
places  specified  which,  to  a  master  of  ordinary  skill  and 
discretion,  would  seem  the  most  natural,  direct,  and 
advantageous. 

(b)  Deviation  Exonerates  the  Insurer. — An  insurer 
is  not  liable  for  any  loss  happening  subsequently  to  an 
improper  deviation.  But  a  deviation  from  the  voyage 
contemplated  by  the  policy  is  sometimes  proper,  and  when 
properly  made  will  not  exonerate  the  insurer.  A  devia- 
tion may  be  properly  made,  when  caused  by  circumstances 
over  which  neither  the  master  nor  the  owner  of  the  ship 
had  any  control;  or,  when  necessary  to  comply  with  a 
warranty,  or  to  avoid  a  peril  of  the  sea,  whether  insured 
against  or  not;  or,  when  made  in  good  faith  and  upon 
reasonable  grounds  of  belief  in  its  necessity  to  avoid  a 
peril  to  ship  or  cargo ;  or,  when  made  in  good  faith  for 
the  purpose  of  saving  human  life  or  relieving  another 
vessel  in  distress.  Every  deviation  not  specified  above  as 
being  proper  is  pronounced  by  the  law  to  be  improper, 
and  when  improperly  made  will  release  the  insurer  from 
liability. 

Civil  Code,  Sections  2692,  2693,  2694,  2695,  2696, 
2697. 

Section  410. — TOTAL  AND  PARTIAL  Loss. — A  loss  may 
be  either  total  or  partial.  Every  loss  which  is  not 
total  is  partial.  A  total  loss  may  be  either  actual  or 
constructive. 

(a)  Actual  Total  Loss. — An  actual  total  loss  is  caused 
by  a  total  destruction  of  the  thing  insured ;  or  a  loss  by 
sinking,  or  by  being  broken  up;  or  any  damage  to  the 
insured  property  which  renders  it  valueless  to  the  owner 


356  BUSINESS  LAW  FOE  BUSINESS  MEN. 

for  the  purposes  for  which  lie  held  it ;  or  any  other  event 
which  entirely  deprives  the  owner  of  the  possession,  at 
the  port  of  destination,  of  the  property  insured.  An 
actual  loss  may  be  presumed  from  the  continued  absence 
of  the  ship  without  being  heard  of ;  and  the  length  of  time 
which  is  sufficient  to  raise  the  presumption  depends  on  the 
circumstances  of  each  case. 

Upon  an  actual  total  loss,  a  person  insured  is  entitled 
to  payment  without  notice  of  abandonment. 

(b)  Constructive  Total  Loss. — A  constructive  total 
loss  is  one  which  gives  to  a  person  insured  a  right  to 
abandon  the  property  by  declaring  to  the  insurer  that  he 
relinquishes  to  him  his  interest  in  the  thing  insured. 

(c)  Insurance   Against   Total   Loss. — An   insurance 
confined  in  terms  to  an  actual  total  loss  does  not  cover  a 
constructive  total  loss,  but  covers  any  loss  which  neces- 
sarily results  in  depriving  the  insured  of  the  possession 
at  the  port  of  destination  of  the  entire  thing  insured. 

(d)  Liability  of  Insurer   When   Voyage  is   Broken 
Up. — When  a  ship  is  prevented,  at  an  intermediate  port, 
from  completing  the  voyage  by  the  perils  insured  against, 
the  master  must  make  every  exertion  to  procure,  in  the 
same  or  a  contiguous  port,  another  ship,  for  the  purpose 
of  conveying  the  cargo  to  its  destination;  and  when  he 
has  done  so,  the  liability  of  a  marine  insurer  of  the  cargo 
continues  after  it  is  thus  reshipped.    And  in  addition,  a 
marine  insurer  is  bound  for  damages,  expenses  of  dis- 
charging, storage,  reshipment,  extra  freightage,  and  all 
other  expenses  incurred  in  saving  the  cargo  reshipped,  up 
to  the  amount  insured. 

Civil  Code,  Sections  2701,  2702,  2703,  2704,  2705, 
2706,  2707,  2708,  2709,  2712. 

Section  411. — ABANDONMENT. — A  person  insured  by  a 
contract  of  marine  insurance  may  abandon  the  thing  in- 
sured, or  any  particular  portion  separately  valued  by  the 
policy  or  otherwise  separately  insured,  and  recover  for 
a  total  loss  thereof,  when  the  cause  of  the  loss  is  a  peril 


BUSINESS  CONTKACTS  AND  LEGAL  OBLIGATIONS.  357 

insured  against,  in  any  of  the  following  cases:  (1)  If 
more  than  half  in  value  is  actually  lost,  or  would  have  to 
be  expended  to  recover  it  from  the  peril ;  (2)  If  the  prop- 
erty is  injured  to  such  an  extent  as  to  reduce  its  value 
more  than  one-half;  (3)  If  a  ship  is  insured,  and  the  con- 
templated voyage  cannot  be  performed  without  incurring 
an  expense  to  the  insured  of  more  than  half  the  value  of 
the  ship,  or  without  incurring  a  risk  which  a  prudent  man 
would  not  take  under  the  circumstances ;  (4)  If  the  cargo 
or  freightage  is  insured,  and  the  voyage  cannot  be  per- 
formed nor  another  ship  procured  by  the  master,  within 
a  reasonable  time  and  with  reasonable  diligence,  to  for- 
ward the  cargo,  without  incurring  an  expense  of  more 
than  half  the  value,  or  without  incurring  a  risk  which  a 
prudent  man  would  not  take  under  the  circumstances. 

Freightage  cannot  in  any  case  be  abandoned  unless  the 
ship  is  also  abandoned. 

An  abandonment  must  be  neither  partial  nor  condi- 
tional. An  abandonment,  to  give  the  insured  the  right 
to  claim  the  full  amount  of  insurance,  must  include  not 
only  an  intention  to  abandon,  but  also  a  relinquishment 
to  all  right  to  the  property.  The  insured  must  in  fact 
and  in  good  faith  abandon  the  ship ;  and  he  cannot  still 
claim  ownership,  or  continue  in  the  use  of  the  vessel,  after 
he  has  given  notice  of  abandonment  as  for  a  total  loss. 

An  abandonment  must  be  made  within  a  reasonable 
time  after  information  of  the  loss,  after  the  commence- 
ment of  the  voyage.  Where  the  information  upon  which 
an  abandonment  has  been  proved  incorrect,  or  the  prop- 
erty insured  was  so  far  restored  when  the  abandonment 
was  made  that  there  was  then  in  fact  no  total  loss,  the 
abandonment  becomes  ineffectual. 

An  abandonment  is  equivalent  to  a  transfer  by  the 
insured  of  his  interest  to  the  insurer,  with  all  the  chances 
of  recovery  and  indemnity.  An  acceptance  of  an  aban- 
donment is  not  necessary  to  the  rights  of  the  insured. 
But  the  acceptance  of  an  abandonment,  whether  express 


BUSINESS  LAW  FOE  BUSINESS  MEN. 

or  implied,  is  conclusive  upon  the  parties,  and  admits  the 
loss  and  the  sufficiency  of  the  abandonment. 

An  abandonment  once  made  and  accepted  is  ir- 
revocable, unless  the  ground  upon  which  it  was  made 
proves  to  be  unfounded;  as,  where  information  of  the 
loss  of  a  ship  turns  out  to  be  incorrect. 

On  an  accepted  abandonment  of  a  ship,  freightage 
earned  previous  to  the  loss  belongs  to  the  insurer  of  the 
freightage;  but  freightage  subsequently  earned  belongs 
to  the  insurer  of  the  ship. 

(a)  Refusal   to   Accept. — If   an  insurance   company 
refuses  to  accept  a  valid  abandonment,  it  is  liable  as  upon 
an  actual  total  loss,  deducting  from  the  amount  any  pro- 
ceeds of  the  thing  insured  which  may  have  come  to  the 
hands  of  the  insured  person. 

(b)  Waiver  of  Formal  Abandonment. — If  a  marine 
insurance  company  pays  for  a  loss  as  if  it  were  an  actual 
total  loss,  it  is  entitled  to  whatever  may  remain  of  the 
property  insured,  or  its  proceeds  or  salvage,  as  if  there 
had  been  a  formal  abandonment. 

(c)  Omission  to  Abandon. — If  a  person  insured  omits 
to  abandon,  he  may  nevertheless  recover  his  actual  loss. 

(d)  Notice  of  Abandonment. — Abandonment  is  made 
by  giving  notice  thereof  to  the  insurer,  which  may  be 
made  orally  or  in  writing.     A  notice  of  abandonment 
must  be  explicit,  and  must  specify  the  particular  cause  of 
the  abandonment ;  but  it  is  only  necessary  to  state  enough 
to  show  that  there  is  probable  cause  to  abandon,  and  the 
notice  need  not  be  accompanied  with  proof  of  interest  or 
of  loss. 

Civil  Code,  Sections  2716,  2717,  2718,  2719,  2720, 
2721,  2722,  2724,  2725,  2727,  2728,  2729,  2730, 
2731,  2732. 

Section  412. — MEASURE  OP  INDEMNITY. — A  valuation  in 
a  policy  of  marine  insurance  is  conclusive  between  the 
parties  thereto,  in  the  adjustment  of  either  a  partial  or 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  359 

total  loss,  if  the  insured  has  some  interest  at  risk,  and 
there  is  no  fraud  on  his  part;  except  that  when  a  thing 
has  been  hypothecated,  before  its  insurance,  and  without 
the  knowledge  of  the  person  actually  procuring  the  insur- 
ance, he  may  show  the  real  value.  But  a  valuation 
fraudulent  in  fact  entitles  the  insurer  to  rescind  the  con- 
tract. 

(a)  Partial  Loss. — A  marine  insurer  is  liable  upon  a 
partial  loss,  only  for  such  proportion  of  the  amount  in- 
sured by  him  as  the  property  lost  bears  to  the  value  of 
the  whole  interest  of  the  insured. 

(b)  Profits. — Where  profits   are   separately  insured 
the  insured  is  entitled  to  recover,  in  case  of  loss,  a  pro- 
portion of  such  profits,  equivalent  to  the  proportion  which 
the  value  of  the  property  lost  bears  to  the  value  of  the 
whole. 

(c)  Valuation   Apportioned. — In    case    of    a   valued 
policy  on  freightage  or  cargo,  if  a  part  only  of  the  subject 
is  exposed  to  risk,  the  valuation  applies  only  in  propor- 
tion to  such  part. 

(d)  Valuation  Applied  to  Profits. — When  profits  are 
valued  and  insured  in  the  policy,  a  loss  of  them  is  con- 
clusively presumed  from  a  loss  of  the  property  out  of 
which  they  were  expected  to  arise,  and  the  valuation  in 
the  policy  fixes  their  amount. 

(e)  Estimating  Loss  Under  an  Open  Policy. — In  esti- 
mating a  loss  under  an  open  policy,  where  the  values  are 
not  fixed  by  the  contract,  the  following  rules  are  to  be 
observed:    (1)   The  value  of  a  ship  is  its  value  at  the 
beginning  of  the  risk,  including  all  articles  or  charges 
which  add  to  its  permanent  value,  or  which  are  necessary 
to  prepare  it  for  the  voyage  insured;  (2)  The  value  of 
cargo  is  its  actual  cost  to  the  insured,  when  laden  on 
board,  or  when  that  cost  cannot  be  ascertained,  its  market 
value  at  the  time  and  place  of  lading,  adding  the  charges 
incurred  in  purchasing  and  placing  it  on  board ;  but  this 


360  BUSINESS  LAW  FOB  BUSINESS  ME*. 

must  be  without  reference  to  any  losses  incurred  in 
raising  money  for  its  purchase,  or  any  drawback  on  its 
exportation,  or  any  fluctuations  of  the  market  at  the  port 
of  destination,  or  any  expenses  incurred  on  the  way  or 
on  arrival;  (3)  The  value  of  freightage  is  the  gross 
freightage,  exclusive  of  primage,  without  reference  to 
the  cost  of  earning  it ;  and  (4)  The  cost  of  insurance  is 
in  each  case  to  be  added  to  the  value  thus  estimated. 

(f)  Arrival  of  Cargo  Damaged. — If  cargo  insured 
against  partial  loss  arrives  at  the  port  of  destination  in 
a  damaged  condition,  the  loss  of  the  insured  is  deemed 
to  be  the  same  proportion  of  the  value  which  the  market 
price  at  that  port,  of  the  goods  damaged,  bears  to  the 
market  price  they  would  have  brought  if  sound. 

(g)  Labor  and  Expenses. — A  marine  insurer  is  liable 
for  all  the  expense  attendant  upon  a  loss  which  forces  the 
ship  into  port  to  be  repaired ;  and  where  it  is  agreed  that 
the  insured  may  perform  labor  for  the  recovery  of  the 
property,  the  insurer  is  liable  fo~r  the  expense  incurred 
thereby ;  such  expense  in  either  case  being  in  addition  to 
a  total  loss,  if  that  afterwards  occurs. 

(h)  One-third  Neiv  for  Old. — In  case  of  a  partial  loss 
of  a  ship  or  its  equipments,  the  old  materials  are  to  be 
applied  towards  payment  for  the  new,  when  repairs  are 
made;  and  whether  the  ship  is  new  or  old,  a  marine  in- 
surer is  liable  for  only  two-thirds  of  the  remaining  costs 
of  the  repairs,  except  that  he  must  pay  for  anchors  and 
cannon  in  full,  and  for  sheathing  metal  at  a  depreciation 
of  only  two  and  one-half  per  cent  for  each  month  that  it 
has  been  fastened  to  the  ship. 

Civil  Code,  Sections  2736,  2737,  2738,  2739,  2740, 
2741,  2742,  2743,  2746. 

Section  413. — GENEEAL  AVERAGE. — A  carrier  by  water 
may,  when  in  case  of  extreme  peril  it  is  necessary  for  the 
safety  of  the  ship  or  cargo,  throw  overboard  or  other- 
wise sacrifice,  any  or  all  the  cargo  or  appurtenances  of 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  361 

the  ship.  Throwing  property  overboard  for  such  purpose 
is  called  jettison,  and  the  loss  incurred  thereby  is  called 
a  general  average  loss. 

A  jettison  must  begin  with  the  most  bulky  and  least 
valuable  articles,  so  far  as  possible. 

A  jettison  can  be  made  only  by  authority  of  the  master 
of  the  ship,  except  in  case  of  his  disability  or  an  over- 
ruling necessity,  when  it  may  be  made  by  any  other 
person. 

The  loss  incurred  by  a  jettison,  when  lawfully  made, 
must  be  borne  in  due  proportions  by  all  that  part  of  the 
ship,  appurtenances,  freightage,  and  cargo,  for  the  bene- 
fit of  which  the  sacrifice  is  made,  as  well  as  by  the  owner 
of  the  property  sacrificed.  The  proportions  in  which  a 
general  average  loss  is  to  be  borne  must  be  ascertained 
by  an  adjustment,  in  which  the  owner  of  each  separate 
interest  is  to  be  charged  with  such  proportion  of  the 
value  of  the  thing  lost  as  the  value  of  his  part  of  the 
property  affected  bears  to  the  value  of  the  whole.  An 
adjustment  made  at  the  end  of  the  voyage,  if  valid  there, 
is  valid  everywhere. 

In  estimating  values  for  the  purpose  of  a  general 
average,  the  ship  and  appurtenances  must  be  valued  as 
at  the  end  of  the  voyage,  the  freightage  at  one-half  the 
amount  due  on  delivery,  and  the  cargo  as  at  the  time  and 
place  of  its  discharge ;  adding,  in  each  case,  the  amount 
made  good  by  contribution. 

The  owner  of  things  stowed  on  deck,  in  case  of  their 
jettison,  is  entitled  to  the  benefit  of  a  general  average  con- 
tribution only  in  case  it  is  usual  to  stow  such  things  on 
deck  upon  such  voyage. 

Where  a  person  insured  by  a  contract  of  marine  insur- 
ance has  a  demand  against  others  for  a  contribution,  by 
reason  of  a  general  average,  he  may  claim  the  whole  loss 
from  the  insurance  company,  subrogating  it  to  his  own 
right  to  contribution.  But  no  such  claim  can  be  made 
upon  the  insurer  after  the  separation  of  the  interests 
liable  to  contribution,  nor  when  the  insured,  having  the 


362  BUSINESS  LAW  FOR  BUSINESS  MEN. 

right    and    opportunity   to    enforce    contribution    from 
others,  has  neglected  or  waived  the  exercise  of  that  right. 
Civil  Code,  Sections  2148,  2149,  2150,  2151,  2152, 
2153,  2154,  2155,  2745. 

Section  414. — PERISHABLE  GOODS. — What  is  known  as 
the  memorandum  clause  in  policies  of  marine  insurance, 
whereby  the  insurance  company  is  exempted  from  lia- 
bility for  any  partial  loss  of  goods  of  a  perishable  nature, 
is  intended  to  apply  only  where  goods  are  perishable  and 
there  is  difficulty  in  proving  whether  the  loss  occurred 
from  the  inherent  quality  of  the  goods  or  from  a  peril  of 
the  sea. 

Section  415. — ACTS  OF  MASTER  AND  CREW. — The  insur- 
ance company  will  be  liable  notwithstanding  a  lack  of 
skill,  or  even  negligence,  on  the  part  of  the  master  or 
crew.  To  relieve  the  company  from  liability  because  of 
acts  of  the  master  or  crew,  there  must  be  want  of  good 
faith  and  honesty  of  purpose  on  their  part.  If  a  ship 
should  be  run  on  shore  by  the  crew  and  wrecked,  through 
being  placed  in  a  dangerous  position  by  reason  of  negli- 
gence or  unskilfulness  of  the  crew,  this  does  not  exempt 
the  company  from  liability,  where  it  appears  that  the 
crew  were  not  acting  in  bad  faith  and  with  dishonest 
purpose  to  cause  loss. 

BUILDING  CONTRACTS 

Section  416. — THE  CONTRACT. — A  building  contract 
may  be  either  oral  or  in  writing,  if  the  work  is  to  be  per- 
formed within  a  year.  But  as  the  lien  law  requires  the 
recording  of  the  original  contract,  in  order  to  give  actual 
notice  of  its  terms  to  all  persons  who  perform  work  upon 
or  furnish  materials  for  the  structure,  it  may  be  said  that 
a  contract  in  writing  is  still  essential. 

Code  of  Civil  Procedure,  Section  1183. 


BUSINESS  CONTRACTS  AND  LEGAL,  OBLIGATIONS.  363 

Section  417. — RECORDING  OF  CONTRACT. — The  contract 
must  be  recorded,  if  recorded  at  all,  in  the  office  of  the 
County  Recorder  of  the  county  where  the  property  is 
situated,  before  the  commencement  of  the  work. 
Code  of  Civil  Procedure,  Section  1183. 

Section  418. — MATERIALS  FURNISHED,  CONTRACTOR  EX- 
EMPT FROM  EXECUTION. — Materials  furnished  for  use  and 
about  to  be  used  in  the  construction,  alteration,  or  repair 
of  any  building  cannot  be  taken  under  attachment  or 
execution,  to  enforce  any  debt  due  by  the  purchaser  of 
such  materials,  except  a  debt  due  for  the  purchase  price 
of  the  materials. 

Code  of  Civil  Procedure,  Section  1196. 

Section  419. — FORM  OF  BUILDER'S  CONTRACT. — The  fol- 
lowing is  a  form  of  builder's  contract,  which  is  in  common 
use  in  this  state,  and  which  meets  the  requirements  of 
the  law  in  its  terms: 

ARTICLES  OF  AGREEMENT,  Made  this 

d ay  of ,  19 ,  Between 

of  the ,  County  of ,  State  of 

California,  the  party  of  the  first  part,  and 

of  the ,  County  of ,  State 

of  California,  the  party  of  the  second  part. 

Witnesseth : — That  the  party  of  the  first  part  will  be 
hereinafter  designated  as  the  Owner,  and  the  party  of 
the  second  part  as  the  Contractor,  singular  number  only 
being  used;  and  the  word  Architect  used  herein  in  the 
singular  shall  include  the  plural,  and  the  masculine  the 
feminine. 

FIRST. — The  Contractor  agrees,  within  the  space  of 

working  days  from  and  after  the  date 

hereof,  to  furnish  the  necessary  labor  and  materials,  in- 
cluding tools,  implements,  and  appliances  required,  and 
perform  and  complete  in  a  workmanlike  manner  all  the 


364  BUSINESS  LAW  FOR  BUSINESS  MEN. 

(Here  insert  description  of  work  to  be  done,  under  the 
contract,  whether  woodwork,  plastering,  plumbing,  iron- 
work, etc.) 

and  other  works  shown  and  described  in  and  by,  and  in 
conformity  with,  the  plans,  drawings,  and  specifications 

for  the  same  made  by ,  the 

authorized  Architect  employed  by  the  Owner,  and  which 
are  signed  by  the  parties  hereto. 

SECOND. — Said  Architect  shall  provide  and  furnish 
to  the  Contractor  all  details  and  working  drawings  neces- 
sary to  properly  delineate  said  plans  and  specifications ; 
and  the  work  is  to  be  done  and  the  materials  furnished  in 
accordance  therewith  under  the  direction  and  supervision 
and  subject  to  the  approval  of  said  Architect,  or  a  Super- 
intendent selected  and  agreed  upon  by  the  parties  hereto, 
within  a  fair  and  equitable  construction  of  the  true  intent 
and  meaning  of  said  plans  and  specifications. 

THIRD. — The  time  during  which  the  Contractor  is 
delayed  in  said  work  by  acts  or  neglects  of  the  Owner  or 
his  employees,  or  those  under  him  by  contract  or  other- 
wise, or  by  the  acts  of  God  which  the  Contractor  could 
not  have  reasonably  foreseen  and  provided  for,  or  by 
stormy  and  inclement  weather  which  delays  the  work,  or 
by  any  strikes,  boycotts,  or  like  obstructive  action  by  em- 
ployee or  labor  organizations,  or  by  lock-outs  or  other 
defensive  action  by  employers,  whether  general,  or  in- 
dividual, or  by  organizations  of  employers,  shall  be  added 
to  the  aforesaid  time  for  completion. 

FOURTH.— Said  building  ... 


to  be  erected  upon  a  lot  of  land  situated  in 

,  County  of. 

State  of  California,  and  described  as  follows : 


(Here  insert  description  of  the  lot  of  land.) 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  365 

FIFTH. — The  Owner  agrees,  in  consideration  of  the 
performance  of  this  agreement  by  tfye  Contractor,  to  pay, 
or  cause  to  be  paid  to  the  Contractor,  his  legal  repre- 
sentative or  assigns,  the  sum  of. 

(Here  insert  contract  price.) 

Dollars,  in 

United  States  Gold  Coin,  at  the  times  and  in  the  manner 

following,  to -wit :   Dollars  when  the 

foundation  is  completed  and  the  framing  materials  on  the 

ground  and  the  frame  up ; Dollars 

when  the  roof  and  rustic  are  on ; Dollars 

when  the  plastering  is  completed ;  and 

Dollars  thirty-five  days  after  the  completion  of  the  build- 
ing and  acceptance  by  the  Owner ; 

(Here  insert  any  other  condition  as  to  payment  desired.) 

Provided,  that  when  each  payment  or  installment  shall 
become  due,  and  in  the  final  completion  of  the  work,  cer- 
tificates in  writing  shall  be  obtained  from  the  said  Archi- 
tect, stating  that  the  payment  or  installment  is  due  or 
work  completed,  as  the  case  may  be,  and  the  amount  then 
due;  and  the  said  Architect  shall  at  said  times  deliver 
said  certificates  under  his  hand  to  the  Contractor,  or,  in 
lieu  of  such  certificates  shall  deliver  to  the  contractor  in 
writing  under  his  hand,  a  just  and  true  reason  for  not 
issuing  the  certificates,  including  a  statement  of  the  de- 
fects, if  any,  to  be  remedied,  to  entitle  the  Contractor  to 
the  certificate  or  certificates.  And  in  the  event  of  the 
failure  of  the  Architect  to  furnish  and  deliver  said  cer- 
tificates, or  any  of  them,  or  in  lieu  thereof  the  writing 
aforesaid,  within  three  days  after  the  times  aforesaid, 
and  after  demand  therefor  made  in  writing  by  the  Con- 
tractor, the  amount  which  may  be  claimed  to  be  due  by 
the  Contractor,  and  stated  in  the  said  demand  made  by 
him  for  the  certificate,  shall,  at  the  expiration  of  said 
three  days,  become  due  and  payable,  and  the  Owner  shall 
be  liable  and  bound  to  pay  the  same  on  demand. 

In  case  the  Architect  delivers  the  writing  aforesaid  in 
lieu  of  the  certificate,  then  a  compliance  by  the  Contractor 


366  BUSINESS  LAW  FOE  BUSINESS  ME"N". 

with  the  requirements  of  said  writing  shall  entitle  the 
Contractor  to  the  certificate. 

SIXTH. — For  any  delay  on  the  part  of  the  Owner  in 
making  any  of  the  payments  or  installments  provided  for 
in  this  contract  after  they  shall  become  due  and  payable, 
he  shall  be  liable  to  the  Contractor  for  any  and  all  dam- 
ages which  the  latter  may  suffer;  and  such  delay  shall, 
in  addition,  operate  as  an  additional  extension  of  the  time 
for  completion  aforesaid  for  the  length  of  time  of  such 
delay.  And  such  delay,  if  for  more  than  five  days  after 
the  date  when  said  payments  or  installments  shall  have 
respectively  become  due  and  payable,  as  in  this  agree- 
ment provided,  shall,  at  the  option  of  the  Contractor,  be 
held  to  be  prevention  by  the  Owner  of  performance  of 
this  contract  by  the  Contractor. 

SEVENTH. — The  specifications  and  drawings  are  in- 
tended to  co-operate,  so  that  any  work  exhibited  in  the 
drawings  and  not  mentioned  in  the  specifications,  or  vice 
versa,  are  to  be  executed  the  same  as  if  both  mentioned 
in  the  specifications  and  set  forth  in  the  drawings,  to  the 
true  intent  and  meaning  of  the  said  drawings  and  specifi- 
cations when  taken  together.  But  no  part  of  said  speci- 
fications that  is  in  conflict  with  any  portion  of  this  agree- 
ment, or  that  is  not  actually  descriptive  of  the  work  to  be 
done  thereunder,  or  of  the  manner  in  which  the  said  work 
is  to  be  executed,  shall  be  considered  as  any  part  of  this 
agreement,  but  shall  be  utterly  null  and  void. 

EIGHTH. — Should  the  Owner  or  the  Architect  at  any 
time  during  the  progress  of  the  work,  request  any  altera- 
tions or  deviations  in,  additions  to,  or  omissions  from, 
this  contract,  or  the  plans  or  specifications,  either  of  them 
shall  be  at  liberty  to  do  so,  and  the  same  shall  in  no  way 
affect  or  make  void  this  contract ;  but  the  amount  thereof 
shall  be  added  to,  or  deducted  from,  the  amount  of  the 
contract  price  aforesaid,  as  the  case  may  be,  by  a  fair 
and  reasonable  valuation.  And  this  contract  shall  be 
held  to  be  completed  when  the  work  is  finished  in  accord 
ance  with  the  original  plans,  as  amended  by  such  changes, 
whatever  may  be  the  nature  or  extent  thereof. 

NINTH. — The  rule  of  practice  to  be  observed  in  the 
fulfilment  of  the  last  foregoing  paragraph  (eighth)  shall 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  367 

be  that,  upon  the  demand  of  either  the  Contractor, 
Owner,  or  Architect,  the  character  and  valuation  of  any 
or  all  changes,  omissions,  or  extra  work,  shall  be  agreed 
upon  and  fixed  in  writing,  signed  by  the  Owner,  Archi- 
tect, and  the  Contractor,  prior  to  execution. 

TENTH. — Should  any  dispute  arise  between  the 
Owner  and  Contractor,  or  between  the  Contractor  and 
Architect,  respecting  the  true  construction  of  the  draw- 
ings and  specifications,  the  same  shall,  in  the  first  in- 
stance, be  decided  by  the  Architect;  but  should  either  of 
the  parties  hereto  be  dissatisfied  with  the  justice  of  such 
decision,  or  should  any  dispute  arise  between  the  parties 
hereto  respecting  the  valuation  of  the  extra  work,  work 
done,  or  work  omitted,  the  disputed  matter  shall  be  re- 
ferred to,  and  decided  by,  two  competent  persons  who  are 
experts  in  the  business  of  building — one  to  be  selected  by 
the  Owner  or  Architect,  and  the  other  by  the  Contractor ; 
and,  in  case  they  cannot  agree,  these  two  shall  select  an 
umpire,  and  the  decision  of  any  two  of  them  shall  be  bind- 
ing on  all  parties. 

1  ELEVENTH.— Should  the  Contractor  fail  to  com- 
plete this  contract,  and  the  works  provided  for  therein, 
within  the  time  fixed  for  such  completion,  due  allowance 
being  made  for  the  contingencies  provided  for  herein,  he 
shall  become  liable  to  the  owner  for  all  loss  and  damages 
which  the  latter  may  suffer  on  account  thereof,  but  not  to 

exceed  the  sum  of  $ per  day  for  each  day  said 

work  shall  remain  uncompleted  beyond  such  time  for 
completion. 

TWELFTH. — In  case  said  work  herein  provided  for 
should,  before  completion,  be  wholly  destroyed  by  fire, 
defective  soil,  earthquake,  or  other  act  of  God  which  the 
Contractor  could  not  have  reasonably  foreseen  and  pro- 
vided for,  then  the  loss  occasioned  thereby  shall  be  sus- 
tained by  the  Owner  to  the  extent  that  he  has  paid  install- 
ments thereon,  or  that  may  be  "due  under  the  fifth  clause 
of  this  contract ;  and  the  loss  occasioned  thereby,  and  to 
be  sustained  by  the  Contractor,  shall  be  for  the  uncom- 
pleted portion  of  said  work  upon  which  he  may  be  en- 
gaged at  the  time  of  the  loss,  and  for  which  no  payment 
is  yet  due  under  said  fifth  clause  of  this  contract. 


368  BUSINESS  LAW  FOR  BUSINESS  MEN. 

In  the  event  of  a  partial  destruction  of  said  work  by 
any  of  the  causes  above  named,  then  the  loss  to  be  sus- 
tained by  the  Owner  shall  be  in  the  proportion  that  the 
amounts  of  installments  paid  or  due  bears  to  the  total 
nmount  of  work  done  and  materials  furnished,  estimated 
according  to  said  contract  price,  and  the  balance  of  said 
loss  to  be  sustained  by  the  Contractor. 

THIRTEENTH.— The  payment  of  the  progress  pay- 
ments by  the  Owner  shall  not  be  construed  as  an  absolute 
acceptance  of  the  work  done  up  to  the  time  of  such  pay- 
ments ;  but  the  entire  work  is  to  be  subjected  to  inspection 
and  approval  of  the  Architect  or  Superintendent  at  the 
time  when  it  shall  be  claimed  by  the  Contractor  that  the 
contract  and  works  are  completed;  but  the  Architect  or 
Superintendent  shall  exercise  all  reasonable  diligence  in 
the  discovery,  and  report  to  the  Contractor,  as  the  work 
progresses,  of  materials  and  labor  which  are  not  satis- 
factory to  the  Architect  or  Superintendent,  so  as  to  avoid 
unnecessary  trouble  and  cost  to  the  Contractor  in  making- 
good  defective  parts. 

FOURTEENTH.— Should  the  Contractor,  at  any 
time  during  the  progress  of  the  work,  refuse  or  neglect, 
without  the  fault  of  the  Owner,  Architect,  or  Superin- 
tendent, to  supply  a  sufficiency  of  materials  or  workmen 
to  complete  the  contract  within  the  time  limited  herein,  or 
any  lawful  extension  thereof,  for  a  period  of  more  than 
three  days  after  having  been  notified  by  the  Owner  in 
writing  to  furnish  the  same,  the  Owner  shall  have  power 
to  furnish  and  provide  said  materials  or  workmen  to 
finish  the  said  work;  and  the  reasonable  expenses  thereof 
shall  be  deducted  from  the  amount  of  the  contract  price. 

IN  WITNESS  WHEREOF,  the  said  parties  to  these 
presents  have  hereunto  set  their  hands  and  seals,  the  day 
and  year  first  above  written. 

(Seal.) 

(Seal.) 

Section  420. — REFERENCE  TO  PLANS  AND  SPECIFICATIONS 
IN  CONTRACT. — Where  a  building  contract  provides  that 
the  contractor  shall  do  the  work  according  to  certain 
drawings  and  specifications,  which  are  referred  to  in  the 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  369 

contract  as  "hereto  annexed,"  the  drawings  and  specifi- 
cations are  an  essential  part  of  the  contract,  and  until 
they  are  annexed  the  contract  is  not  complete ;  and  it  is 
essential  that  the  drawings  and  specifications  referred  to 
in  the  contract  should  be  filed  in  the  Recorder's  office, 
together  with  the  contract,  and  a  failure  to  file  them 
may  destroy  the  validity  of  the  contract. 

Section  421. — FAILURE  TO  FILE  CONTRACT. — The  failure 
to  file  the  contract  for  record  will  not  make  the  contract 
void.  The  filing  of  the  contract  for  record  gives  actual 
notice  of  its  terms  to  all,  and  limits  lien  claims  to  the 
labor  or  materials  embraced  within  the  terms  of  the 
original  contract;  but  the  contract  will  be  valid,  though 
not  recorded  at  all. 

Code  of  Civil  Procedure,  Section  1183. 

Section  422. — CONTRACT  OF  MINOR. — A  minor  is  not 
bound  by  his  contract  for  the  erection  or  repair  of  a 
building.  A  minor  is  only  bound  by  his  contracts  in  cer- 
tain cases,  which  form  exceptions  to  the  general  rule  that 
minors  cannot  make  contracts,  in  which  the  erection  of  a 
building  is  not  included. 

Section  423. — PRICE  WHERE  CONTRACTOR  ABANDONS 
THE  WORK. — If  the  contract  for  the  erection  and  comple- 
tion of  a  building  is  entire,  and  the  contractor  abandons 
the  work  before  it  is  completed,  he  loses  the  right  which 
he  would  have  had  to  the  full  compensation  agreed  on. 

Section  424. — OWNER  PREVENTING  WORK. — Where  a 
contractor  has  proceeded  to  construct  a  building  of  the 
material  and  in  the  manner  substantially  as  provided  for 
in  the  contract,  and  the  owner  before  completion  of  the 
contract,  and  without  cause,  and  in  violation  of  the  con- 
tract, refuses  to  allow  the  contractor  to  go  on,  and  takes 
possession  of  the  building,  and  appropriates  to  his  own 
use  the  materials  on  hand  for  the  construction  of  the 


370  BUSINESS  LAW  FOB  BUSINESS  MEN. 

building,  the  contractor  is  entitled  to  treat  the  contract 
as  rescinded.  And  in  other  circumstances,  where  acts  of 
similar  character  by  the  owner  prevent  the  contractor 
from  completing  the  work  as  agreed  upon,  the  contractor 
may  look  upon  the  contract  as  rescinded.  In  all  such 
cases,  the  contractor  may  recover  from  the  owner  the 
reasonable  value  of  the  work  performed  and  material 
furnished  by  him. 

Section  425. — ACCEPTANCE  BY  AGENT. — Where  the  par- 
ties to  a  building  contract  agree  upon  an  agent,  who  is 
authorized  to  accept  or  reject  the  work  when  completed, 
his  acceptance  is  binding  upon  both  parties;  and  where 
the  agent  acts  in  good  faith,  and  without  practicing  any 
fraud  upon  either  party  to  the  contract,  his  acceptance  of 
the  work  is  final  and  conclusive. 

Section  426. — BREACH  OF  CONTRACT  BY  OWNER,— 
Where  a  contractor  agrees  to  perform  certain  work  and 
furnish  certain  materials  for  the  construction  of  a  build- 
ing, and  after  furnishing  a  portion  of  the  materials  the 
owner  of  the  building  stops  the  work,  and  fails  to  receive 
any  further  material  from  the  contractor,  the  owner  is 
liable  to  the  contractor  in  damages.  The  contractor  may 
recover  from  the  owner  as  damages  all  the  profits  he 
would  have  made  if  the  work  had  gone  on  and  the  ma- 
terials had  been  received  from  him. 

Section  427. — AGREEMENT  AS  TO  EXTRA  WORK. — Where 
a  building  contract  provides  that  "no  extra  work  is  to 
be  paid  for  except  by  contract  in  writing,"  the  parties 
may  verbally  rescind  this  provision,  at  any  time,  and 
agree  to  alterations.  Where  alterations  are  made  by 
agreement,  written  or  verbal,  the  original  contract  is  not 
set  aside,  but  is  only  modified  to  the  extent  of  the  change 
in  the  plans. 

Section  428. — Loss  BY  FIRE  BEFORE  COMPLETION. — 
Where,  by  the  terms  of  a  building  contract,  the  third  and 
last  installments  of  payment  for  the  work  are  conditioned 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  371 

upon  its  completion  according  to  agreement  and  specifi- 
cations, such  installments  cannot  be  recovered  where  the 
whole  work  is  consumed  by  fire,  without  apparent  fault 
of  either  party,  before  its  completion.  A  question  will 
arise  under  such  circumstances  as  to  whether  the  build- 
ing was  substantially  completed  at  the  time  of  the  fire. 
In  a  suit  between  a  contractor  and  owner,  at  San  Fran- 
cisco, the  Supreme  Court  of  California  decided  that  where 
it  was  proved  that  no  part  of  the  second  coat  of  paint 
required  by  the  contract  had  been  put  on ;  that  the  work 
bench  of  the  carpenters  and  the  paint  for  the  second  coat 
were  in  the  building  at  the  time  of  the  fire ;  that  two  of 
the  doors  were  unhung,  and  no  fastenings  put  on  the  front 
door  or  windows ;  and  that  the  house  had  not  been  deliv- 
ered or  accepted ;  the  building  was  not  substantially  com- 
pleted before  the  fire.  (Decided  by  the  Supreme  Court  of 
California  in  the  case  of  Clark  vs.  Collier,  which  decision 
is  printed  in  Volume  100  of  the  California  Reports, 
page  256.)  So  many  things  were  lacking  in  the  case 
quoted,  that  it  would  have  been  surprising  indeed  if  the 
Supreme  Court  had  decided  that  the  work  was  substan- 
tially performed;  and  in  all  cases  the  question,  whether 
a  contract  has  been  substantially  performed  before  a  fire, 
will  depend  upon  the  terms  of  the  contract  and  a  reason- 
able consideration  of  the  work  done  and  remaining  to 
be  done. 

Section  429. — CONTRACT  PROVIDING  FOR  ARBITRATION.— 
Where  a  building  contract  provides  for  the  arbitration  of 
any  matter,  the  contractor  must  first  demand  an  arbitra- 
tion before  he  can  sue  for  his  pay  for  the  work  included 
in  the  provision  for  arbitration.  For  instance,  the  con- 
tractor is  not  entitled  to  recover  for  extra  work,  or  for 
materials  furnished,  when  the  contract  provides  that 
c-laims  for  such  extras  must  be  submitted  to  arbitration, 
and  the  contractor  has  made  no  offer  or  request  to 
arbitrate.  The  contractor  must  offer  in  good  faith  to 
arbitrate,  and  if  the  owner  refuses,  he  may  then  sue  for 


372  BUSINESS  LAW  FOE  BUSINESS  MEN. 

and  recover  the  value  of  the  extra  work,  regardless  of 
the  arbitration  clause. 

Section  430. — SUBSTANTIAL  PERFORMANCE. — In  certain 
cases,  the  contractor,  although  he  has  not  completed  the 
work  literally  as  called  for  by  the  contract,  yet  may  re- 
cover from  the  owner  the  contract  price,  less  damages 
suffered  by  the  owner  from  the  contractor 's  failure  to  do 
the  work  as  contracted  for.  But  the  contractor  must 
show  in  such  cases  that  the  failure  was  not  by  his  own 
fault;  that  he  endeavored  and  intended  in  good  faith  to 
do  the  work  exactly  as  contracted  for;  and  he  must  also 
be  able  to  show  that  the  work  has  been  in  every  material 
particular  performed  substantially  in  the  manner  called 
for  by  the  contract.  The  contractor  must  have  intended 
in  good  faith  to  comply  with  the  terms  of  the  contract. 
The  spirit  of  the  contract  must  be  faithfully  observed, 
though  the  very  letter  of  it  fail.  Good  faith  alone,  how- 
ever, is  not  enough.  The  owner  has  a  right  to  a  structure 
in  all  essential  particulars  such  as  he  has  contracted  for, 
and  to  authorize  a  court  or  jury  to  find  that  there  has  been 
a  substantial  performance,  it  must  be  found  that  he  has 
such  a  structure.  The  court  cannot  say  that  anything  is 
immaterial,  which  the  parties  have  made  material  by 
their  own  agreement.  The  owner  has  a  right  to  have  the 
structure  he  contracted  for,  and  not  another;  and  even 
his  caprices,  if  expressed  in  the  contract,  must  be  com- 
plied with,  even  though  they  do  not  add  to  the  value  of 
the  building,  or  may  have  lessened  its  value.  It  is  only 
where  the  plan  has  been  substantially  embodied  in  the 
work  that  the  contractor  will  have  a  remedy  for  substan- 
tial performance.  The  omissions  or  deviations  from  the 
plans  must  be  the  result  of  a  mistake  or  inadvertence,  and 
not  intentional,  much  less  fraudulent;  and  they  must  be 
slight  or  susceptible  of  remedy,  so  that  an  allowance  out 
of  the  contract  price  will  give  the  owner  substantially 
what  he  contracted  for.  Some  of  the  things  which  will 
not  be  considered  as  substantial  performance  of  a  build- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  373 

ing  contract  are  mentioned  in  the  suit  brought  at  San 
Francisco  by  Edward  H.  Perry  against  Thomas  M.  Quack- 
enbush,  and  decided  by  the  Supreme  Court  of  California. 
The  contractor  agreed  in  the  construction  of  the  founda- 
tion to  use  good,  hard  brick  and  lay  seven  courses,  and 
to  construct  twelve  piers  of  brick  laid  in  six  courses.  In 
violation  of  the  agreement,  he  used  old,  second-hand  brick 
of  poor  quality,  that  had  been  used  in  other  buildings,  and 
laid  the  same  in  courses  of  five  and  six  instead  of  seven, 
and  constructed  only  six  piers  of  brick  of  the  same  kind 
laid  in  three  courses.  He  agreed  to  use  in  the  construc- 
tion of  the  frame  of  said  building  the  best  kind  of  lum- 
ber ;  contrary  to  his  agreement,  he  used  only  second-class 
lumber  and  second-hand  and  refuse  lumber  that  had  been 
used  in  other  buildings.  He  agreed  to  use  in  the  con- 
struction of  the  roof  the  best  quality  of  shingles ;  contrary 
to  his  agreement,  he  used  second-hand  lumber  and  second- 
class  shingles.  He  agreed  to  paint  the  building  with  two 
coats  of  metallic  paint,  but  used  no  metallic  paint  at  all, 
but  cheap  and  inferior  paint.  The  Supreme  Court  held 
that  these  facts  showed  that  the  contractor  had  in  no 
sense  substantially  performed  his  agreement,  but  that  he 
had  intentionally  and  wilfully  departed  from  it.  (Decided 
by  the  Supreme  Court  of  California  in  the  case  of  Edward 
H.  Perry  vs.  Thomas  M.  Quackenbush,  which  decision  is 
printed  in  Volume  105  of  the  California  Reports,  page 
299.) 

Section  431. — BIGHT  OF  CONTRACTOR  TO  ABANDON 
WORK. — If  the  owner  prevents  the  progress  of  the  work, 
or  fails  to  furnish  materials  with  which  the  work  can  be 
done,  where  the  owner  is  to  furnish  the  material,  or  fails 
to  pay  an  installment  of  the  price  when  it  becomes  due, 
the  contractor  has  the  right  to  abandon  the  work  and  sue 
the  owner  for  the  reasonable  value  of  his  work  and  ma- 
terials. The  contractor  has  no  right  to  leave  the  work 
without  cause;  and  if,  when  he  makes  a  demand  for  an 
installment  of  the  price,  he  has  not  performed  the  con- 


374  BUSINESS  LAW  FOR  BUSINESS  MEN. 

tract  according  to  its  terms,  the  installment  is  not  legally 
due,  and  he  will  not  be  justified  in  leaving  the  work  on 
the  ground  of  non-payment. 

Section  432. — MATERIAL  DEPARTURE  FROM  SPECIFICA- 
TIONS.— A  building  contractor  must  stick  close  to  the 
plans  and  specifications,  and  must  make  no  changes  or 
deviations  without  the  consent  of  the  owner.  Any  mate- 
rial departure  from  the  plans  and  specifications  by  the 
contractor  will  render  him  liable  to  the  owner  in  damages, 
and  may  give  the  owner  the  right  to  rescind  the  contract 
altogether.  Where  a  building  contract  called  for  laths 
one  and  one-quarter  inches  wide,  and  laths  one  and  one- 
half  inches  wide  were  used,  and  the  contract  called  for 
No.  1  rustic  and  the  best  quality  of  joists  and  studding, 
and  the  contractor  used  second  quality  of  joists  and  stud- 
ding and  No.  2  rustic,  it  has  been  decided  by  our  Supreme 
Court  that  there  was  a  substantial  and  material  departure 
from  the  specifications  of  the  contract. 

Section  433. — EXCAVATIONS. — The  question  whether 
the  owner  of  land  will  be  liable  in  damages,  for  injury  to 
adjoining  property,  caused  by  excavating,  will  depend  in 
every  case  upon  the  manner  of  making  the  excavation. 
The  owner  of  a  lot  in  making  excavations  must  use  due 
care.  If  one  by  carelessness  in  making  excavations  on 
his  own  land  causes  injury  to  an  adjoining  building,  even 
where  the  owner  of  the  house  has  no  easement  of  support, 
he  will  be  liable  for  damages.  The  law  exacts  from  a 
person  who  undertakes  even  a  lawful  act  on  his  own 
premises  from  which  injury  might  be  apprehended  to  the 
property  of  his  neighbor,  the  exercise  of  a  degree  of  care 
measured  by  the  danger,  to  prevent  or  lessen  the  injury. 
The  general  rule  is,  that  no  one  has  absolute  freedom  in 
the  use  of  his  property,  but  is  restrained  by  the  co-exist- 
ence of  equal  rights  of  his  neighbor  to  the  use  of  his  prop- 
erty, so  that  each  in  exercising  his  right  must  do  no  act 
which  causes  injury  to  his  neighbor.  But  if  the  owner  of 


Section  434,  page  375,  add  the  following:  All  scaffolding  or  staging 
swung  or  suspended  from  an  overhead  support  which  is  more  than  ten 
feet  from  the  ground  or  floor,  shall  have  a  safety  rail  of  wood,  or  other 
equally  rigid  material  of  sufficient  strength.  Such  rail  shall  be  properly 
secured  and  braced;  such  rail  to  rise  at  least  forty-two  inches  above  the 
floor  or  floors  or  main  portions  of  such  scaffolding  or  staging,  and  to  ex- 
tend along  the  entire  length  of  the  outside  and  ends  thereof,  and  properly 
attached  thereto;  and  such  a  scaffolding  or  staging  shall  be  fastened  so  as 
to  prevent  the  same  from  swaying  from  the  building  or  structure,  or  place 
of  work,  where  such  scaffolding  or  staging  is  being  used. — Act  of  the  Legis- 
lature of  California,  approved  May  18,  1921;  in  effect  July  18,  1921. 

Section  439,  page  444,  "Embezzlement  by  Contractor" — LAW  UNCON- 
STITUTIONAL—The  District  Court  of  Appeal  of  California  has  declared 
this  law  to  be  unconstitutional  and  void,  the  reason  being  that  its  effect  is  to 
put  a  man  in  jail  for  debt.  The  court  says  that  a  statute  that,  in  its  practical 
operation,  in  effect  declares  that  under  any  contract  between  the  owner  oi 
property  and  a  building  contractor  the  payments  that  may  be  made  to  the  lat- 
ter shall  not  be  absolutely  his  own  to  do  with  as  he  pleases,  but  shall  be  held 
by  him  in  trust  to  pay  debts  due  by  him  to  certain  preferred  creditors,  is  un- 
constitutional in  that  it  is  an  infringement  upon  the  inalienable  right  of  con- 
tract. 

Any  legislation  that  makes  it  a  crime  for  one  to  use  his  own  money  for 
any  purpose  other  than  the  payment  of  his  debts  is  violative  of  section  15 
of  Article  I  of  the  constitution  of  this  state,  which  expressly  inhibits  impris- 
onment for  debt  except  in  cases  of  fraud. 

Decided  by  the  California  Court  of  Appeal  in  the  case  of  People  vs.  Hol- 
der, which  decision  is  printed  in  Vol.  35,  page  326,  California  Appellate  De- 
cisions. 


BUSINESS  CONTKACTS  AND  LEGAL  OBLIGATIONS.  375 

the  land,  in  making  excavations,  performs  the  work  in  a 
proper  and  careful  manner,  he  will  not  be  liable  for  in- 
jury to  the  premises  of  an  adjoining  owner.  He  is  re- 
quired only  to  take  reasonable  precaution  to  sustain  the 
land  of  the  adjoining  owner.  The  adjoining  owner  must 
also  take  precaution  to  sustain  his  own  walls,  after  notice 
of  the  intended  excavations.  The  party  intending  to  make 
excavations  must  give  notice  to  the  adjoining  owner.  This 
notice  may  be  verbal  or  written.  The  notice  is  not  re- 
quired to  be  in  any  particular  form.  In  one  case  decided 
by  the  Supreme  Court  of  California,  it  was  held  that  the 
following  notice  was  entirely  sufficient:  "Dear  Madam: 
As  we  are  about  to  excavate  the  premises  on  the  south- 
east corner  of  Haight  and  Devisadero  Streets,  directly 
adjoining  your  lot,  to  a  depth  somewhat  below  your 
foundation,  you  are  hereby  notified  to  take  the  necessary 
measures  to  protect  your  property.  Very  respectfully, 
Cunningham  Bros.,  Architects.  For  Christian  Warneke. ' ' 
(Decided  by  the  Supreme  Court  of  California,  in  the  case 
of  Nippert  vs.  Warneke,  which  decision  is  reported  in 
Volume  128  of  the  California  Eeports,  page  501.) 
Civil  Code,  Section  832. 

Section  434. — UNSAFE  SCAFFOLDING,  LADDERS,  ETC. — 
Any  person  or  corporation  employing  or  directing  an- 
other to  do  or  perform  any  labor  in  the  construction,  alter- 
ation, repairing,  painting  or  cleaning  of  any  house,  build- 
ing or  structure  within  this  state,  who  knowingly  or  negli- 
gently furnishes  or  erects  or  causes  to  be  furnished  or 
erected  for  performance  of  labor,  unsafe  or  improper 
scaffolding,  slings,  hangers,  blocks,  pulleys,  stays,  braces, 
ladders,  irons,  ropes  or  other  mechanical  contrivances; 
or  who  hinders  or  obstructs  any  officer  attempting  to  in- 
spect the  same ;  or  who  destroys,  defaces,  or  removes  any 
notice  posted  thereon  by  such  officer ;  or  who  permits  the 
use  thereof,  after  the  same  has  been  declared  unsafe  by 
such  officer,  is  guilty  of  a  misdemeanor. 

Act  of  the  Legislature,  approved  March  13, 1909. 


376  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Section  435. — TEMPORARY  FLOORING  FOR  PROTECTION 
OF  WORKMEN. — Any  building  more  than  two  stories  high 
in  the  course  of  construction  shall  have  the  joists,  beams 
or  girders  of  each  and  every  floor  below  the  floor  or  level 
where  any  work  is  being  done,  or  about  to  be  done,  cov- 
ered with  flooring  laid  close  together,  or  with  such  other 
suitable  material  to  protect  workmen  engaged  in  such 
building  from  falling  through  joists  or  girders,  and  from 
falling  planks,  bricks,  rivets,  tools,  or  any  other  substance 
whereby  life  and  limb  are  endangered. 

Such  flooring  shall  not  be  removed  until  the  same  is 
replaced  by  the  permanent  flooring  in  such  building. 

It  shall  be  the  duty  of  the  general  contractor  having 
charge  of  the  erection  of  such  building  to  provide  for  the 
flooring  as  herein  required,  or  to  make  such  arrangements 
as  may  be  necessary  with  sub-contractors  in  order  that 
the  provisions  of  this  act  may  be  carried  out. 

It  shall  be  the  duty  of  the  owner  or  the  agent  of  the 
owner  of  such  building  to  see  that  the  general  contractor 
or  sub-contractors  carry  out  the  provisions  of  this  act. 

Should  the  general  contractor  or  sub-contractors  of 
such  building  fail  to  provide  for  the  flooring  of  such  build- 
ing, as  herein  provided,  then  it  shall  be  the  duty  of  the 
owner  or  the  agent  of  the  owner  of  such  building  to  see 
that  the  provisions  of  this  act  are  carried  out. 

Failure  upon  the  part  of  the  owner,  agent  of  the 
owner,  general  contractor,  or  sub-contractors  to  comply 
with  the  provisions  of  this  act  shall  be  deemed  a  misde- 
meanor and  shall  be  punishable  as  such. 

Act  of  the  Legislature,  approved  April  26',  1911. 

Section  436. — TENEMENT  HOUSE  ACT. — The  Legisla- 
ture in  1917  passed  a  law  known  as  the  State  Tenement 
House  Act,  providing  as  follows : 

SEC.  1. — This  act  shall  be  known  as  the  "state  tene- 
ment house  act"  and  its  provisions  shall  apply  to  all  parts 
of  the  State  of  California,  including  incorporated  towns, 
incorporated  cities,  and  incorporated  cities  and  counties. 


Section  435,  page  376,  "Business  Law  for  Business  Men" — PROTEC- 
TION OF  WORKMEN — Concrete  buildings  must  have  the  floors  filled  in 
either  with  forms  or  concrete  on  each  floor  before  the  commencement  of  work 
upon  the  walls  of  the  second  floor  above,  or  the  commencement  of  work  upon 
the  floor  of  the  next  floor  above. 

If  such  building  has  a  structural  frame  of  iron  or  steel,  the  entire  floor 
of  every  second  story,  except  such  space  as  may  reasonably  be  required  for 
the  proper  construction  of  such  building,  shall  be  thoroughly  covered  with 
planks  tightly  laid  together,  so  that  workmen  shall  have  at  all  times  planked 
floors  within  two  stories  below  them. 

If  a  span  of  a  floor  exceeds  thirteen  (13)  feet,  an  intermediate  beam  shall 
be  used  to  support  the  temporary  flooring;  provided,  however,  that  spans  not  to 
exceed  sixteen  (16)  feet  may  be  covered  by  three  (3)  inch  planks  without  such 
beam.  Such  intermediate  beam  shall  be  of  a  sufficient  strength  to  sustain  a 
live  load  of  fifty  (50)  pounds  per  square  foot  of  the  area  supported. 

If  the  distance  between  planked  floors  in  any  building  or  structure  ex- 
ceeds twenty-five  (25)  feet,  intermediate  flooring  or  safety  nets  shall  be  pro- 
vided which  shall  be  fixed  not  to  exceed  twenty-five  (25)  feet  below  a  floor 
upon  which  work  is  being  performed  and  as  close  to  such  floor  as  practicable. 
The  erection  gang  shall  at  all  times  have  a  planked  floor  below  them  not 
more  than  two  stories  distant. 

The  riveting  gang  and  steel  painters  shall  at  all  times  have  a  planked 
floor  below  them  not  more  than  two  stories  distant.  Men  working  below  riv- 
eting gangs  shall  at  all  times  be  protected  from  falling  objects  by  having  a 
planked  floor  between  them  and  the  riveting  gangs. 

If  building  operations  are  suspended  and  the  temporary  flooring,  herein- 
before required,  is  removed,  upon  the  resumption  of  work,  in  case  of  such  sus- 
pension, the  building  must  be  replanked  so.  that  every  man  at  work  shall  have 
a  covered  floor  not  more  than  two  floors  below. 

Where  a  building  is  being  constructed  in  sections  each  section  shall  con- 
stitute a  building  for  the  purpose  of  this  act. 

Where  such  building  has  a  structural  frame  of  iron  or  steel,  and  the  iron 
or  steel  columns  are  spliced  at  every  story,  the  erection  gang  shall  in  no  case 
be  more  than  two  stories  distant  from  the  riveting  gang.  If  the  columns  are 
spliced  every  second  or  third  story,  the  erection  gang  shall  in  no  case  be  more 
than  four  stories  distant  from  the  riveting  gang. 

Planked  floors  shall  consist  of  planks  tightly  laid  together  of  number  one 
common  lumber,  not  less  than  two  inches  thick  and  eight  inches  wide,  free 
from  protruding  nails  or  other  objects.  Nets  shall  consist  of  at  least  one  and 
one-half  inch  manila  rope  with  three-quarter  inch  borders,  and  four  by  four 
inch  mesh.  The  borders  of  the  nets  shall  be  provided  with  loops  so  that  they 
can  be  readily  combined  or  attached  to  convenient  points  on  the  structural 
frame. 

No  owner,  agent  of  the  owner,  general  contractor,  contractor,  sub-con- 
tractor, or  other  person,  shall  proceed  with  any  work  assigned  to  or  under- 
taken by  him,  or  require  or  permit  any  other  person  to  proceed  with  work 
assigned  to  or  undertaken  by  either,  unless  the  planking  or  nets  required  by 
this  act  are  in  place.  Violation  of  this  section  shall  constitute  a  misdemeanor. 
Act  of  the  Legislature  of  California,  approved  May  18,  1921;  in  effect 
July  18,  1921. 


BUSINESS  CONTKACTS  AND  LEGAL  OBLIGATIONS.  377 

(a)  Duty  of  Building  Departments. — Sec.  2.  It  shall 
be  the  duty  of  the  "building  department"  of  every  incor- 
porated town,  incorporated  city,  and  incorporated  city 
and  county,  to  enforce  all  the  provisions  of  this  act  per- 
taining to  the  erection,  construction,  reconstruction,  mov- 
ing, conversion,  alteration  and  arrangement  of  tenement 
houses  and  to  issue  the  certificate  of  "final  completion" 
hereinafter  provided. 

It  shall  be  the  duty  of  the  "housing  department"  or 
if  there  is  no  housing  department  the  health  department 
of  every  incorporated  town,  incorporated  city,  and  incor- 
porated city  and  county  to  enforce  all  of  the  provisions  of 
this  act  pertaining  to  the  maintenance,  sanitation,  ven+ila- 
tion,  use  and  occupancy  of  tenement  houses  after  said 
tenement  houses  have  been  erected,  constructed,  or  al- 
tered, as  the  case  may  be,  and  the  certificate  of  "final 
completion"  has  been  issued  by  the  building  department, 
and  to  issue  the  "permit  of  occupancy"  as  hereinafter 
provided. 

In  the  event  that  there  is  no  building  department  or 
no  housing  department  or  health  department  in  an  incor- 
corporated  town,  incorporated  city  or  incorporated  city 
and  county,  it  shall  be  the  duty  of  the  officer  or  officers 
who  are  charged  with  the  enforcement  of  ordinances  and 
laws  regulating  the  erection,  construction  or  alteration 
of  buildings,  or  the  maintenance,  sanitation,  ventilation 
or  occupancy  of  buildings,  or  of  the  police,  fire  or  health 
regulations  in  said  incorporated  town,  incorporated  city 
or  incorporated  city  and  county  to  enforce  all  of  the  pro- 
visions of  this  act. 

In  every  county  it  shall  be  the  duty  of  the  officer  or 
officers  who  ,are  charged  with  the  enforcement  of  ordi- 
nances or  laws  regulating  the  erection,  construction  or 
alteration  of  buildings,  or  of  the  maintenance,  sanitation, 
occupancy  and  ventilation  of  buildings,  or  of  the  police, 
fire  or  health  regulations  in  said  county,  to  enforce  all  of 
the  provisions  of  this  act  outside  of  the  limits  of  any  in- 
corporated town  or  incorporated  city. 


378  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Every  incorporated  town,  incorporated  city,  or  incor- 
porated city  and  county  in  the  State  of  California  shall 
have,  and  it  is  hereby  empowered  and  given  authority  to 
designate  and  charge  by  ordinance  any  other  department 
or  officer  than  the  department  or  officers  mentioned  herein, 
with  the  enforcement  of  this  act,  or  any  portion  thereof. 

(b)  Unlawful   to   Construct   Tenement   House   Con- 
trary to  Act. — Sec.   3.     It  shall  be  unlawful  for  any 
person,  firm  or  corporation,  whether  as  owner,  agent,  con- 
tractor, builder,  architect,  engineer,  superintendent,  fore- 
man, plumber,  tenant,  lessee,  lessor,  occupant,  or  in  any 
other  capacity  whatsoever,  to  erect,  construct,  reconstruct, 
alter,  build  upon,  move,  convert,  use,  occupy  or  maintain, 
or  to  cause,  permit  or  suffer  to  be  erected,  constructed, 
reconstructed,  altered,  built  upon,  moved,  converted,  used, 
occupied  or  maintained  any  tenement  house  or  any  por- 
tion thereof  contrary  to  the  provisions  of  this  act,  or  to 
commit  or  maintain  or  cause  or  permit  to  be  committed 
or  maintained  any  nuisance  in  or  upon  any  tenement 
house  or  any  portion  thereof,  or  any  of  the  premises, 
yards  or  courts  which  are  a  part  thereof,  or  which  are 
required  by  the  provisions  of  this  act ;  or  to  do  or  cause 
to  be  done,  or  to  use  or  cause  to  be  used,  any  privy,  sewer, 
cesspool,  plumbing  or  house  drainage  affecting  the  sani- 
tary condition  of  any  tenement  house    or   any   portion 
thereof,  or  of  the  premises  thereof,  contrary  to  any  of 
the  provisions  of  this  act. 

(c)  Alterations. — Sec.  4.    It  shall  be  unlawfni  for  any 
person  to  make  any  alterations  or  changes,  or  reconstruc- 
tion work  of  any  kind  whatsoever,  to  any  tenement  house 
erected  prior  to  the  passage  of  this  act,  or  to  any  tene- 
ment house  hereafter  erected,  or  to  increase  the  height 
or  the  percentage  of  the  lot  occupied,  in  any  manner 
which  would  be  inconsistent  with  any  of  the  provisions 
of  this  act,  or  in  violation  of  the  said  provisions  of  this 
act,  or  in  any  manner  to  diminish  the  size  of  the  yards, 
courts,  or  shafts  or  the  size  of  windows  or  skylights,  or 
to  remove  any  stairway  or  fire  escape,  or  to  obstruct  the 


TENEMENT  HOUSES 

Section  436,  page  379,  "Business  Law  for  Business  Men" — STATE 
HOUSING  ACT — The  law  relating  to  the  construction  of  tenement  houses 
and  dwellings  will  hereafter  be  known  as  the  State  Housing  Act,  and  its  pro- 
visions will  hereafter  be  enforced  by  the  Commission  of  Immigration  and 
Housing  of  California. 

(a)  On  page  394,  sub-division  (u),  make  the  table  for  courts  of  tenement 
houses  for  five  stories  read:  "5  stories,  6  ft.,  6  in.,  35  ft.  0  in."     And  strike  out 
the  lines  for  9  stories  and  10  stories. 

(b)  On  page  395,  sub-division  (v),  make  the  second  table  read:  "2  stories, 
5  ft.  60  square  feet;  3  stories,  6  ft.  120  square  feet;  4  stories,  7  ft.  175  square 
feet;  5  stories,  9  ft.  225  square  feet;  6  stories,  12  ft.  360  square  feet;  7  stories, 
15  ft.  525  square  feet;  8  stories  or  more,  18  ft.  630  square  feet. 

(c)  On  page  397,  sub-division  (a-a),  in  line  3  of  said  sub-division,  change 
the  words  "eighteen  inches"  to  "twelve  inches." 

On  page  399,  sub-division  (b-b),  in  the  second  line  of  the  last  paragraph, 
make  the  words  "thirty-six  inches"  read  "thirty  inches." 

(d)  On  page  431,  sub-division  (kkk),  add  the  following:     In  every  tene- 
ment house  or  hotel  hereafter  erected,  the  studs  in  every  bearing  wall  and  par- 
tition shall  be  not  less  than  two  inches  by  four  inches   (2"x4")   and  in  every 
such  building  that  exceeds  two  (2)  stories  in  height  the  studs  in  every  bearing 
wall  and  partition  below  the  second  floor  thereof  shall  be  not  less  than  two 
inches  by  six  inches  (2"x6")  or  the  equivalent  thereof.     Every  stud  wall  and 
partition  shall  have  fire  stops  at  each  floor  and  ceiling  and  at  approximately 
halfway  between  the  floor  and  the  ceiling,  except  that  where  two    (2)   inch 
plates  are  used  the  full  width  of  the  studs  at  the  floor  and  ceiling  of  a  wall 
or  partition  then  the  fire  stops  at  the  floor  and  ceiling  may  be  omitted.     Each 
stud  wall  and  partition  shall  be  diagonally  braced  at  each  corner  and  at  least 
once  in  each  twenty-five  (25)  foot  length  thereof,  except  where  such  exterior 
walls  and  partitions  are  plastered  and  back-plastered  with   Portland  cement 
plaster  on  expanded  metal  lath  reinforcement  that  weighs  not  less  than  three 
and  four-tenths  (3.4)  pounds  to  the  square  yard.     Every  such  partition  or  wall 
that  is  plastered  and  back-plastered  shall   be  plastered  not  less   than   three- 
quarters  (%)  of  an  inch  thick  and  back-plastered  between  the  studs  not  less 
than  one-half  (Yz)   of  an  inch  thick  in  an  approved  manner  so  that  the  ex- 
panded  metal   lath  will  be   thoroughly   imbedded   in   the   plaster.      Over   each 
bearing  partition  or  wall  and  at  the  exterior  walls,  the  space  between  the  floor 
joists  shall  be  blocked  solid  with  blocks  not  less  than  two   (2)   inches  thick 
and  the  full  depth  of  the  joists.     No  wooden  floor  joists  less  than  two  inches 
by  eight  inches    (2"x8")    shall   be   used   to   support  any  floor   above   the   first 
floor  of  any  such  building  and  such  floor  joists  shall  not  be  spaced  more  than 
sixteen   (16)   inches  apart.     No  span  of  such  two  inch  by  eight  inch   (2"x8") 
floor  joist   shall  exceed   fourteen    (14)    feet.     All   joists   that   span   more   than 
fourteen   (14)   feet  or  that  otherwise  vary  from  the  foregoing  dimensions  or 
that  support  loads  other  than  the  live  floor  loads,  shall  be  of  such  sizes  as  to 
safely  sustain  the  loads  transmitted  thereto.     No  floor  joist  or  other  bearing 
support  shall  be  cut  or  notched  for  any  purpose  unless  reinforced  to  take  up 
the   weakness  caused   thereby.      Every   span   of   wooden   floor   joists   shall   be 
cross-bridged   with   two    (2)    inch   cross-bridging  at   intervals   not   more   than 
seven    (7)   feet  apart,   and  a  bearing  partition,   wall,   girder  or  other  support 
under  such  joists  that  is  blocked  solid  over  the  top  thereof  between  the  joists 
as  hereinbefore  provided  shall  take  the  place  of  a  cross-bridging. 

Act  of  the  Legislature  of  California,  approved  May  19,  1921;  in  effect 
July  19,  1921. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  379 

egress  from  such  building  or  from  the  hallways  or  stair- 
ways, or  to  do  anything  that  would  affect  the  ventilation 

nd  sanitation  of  the  building,  contrary  to  any  of  the  pro- 

isions  of  this  act. 

(d)  Building  Converted  to  Use  as  Tenement  House.— 
oec.  5.    A  building  not  erected  for,  or  which  is  not  used 
MS  a  tenement  house  at  the  time  of  the  passage  of  this  act, 

f  hereafter  converted  to  or  altered  for  such  use,  shall 
'hereupon  become  subject  to  all  of  the  provisions  of  this 
ict  affecting  tenement  houses  hereafter  erected. 

A  building  used  as  a  tenement  house  at  the  time  of  the 
passage  of  this  act,  if  moved,  shall  be  made  to  conform  to 
vill  of  the  provisions  of  this  act  affecting  tenement  houses 
hereafter  erected,  in  so  far  as  they  pertain  to  the  per- 
centage of  lot  occupied  and  the  size  of  outer  courts,  inner 
courts  bounded  by  a  lot  line,  and  yards. 

It  shall  be  unlawful  to  reconstruct  any  tenement  house 
which  is  hereafter  damaged  by  fire  or  the  elements  to  an 
extent  in  excess  of  fifty-one  (51)  per  cent  of  its  physical 
proportions,  unless  the  said  building  is  made  to  conform 
to  all  of  the  provisions  of  this  act  affecting  tenement 
houses  hereafter  erected. 

(e)  Penalty   for    Violation. — Sec.    6.      Any    person, 
firm  or  corporation  violating  any  of  the  provisions  of  this 
act  shall  be  deemed  guilty  of  a  misdemeanor,  and  upon 
conviction  thereof  shall  be  punishable  by  a  fine  not  ex- 
ceeding five  hundred  dollars,  or  by  imprisonment  in  a 
county  jail  not  exceeding  six  months,  or  by  both  such  fine 
and  imprisonment,  and  in  addition  to  the  penalty  there- 
for, shall  be  liable  for  all  costs,  expense  and  disburse- 
ments paid  or  incurred  by  the  department,  by  any  of  the 
officers  thereof,  or  by  any  agent,  employee  or  contractor 
of  same,  in  the  prosecution  of  such  violation.    The  costs, 
expense  and  disbursements  by  this  section  provided  shall 
be  fixed  by  the  court  having  jurisdiction  of  the  matter. 

(f)  Permit  to  Erect  Tenement  House. — Sec.  7.     In 
every  incorporated  town,  incorporated  city,  and  incor- 
porated city  and  county,  it  shall  be  unlawful  to  commence 


380  BUSINESS  LAW  FOR  BUSINESS  MEN. 

or  to  proceed  with  the  erection,  construction,  reconstruc- 
tion, conversion,  or  alteration  of  a  tenement  house,  or  to 
move  or  to  build  upon  a  tenement  house,  or  to  convert  a 
building  or  any  portion  thereof  into  use  as  a  tenement 
house,  without  first  obtaining  a  permit  in  writing  so  to  do 
from  the  department  charged  with  the  enforcement  of 
this  act.  Any  person,  firm  or  corporation  desiring  such 
a  permit  shall  file  an  application  therefor  with  the  depart- 
ment charged  with  the  enforcement  of  this  act.  Said  ap- 
plication shall  give  a  detailed  statement  in  writing,  veri- 
fied under  oath  by  the  person  making  the  same,  of  the 
erection,  construction,  reconstruction,  moving,  conver- 
sion or  alteration,  as  the  case  may  be,  upon  blanks  or 
forms  to  be  furnished  by  the  said  department.  The  said 
application  must  be  accompanied  with  a  full,  true  and 
complete  set  of  the  plans  of  the  tenement  house  or  altera- 
tion, or  work  proposed,  as  the  case  may  be,  together  with 
a  set  of  specifications  describing  the  materials  proposed 
to  enter  into  the  construction  of  the  proposed  work,  also 
a  plan  of  the  lot  on  which  such  building  is  proposed  to  be 
erected,  constructed,  reconstructed,  converted,  altered,  or 
moved,  as  the  case  may  be.  Such  statement  shall  give  in 
full  the  name  and  address  by  street  and  number  of  the 
owner  or  owners,  also  the  name  and  address  of  the  archi- 
tect and  of  the  contractor,  if  there  be  such  an  architect  or 
contractor;  also  shall  give  such  other  data  and  informa- 
tion as  in  the  judgment  of  the  department  charged  with 
the  enforcement  of  this  act  is  deemed  necessary. 

The  affidavit  to  said  application  shall  allege  that  the 
plans  and  specifications  are  true  and  contain  a  correct  de- 
scription of  the  proposed  tenement  house,  lot  and  pro- 
posed work.  If  any  person  other  than  the  owner  makes 
such  affidavit,  such  person  shall  not  be  recognized  except 
that  he  allege  in  his  affidavit  that  he  is  authorized  and  em- 
powered by  the  said  owner  to  act  for  him  and  to  sign  the 
required  affidavit.  Said  department  charged  with  the  en- 
forcement of  this  act  shall  cause  all  such  plans,  specifica- 
tions and  statements  to  be  examined,  and  if  it  appears 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  381 

that  they  conform  to  the  provisions  of  this  act,  shall  then 
issue  a  permit  to  the  person  submitting  the  same.  Said 
departments  may,  from  time  to  time,  approve  changes 
in  any  plans,  specifications  or  statements  previously  ap- 
proved by  it;  provided,  that  all  changes  when  so  made 
shall  be  in  conformity  with  the  provisions  of  this  act. 
Said  department  shall  have  the  power  to  revoke  or  cancel 
any  permit  or  approval  that  it  has  previously  issued  in 
case  of  any  refusal,  failure  or  neglect  of  the  person  to 
whom  such  permit  or  approval  has  been  issued  to  comply 
with  any  of  the  provisions  of  this  act,  or  in  case  any  false 
statement  or  misrepresentation  is  made  in  any  of  the  said 
plans,  specifications  or  statements  submitted  or  filed  for 
such  permit  or  approval.  The  erection,  construction,  re- 
construction, moving,  alteration  or  conversion  of  any  such 
tenement  house,  as  the  case  may  be,  shall  be  made  in  ac- 
cordance with  the  plans,  specifications  and  statements 
submitted  or  filed  and  for  which  the  permit  is  issued. 

A  true  copy  of  the  plans,  specifications  and  other  in- 
formation submitted  or  filed,  upon  which  a  permit  is 
issued,  with  the  approval  of  the  department  with  which 
they  are  filed,  stamped  or  written  thereon  shall  be  kept 
upon  the  premises  of  the  tenement  house  or  work  for 
which  the  said  permit  is  issued,  from  the  commencement 
of  the  said  building  or  work  to  the  final  completion  of 
same,  and  shall  be  subject  to  inspection  at  all  times  by 
proper  authorities. 

The  department  charged  with  the  enforcement  of  this 
act  may,  at  its  discretion,  issue  a  permit  in  case  of  nom- 
inal alterations  or  repairs,  when  application  is  made 
therefor,  in  writing,  by  the  owner  or  his  agent,  when  the 
making  of  said  nominal  alterations  and  repairs  do  not 
affect  any  structural  feature  or  the  sanitation  or  the  ven- 
tilation of  the  tenement  house,  without  requiring  the  filing 
of  plans  or  specifications. 

The  issuance  or  granting  of  a  permit  or  approval  by 
the  department  charged  with  the  enforcement  of  this  act 
under  the  authority  of  this  section  shall  not  be  deemed  or 


382  BUSINESS  LAW  FOR  BUSINESS  MEN. 

construed  to  be  a  permit  or  an  approval  of  the  violation 
of  any  of  the  provisions  of  this  act. 

Every  permit  or  approval  which  is  issued  by  the  de- 
partment charged  with  the  enforcement  of  this  act,  but 
under  which  no  work  has  been  done  within  ninety  days 
from  the  date  of  issuance,  or  where  work  has  been  sus- 
pended for  a  period  of  ninety  days,  shall  expire  by  limita- 
tion and  a  new  permit  shall  be  obtained  before  the  work 
may  be  done. 

(g)  "Certificate  of  Final  Completion"  and  "Permit 
of  Occupancy." — Sec.  8.  In  every  incorporated  town, 
incorporated  city  and  county,  it  shall  be  unlawful  to 
occupy  or  to  permit  to  be  occupied,  any  tenement  house 
hereafter  erected,  constructed,  reconstructed,  altered, 
converted  or  moved,  as  the  case  may  be,  or  any  portion 
thereof,  for  human  habitation  until  the  issuance  of  a 
"certificate  of  final  completion"  and  a  "permit  of  oc- 


with  the  enforcement  of  this  act. 

It  shall  also  be  unlawful  to  occupy  any  existing  tene- 
ment house  until  a  permit  of  occupancy  has  been  issued 
by  the  department  designated  to  issue  such  permit. 

Every  permit  of  occupancy  shall  be  renewed  each  cal- 
endar year  by  the  department  designated  to  issue  the  said 
permit;  provided,  that  no  structural  alterations  or 
changes  have  occurred  since  the  issuance  of  the  certificate 
of  final  completion ;  and  provided,  that  all  other  provisions 
of  this  act  have  been  complied  with. 

Any  person  desiring  a  certificate  shall  file  a  notice  with 
the  department  charged  with  the  enforcement  of  this  act. 
Said  department  shall  cause  an  inspection  to  be  made  of 
the  said  tenement  house  or  portion  thereof,  or  work  de- 
scribed in  the  said  notice,  within  ten  days  after  written 
application  therefor,  and  shall  issue  a  "certificate  of  final 
completion"  if  it  is  found  that  all  the  provisions  of  this 
act,  regulating  the  erection,  construction,  alteration  or 
moving,  as  the  case  may  be,  have  been  complied  with. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  383 

The  department  charged  with  the  enforcement  of  this 
act  and  designated  to  issue  the  permit  of  occupancy  shall 
issue  the  said  " permit  of  occupancy"  upon  application, 
in  writing,  therefor  by  the  owner  or  his  agent,  and  upon 
the  filing  by  the  owner  or  his  agent  of  such  statements  or 
records  required  by  the  department,  after  the  ' '  certificate 
of  final  completion"  has  been  issued;  provided,  that  no 
violations  have  occurred  since  the  issuance  of  the  certfi- 
cate  of  final  completion,  or,  in  the  case  of  a  tenement  house 
erected  prior  to  the  passage  of  this  act,  and  for  which  no 
certificate  of  final  completion  has  been  issued,  then  after 
the  said  department  has  caused  an  inspection  to  have 
been  made  of  the  said  tenement  house  and  has  found  that 
all  of  the  provisions  of  this  act  applying  to  such  tenement 
house  have  been  complied  with. 

All  permits  and  certificates  shall  be  made  in  duplicate 
and  a  copy  shall  remain  on  file  in  the  department  issuing 
them. 

Any  tenement  house  hereafter  erected,  altered,  con- 
verted or  moved,  which  is  occupied,  or  any  portion  thereof 
which  is  occupied  for  human  habitation,  prior  to  a  "  cer- 
tificate of  final  completion"  or  a  "permit  of  occupancy," 
being  issued,  shall  be  deemed  a  nuisance,  and  the  depart- 
ment or  departments  charged  with  the  enforcement  of 
this  act  may  cause  it  to  be  vacated  until  the  said  certifi- 
cate of  completion  and  permit  of  occupancy  have  been 
obtained  in  accordance  with  the  provisions  of  this  act. 

(h)  Power  to  Enter  Tenement  House. — Sec.  9. 
The  "department  or  departments  charged  with  the  en- 
forcement of  this  act  in  any  incorporated  town,  incorpor- 
ated city,  incorporated  city  and  county,  or  county,  and 
the  authorized  officers,  agents  or  employees  of  such  de- 
partment or  departments,  may,  whenever  necessary,  en- 
ter tenement  houses  or  portions  thereof,  or  the  premises 
thereof,  within  the  corporate  limits  of  such  towns,  either 
cities  and  counties,  or  counties,  for  the  purpose  of  in- 
specting such  buildings,  in  order  to  secure  compliance 


384  BUSINESS  LAW  FOR  BUSINESS  MEN. 

with  the  provisions  of  this  act  and  to  prevent  violations 
thereof. 

The  members  of  the  commission  of  immigration  and 
housing  of  California  and  the  agents,  officers  or  employ- 
ees of  said  commission  may,  whenever  necessary,  enter 
tenement  houses  or  portions  thereof,  or  the  premises 
thereof,  for  the  purpose  of  inspecting  such  buildings  in 
order  to  secure  compliance  with  the  provisions  of  this  act 
and  to  prevent  violations  thereof. 

The  owner  or  his  authorized  agent  may,  whenever 
necessary,  enter  tenement  houses,  or  portions  thereof,  or 
the  premises  thereof,  owned  by  him,  to  carry  out  any  in- 
structions or  to  perform  any  work  required  to  be  done 
by  the  provisions  of  this  act. 

(i)  Definitions. — Sec.  10.  For  the  purpose  of  this 
act,  certain  words  and  phrases  are  defined  as  follows,  un- 
less it  shall  be  apparent  from  their  context  that  they  have 
a  different  meaning: 

"Apartment"  is  a  room  or  suite  of  rooms  which  is 
occupied,  or  is  intended  or  designed  to  be  occupied,  by  one 
family  for  living  and  sleeping  purposes. 

"Basement"  is  any  story  or  portion  thereof  partly 
below  the  level  of  the  curb  or  the  actual  adjoining  ground 
]evel,  the  ceiling  of  which  in  no  part  is  less  than  seven 
feet  above  the  curb  level  or  actual  adjoining  ground 
levels.  If  the  adjoining  ground  is  excavated  to  or  below 
the  curb  level,  or  to  or  below  the  adjoining  natural  ground 
level,  such  excavated  space  shall  have  not  less  than  the 
minimum  width  and  length  required  in  this  act  for  outer 
courts. 

Every  basement  is  a  story. 

"Cellar"  is  any  story  or  portion  thereof,  the  ceiling 
of  which  in  any  part  is  less  than  seven  feet  above  the  curb 
level  and  actual  adjoining  ground  levels. 

"Court"  is  an  open,  unoccupied  space  other  than  a 
yard  on  the  lot  on  which  is  situated  a  tenement  house.  A 
court,  one  entire  side  or  end  of  which  is  bounded  by  a 
front  yard,  a  rear  yard  or  a  side  yard,  or  by  the  front  of 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  385 

lot,  or  by  a  street  or  a  public  alley,  is  an  "outer  court." 
Every  court  which  is  not  an  "outer  court"  is  an  "inner 
court." 

Every  court  shall  be  open  and  unobstructed  to  the  sky 
from  a  point  not  more  than  two  feet  above  the  floor  line 
of  the  lowest  story  in  the  building  in  which  there  are  win- 
dows from  rooms  or  apartments,  abutting  the  said  court, 
except  that  a  cornice  on  the  building  may  extend  into  an 
"outer  court"  two  inches  for  each  one  foot  in  width  of 
such  court,  and  a  cornice  may  extend  into  an  "inner 
court"  one  inch  for  each  one  foot  in  width  of  such  court. 

"Curb  level"  is  the  curb  level  opposite  the  center  of 
the  "front  of  lot." 

"Family"  is  one  person  living  alone  or  a  group  of  two 
or  more  persons  living  together  in  an  apartment,  whether 
related  to  each  other  by  birth  or  not. 
.  "Fireproof  tenement  house"  is  a  building  wherein 
all  the  exterior  and  interior  loads  or  strains  are  transmit- 
ted to  the  foundation  by  means  of  concrete,  reinforced 
concrete,  brick,  stone,  or  by  means  of  a  skeleton  frame- 
work of  steel  or  iron,  the  exterior  walls,  inner  court  walls 
and  roof  constructed  of  concrete,  reinforced  concrete, 
brick,  stone  or  hollow  terra  cotta  tile ;  where  all  the  struc- 
tural steel  or  iron  is  thoroughly  fireproofed  by  concrete, 
cement  plaster,  tile,  brick  or  sandstone,  not  less  than  two 
inches  thick;  where  all  the  interior  partitions  are  con- 
structed of  either  hollow  terra  cotta  tile  blocks,  gypsum 
blocks,  brick,  concrete,  reinforced  concrete,  or  of  metal 
studs  lathed  with  metal  lath  and  plastered  not  less  than 
three-quarters  inch  thick  including  the  lath,  or  of  metal 
studs  lathed  with  approved  plaster  board  and  plastered 
not  less  than  three-quarters  inch  thick  including  the  plas- 
ter board,  or  constructed  of  wire  glass  not  less  than  one- 
fourth  inch  thick,  set  in  metal  frames  and  sash,  and  all 
other  materials  used  in  the  said  building  are  of  approved 
incombustible  material,  except  that  the  glass  in  windows, 
transoms,  or  doors  may  be  plain  glass,  and  except  that 
doors,  frames,  sash  and  the  usual  trim  of  rooms,  hallways, 


386  BUSINESS  LAW  FOR  BUSINESS  MEN. 

corridors  and  passageways  may  be  of  wood,  and  except 
that  wood  floors  may  be  placed  on  top  of  the  floors  con- 
structed of  incombustible  materials,  except  in  the  stair- 
ways and  public  hallways. 

"Kitchen"  is  any  room  in  any  apartment  used  or  in- 
tended or  designed  to  be  used  for  cooking  purposes  and 
for  the  preparation  of  food. 

"Lot"  is  a  parcel  or  area  of  land  on  which  is  situated  a 
tenement  house,  together  with  the  land,  yards,  courts  and 
unoccupied  spaces  for  such  a  tenement  house  as  required 
by  this  act ;  all  of  which  land  shall  be  owned  by  or  be  un- 
der the  absolute  lawful  control  and  in  the  lawful  posses- 
sion of  the  tenement  house. 

A  lot  situated  at  the  junction  of  two  or  more  intersect- 
ing streets,  with  a  boundary  line  thereof  bordering  on 
each  of  the  two  streets,  is  a  "corner  lot."  All  parts  of 
the  width  of  such  a  corner  lot  which  are  distant  more 
than  seventy-five  feet  from  the  junction  point  of  the  two 
or  more  intersecting  streets,  shall  be  deemed  to  be  an 
"interior  lot."  The  owner  or  his  authorized  agent  may 
designate  either  street  frontage  as  being  the  front  of 
such  corner  lot  for  the  purpose  of  determining  the  width 
thereof. 

A  lot  which  has  only  one  boundary  line  bordering  on  a 
public  street  is  an  "interior  lot." 

"Rear  lot"  is  a  parcel  or  area  of  land  having  no 
boundary  line  bordering  on  a  street,  or  having  less  than 
one-half  of  its  width  as  a  boundary  line  bordering  on  a 
street. 

"Front  of  lot"  is  the  boundary  line  of  lot  bordering 
on  the  street.  In  case  of  a  corner  lot,  either  of  such 
boundary  lines  may  be  the  ' i  front  of  lot. ' ' 

"Rear  of  lot"  is  the  boundary  line  of  lot  opposite 
from  the  "front  of  lot," 

"Depth  of  lot"  is  the  mean  distance  from  the  "front 
of  lot"  to  the  "rear  of  lot." 

"Nuisance"  embraces  public  nuisance  as  known  at 
common  law  or  in  equity  jurisprudence,  and  whatever  is 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  387 

dangerous  to  human  life  or  detrimental  to  health,  and 
shall  also  embrace  the  overcrowding  with  occupants  of 
any  room,  insufficient  ventilation,  or  illumination,  or  in- 
adequate or  unsanitary  sewerage  or  plumbing  facilities, 
or  uncleanliness,  and  whatever  renders  air,  food  or  drink 
unwholesome  or  detrimental  to  the  health  of  human  be- 
ings. 

"Occupied  space"  is  all  the  space  covered  by  a  tene- 
ment house,  including  outside  stairways,  platforms,  fire 
escapes,  balconies,  fire  towers,  chimneys,  stacks,  vent 
shafts,  not  exceeding  thirty-two  square  feet  in  area,  cor- 
nice, or  any  part  thereof,  which  projects  into  an  inner 
court  more  than  one  inch  for  each  one  foot  in  width  of 
such  court,  or  which  projects  into  an  outer  court  or  yard 
more  than  two  inches  for  each  one  foot  in  width  of  such 
outer  court  or  a  yard,  except  that  outside  stairways,  plat- 
forms and  balconies  constructed  of  open  metal  work  and 
fire  escapes  may  extend  not  exceeding  four  feet  beyond 
the  exterior  walls  of  the  building  into  a  front  or  rear  yard, 
and  except  that  a  retaining  wall  may  extend  not  to  ex- 
ceed twelve  inches  into  a  yard  or  court.  For  the  purpose 
of  determining  occupied  space,  the  area  of  the  building 
shall  be  taken  at  the  lowest  story  or  portion  thereof  used 
for  living  or  sleeping  purposes. 

" Public  hallway"  is  a  hallway,  corridor,  passageway 
or  vestibule  not  within  an  apartment,  and  includes  stair- 
ways, landings  and  platforms. 

"Rear  tenement  house"  is  a  tenement  house  on  a 
"rear  lot." 

" Semifi reproof  tenement  house"  is  a  building  with 
all  exterior  walls  and  walls  of  inner  and  outer  courts  con- 
structed of  brick,  stone,  concrete,  reinforced  concrete  or 
hollow  terra  cotta  tile ;  except  that  the  walls  of  an  inner 
court,  which  court  is  surrounded  on  four  sides  by  the 
same  building,  may  be  constructed  as  provided  in  this  act 
for  such  inner  courts ;  interior  partitions  and  floors  con- 
structed of  approved  incombustible  materials  or  of  wood, 
with  all  ceilings,  partitions,  soffits  of  stairways,  and  out- 


388  BUSINESS  LAW  FOR  BUSINESS  MENT. 

side  stringers  of  open  stairways  and  stair  wells  metal 
lathed  and  plastered  not  less  than  three-quarters  inch 
thick  including  the  lath  or  lathed  with  an  approved  plas- 
ter board  plastered  not  less  than  three-quarters  inch  thick 
including  the  plaster  board;  in  which  all  finished  floors, 
frames,  doors  and  the  usual  trim  of  rooms  and  hallways 
may  be  built  of  wood  and  the  roof  of  which  shall  be  cov- 
ered with  at  least  a  composition  fire-retardant  material. 

''Street"  is  any  public  street,  alley,  thoroughfare  or 
park  having  a  minimum  width  of  sixteen  feet,  measured 
from  the  "front  of  lot"  to  the  opposite  "front  of  lot," 
and  which  shall  have  been  dedicated  or  deeded  to  the 
public  for  public  use. 

"Tenement  house"  is  any  house  or  building,  or  por- 
tion thereof,  more  than  one  story  in  height,  which  is  de- 
signed, built,  rented,  leased,  let  or  hired  out  to  be  occu- 
pied, or  which  is  occupied  as  the  home  or  residence  of 
three  or  more  families  living  independently  of  each  other 
and  doing  their  cooking  in  the  said  building;  provided, 
hoivever,  that  any  building  not  more  than  two  stories  in 
height  which  is  designed,  built,  rented,  leased,  let  or  hired 
out  to  be  occupied,  or  is  occupied,  as  the  home  or  residence 
of  not  more  than  four  families,  and  the  said  building  is 
so  arranged  that  each  of  the  said  families  live  independ- 
ently of  each  other,  and  the  building  is  constructed  and 
arranged  so  that  a  separate  section  is,  or  may  be,  kept 
as  a  home  or  residence  of  a  separate  family,  and  each 
such  section  has  an  entirely  independent  and  separate  en- 
trance, and  if  a  stairway  is  required,  one  such  stairway 
leading  to  each  section  from  the  street  or  from  an  outside 
vestibule  on  the  level  of  the  first  floor  of  said  building  is 
a  separate  stairway,  and  with  no  room,  hallway,  bath- 
room, water-closet,  or  kitchen  used  in  common  by  two  or 
more  families  occupying  the  said  building,  shall  be  deemed 
not  to  come  within  the  definition  of  a  "tenement  house." 

"Wooden  tenement  house"  is  a  building  which  does 
not  fully  comply  with  the  requirements  for  a  "fireproof" 
or  a  "semifireproof "  tenement  house  as  defined  in  this 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  389 

act,  and  shall  include  all  frame  and  all  veneered  buildings. 

In  every  such  building  all  ceilings  and  walls  and  parti- 
tions of  public  hallways,  soffits  of  interior  stairways  and 
the  outside  stringers  of  open  stairways,  and  stair  wells 
shall  be  metal  lathed  and  plastered  not  less  than  three- 
quarters  inch  thick  including  the  lath,  or  lathed  with  an 
approved  plaster  board  plastered  not  less  than  three- 
quarters  inch  thick  including  the  plaster  board. 

"Yard"  is  a  portion  of  a  lot  on  which  is  situated  a 
tenement  house  and  which  is  unoccupied  by  the  building 
and  extends  from  the  ground  up  (except  where  otherwise 
provided  by  this  act)  open  and  unobstructed  to  the  sky; 
except  that  outside  stairways,  platforms  and  balconies 
constructed  of  open  metal  work  and  fire  escapes  may  ex- 
tend not  more  than  four  feet  into  such  yards.  If  such 
yard  is  between  the  front  line  of  the  building  and  the  front 
boundary  line  of  the  lot,  it  is  a  "front  yard."  If  it  is 
between  the  extreme  rear  line  of  the  building  and  the  rear 
of  the  lot,  it  is  a  "rear  yard."  If  it  -extends  from  the 
rear  yard  to  the  front  yard  or  front  of  the  lot,  it  is  a  "  side 
yard." 

(j)  Front  Yard. — Sec.  11.  No  tenement  house  shall 
hereafter  be  erected  on,  or  moved  on  to,  a  rear  lot.  No 
building  for  any  purpose  shall  hereafter  be  erected  in 
front  of  any  tenement  house  unless  there  shall  be  left  un- 
occupied a  front  yard  extending  from  the  front  of  the 
rear  tenement  house  to  the  front  line  of  lot  bordering  on 
the  street. 

Such  front  yard  shall  not  be  in  any  part  less  in  width 
than  fifty  per  cent  of  the  actual  width  of  the  rear  tene- 
ment house. 

(k)  Height. — Sec.  12.  No  fireproof  tenement  house 
hereafter  erected  shall  exceed  one  hundred  fifty  feet  in 
height,  nor  more  than  one  and  one-half  times  the  width 
of  the  widest  street  to  which  the  lot  on  which  it  is  situated 
abuts. 

No  semifireproof  tenement  house  hereafter  erected 
shall  exceed  six  stories  at  any  point,  nor  more  than  sixty- 


390  BUSINESS  LAW  FOR  BUSINESS  MEN. 

five  feet  in  height  (except  as  hereinafter  provided),  nor 
more  than  one  and  one-half  times  the  width  of  the  widest 
street  to  which  the  lot  on  which  it  is  situated  abuts. 

No  wooden  tenement  house  hereafter  erected  shall  ex- 
ceed three  stories  at  any  point  nor  more  than  thirty-six 
feet  in  height  (except  as  hereinafter  provided),  nor  more 
than  one  and  one-half  times  the  width  of  the  widest  street 
to  which  the  lot  on  which  it  is  situated  abuts. 

The  width  of  the  street,  for  this  purpose,  shall  be 
measured  from  the  extreme  front  of  the  building  to  the 
front  of  lot  opposite,  across  the  street. 

For  the  purposes  of  this  section  a  basement  is  a  story. 

The  height  of  a  fireproof  tenement  house  is  the  per- 
pendicular distance  from  the  curb  level  or  adjoining 
ground  levels  to  the  highest  point  of  the  roof.  The  height 
of  a  semifireproof  or  of  a  wooden  tenement  house  is  the 
perpendicular  distance  from  the  curb  level  or  adjoining 
ground  levels  to  the  lowest  point  of  the  finished  ceilirg  of 
the  top  story ;  provided,  that  in  the  case  of  a  semifirepi  oof 
tenement  house  situated  on  a  lot  wath  the  ground  sloping- 
downward  from  the  facade  at  which  the  measurement  is 
taken  the  height  of  the  building  shall  not  at  any  point  ex- 
ceed sixty-five  feet  above  the  curb  level  measured  on 
the  facade  facing  the  street,  nor  shall  the  height  of  the 
building  at  any  point  of  the  grade  exceed  seventy-five  feet 
above  the  adjoining  curb  in  case  of  a  corner  lot,  or  above 
the  level  of  the  ground  in  the  case  of  an  interior  lot,  and 
in  the  case  of  a  wooden  tenement  house  situated  on  a  lot 
with  the  ground  sloping  downward  from  the  facade  at 
which  the  measurement  is  taken  the  height  of  the  building 
shall  not  at  any  point  exceed  thirty-six  feet  above  the 
curb  line  measured  on  the  facade  facing  the  street,  nor 
shall  the  height  of  the  building  at  any  point  of  the  grade 
exceed  forty-six  feet  above  the  adjoining  curb  in  the  case 
of  a  corner  lot  or  above  the  level  of  the  ground  in  the  case 
of  an  interior  lot. 

SEC.  13.  (1) — PER  CENT  OF  LOT  LEFT  UNOCCUPIED. — 
On  every  corner  lot  on  which  a  tenement  house  is  here- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  391 

after  erected,  at  least  ten  per  cent  of  such  lot  shall  be 
left  unoccupied;  provided,  however,  that  if  such  corner 
lot  extends  through  from  one  street  to  another  street, 
one-half  of  the  narrowest  street  to  which  said  lot  abuts 
may  be  considered  as  a  part  of  the  lot  in  computing  the 
percentage  of  lot  to  be  left  unoccupied ;  except  that  if  such 
one-half  of  the  narrowest  street  is  greater  than  the  rear 
yard  required  for  such  tenement  house,  then  only  as  much 
of  the  said  street  as  is  required  for  the  rear  yard  shall 
be  considered  as  part  of  the  lot  for  the  purpose  of  com- 
puting the  percentage  of  lot  to  be  left  unoccupied. 

On  every  interior  lot  on  which  a  tenement  house  is 
hereafter  erected,  at  least  twenty-five  per  cent  of  such  lot 
shall  be  left  unoccupied ;  provided,  however,  that  if  such 
interior  lot  extends  through  from  one  street  to  another 
street,  one-half  of  the  narrowest  street  to  which  such  lot 
abuts  may  be  considered  as  a  part  of  the  lot  in  computing 
the  percentage  of  lot  to  be  left  unoccupied ;  except  that  if 
such  one-half  of  the  narrowest  street  is  greater  than  the 
rear  yard  required  for  such  tenement  house,  then  only  as 
much  of  the  said  street  as  is  required  for  the  rear  yard 
shall  be  considered  as  part  of  the  lot  for  the  purpose 
of  computing  the  percentage  of  lot  to  be  left  unoccupied. 

(m)  Rear  Yard. — Sec.  14.  Immediately  behind  every 
tenement  house  hereafter  erected  there  shall  be  a  rear 
yard  extending  across  the  entire  width  of  the  lot. 

(n)  Yard  Serving  Two  Tenement  Houses. — Sec.  15. 
In  no  event  shall  any  yard  or  court  be  made  to  serve  the 
purpose  of  two  tenement  houses  hereafter  erected,  or  of 
an  existing  tenement  house  and  a  tenement  house  here- 
after erected,  unless  such  yard  or  court,  as  the  case  may 
be,  is  of  the  full  size  required  for  two  tenement  houses, 
and  then  only  in  the  event  that  such  yard  or  court,  as  the 
case  may  be,  is  located  on  the  same  lot  and  owned  by  or 
in  the  absolute  lawful  control  and  in  the  lawful  possession 
of  the  tenement  house  it  proposes  to  serve. 

Where  a  tenement  house,  now  or  hereafter  erected, 
stands  upon  a  lot,  no  other  building  shall  hereafter  be 


392 


BUSINESS  LAW  FOK  BUSINESS  MEN. 


placed  upon  the  front  or  rear  of  that  lot,  unless  the 
minimum  distance  between  such  buildings  shall  be  at  least 
ten  feet,  and  two  additional  feet  shall  be  added  to  such 
minimum  distance  of  ten  feet  for  every  story  more  than 
one  in  height  of  the  highest  building  on  such  lot. 

(o)  Depth  of  Rear  Yard. — Sec.  1C.  The  depth  of  a 
rear  yard  shall  be  measured  at  right  angles  from  the  ex- 
treme rear  line  of  the  building  towards  the  rear  lot  line. 

(p)  Minimum  Depth  of  Rear  Yard  on  Interior  Lot.— 
Sec.  17.  On  every  interior  lot  on  which  a  tenement  house 
is  hereafter  erected  there  shall  be  provided  a  rear  yard. 
Such  yard  shall  extend  from  the  ground  clear  and  unob- 
structed to  the  sky,  and  shall  extend  across  the  entire 
width  of  the  lot ;  except  that  outside  stairways,  platforms 
and  balconies  constructed  of  open  metal  work  and  fire 
escapes  may  extend  not  more  than  four  feet  into  such 
yard.  The  minimum  depth  of  such  rear  yard  shall  be 
as  follows : 


Height  of  building  measured  from  top  of  wall  to  floor  of  yard  at 
point  abutting  the  rear  yard. 

Depth  of 
rear  yard. 

Not  exceeding     36  feet     

10  feet 

Not  exceeding     48  feet  

11  feet 

Not  exceeding     60  feet                    .... 

12  feet 

Not  exceeding    72  feet 

14  feet 

Not  exceeding     84  feet  

16  feet 

Not  exceeding     96  feet  

18  feet 

Not  exceeding  108  feet 

20  feet 

Not  exceeding  120  feet 

22  feet 

Not  exceeding  132  feet                                       .             

24  feet 

Not  exceeding  150  feet     .               

26  feet 

Provided,  however,  that  if  such  interior  lot  extends 
through  from  one  street  to  another  street  or  public  alley, 
one-half  of  the  narrowest  street  or  public  alley  to  which 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  393 

said  lot  abuts  may  be  considered  as  a  part  of  the  lot  in 
computing  the  rear  yard  required  by  this  section. 

(q)  Minimum  Depth  of  Rear  Yard  on  Corner  Lot.— 
Sec.  18.  On  every  corner  lot  on  which  a  tenement  house  is 
hereafter  erected  there  shall  be  provided  a  rear  yard. 
Such  yard  shall  extend  from  the  lowest  floor  which  is  used 
for  living  or  sleeping  apartments,  clear  and  unobstructed 
to  the  sky,  and  shall  extend  across  the  entire  width  of 
such  lot;  except  that  outside  stairways,  platforms  and 
balconies  constructed  of  open  metal  work  and  fire  escapes 
may  be  extended  not  more  than  four  feet  into  such  yard. 
The  minimum  depth  of  such  rear  yard  shall  be  as  follows : 


Depth   of   corner   lot. 


Depth    of   rear   yard. 


Not  exceeding  100  feel |  Not  less  than  10  per  cent  of  the  depth 

!  of  the  lot  nor  less  than  5  feet,  nor  less 
I  than  the  minimum  width  required  for 
I  an  outer  court,  based  on  the  number  of 
|  stories  in  such  building. 

Exceeding  100  feet I  Not  less  than  10  feet  nor  less  than  the 

|  minimum  width  required  for  an  outer 
|  court,  based  on  the  number  of  stories 
|  in  such  building. 

Provided,  however,  if  such  corner  lot  extends  through 
from  one  street  to  another  street,  or  to  a  public  alley,  one- 
half  of  the  narrowest  street  or  public  alley  to  which  such 
lot  abuts  may  be  considered  as  a  part  of  the  lot  in  com- 
puting the  rear  yard  required  by  this  section. 

(r)  Passageway  to  Street. — Sec.  19.  Every  rear  yard 
required  by  this  act  and  not  bordering  on  a  street  or  pub- 
lic alley  and  without  direct  access  thereto  shall  have 
access  to  a  street  or  public  alley  by  means  of  an  unob- 
structed passageway  not  less  than  three  feet  six  inches  in 
clear  width,  nor  less  than  seven  feet  in  clear  height;  and 
if  such  passageway  or  any  portion  thereof  passes  through 
a  building,  such  portion  thereof  shall  be  built  of  approved 
incombustible  materials,  or  shall  be  lathed  with  metal  lath 
or  approved  plaster  board  and  be  plastered  not  less  than 
three-quarters  inch  thick  including  the  lath  or  plaster 
board,  or  shall  be  lined  with  not  less  than  number  twenty- 


394 


BUSINESS  LAW  FOR  BUSINESS  MEN. 


six  (gauge)  galvanized  iron,  and  shall  be  drained  and 
lighted. 

(s)  Excavated  Front  Yard. — Sec.  20.  Every  front 
yard  which  is  excavated  below  the  level  of  a  curb  or  below 
the  adjoining  ground  level  for  the  purpose  of  furnishing 
light  and  ventilation  to  a  basement  shall  in  no  part  be  less 
in  width  and  length  than  required  for  outer  courts. 

(t)  Width  of  Side  Yard.— Sec.  21.  The  width  of  every 
side  yard  shall  be  not  less  than  the  width  required  for  an 
outer  court  except  that  the  provisions  of  this  act  regard- 
ing the  maximum  lengths  of  an  outer  court  shall  not  apply 
to  a  side  yard ;  provided,  that  if  there  is  a  side  yard  on 
both  sides  of  the  building,  connected  one  with  the  other 
across  the  rear  of  the  building  by  the  rear  yard,  then  the 
width  of  the  side  yards  may  be  reduced  twelve  inches. 

(u)  Minimum  Size  of  Outer  Court. — Sec.  22.  The 
minimum  size  of  every  outer  court  for  a  tenement  house 
hereafter  erected  shall  be  as  follows : 


Height   of   building   based    on    the    full   number    of 
stories    in    the    building    measured    upward   from 
and     including    the     lowest     story     in     which 
there  is  an  apartment  or  apartments. 

Minimum 
width   of 
court. 

Maximum 
length    of 
court. 

1  story  

4  ft.  0  in. 

16  ft.  0  in. 

2   stories    

4  ft.  0  in. 

16  ft.  0  in. 

3    stories   ..            

4  ft.  6  in. 

25  ft.  0  in. 

4    stones   

5  ft.  6  in 

30  ft.  0  in. 

5    stories    

6  ft.  0  lit. 

35  ft.  0  in. 

6    stories    .                 

8  ft.  0  in. 

35  ft.  0  in. 

7    stories    

10  ft.  0  in. 

40  ft.  0  in. 

8    stories   

12  ft.  0  in. 

40  ft.  0  in 

9    stories    .  .                          

13  ft.  0  in. 

40  ft.  0  in. 

10  or  more  stories.... 

14  ft.  0  in. 

40  ft.  0  in. 

There  shall  be  added  to  the  minimum  width  of  each 
such  outer  court  six  inches  for  each  five  feet  or  fractional 
part  thereof  in  excess  of  the  maximum  length ;  provided, 
however,  that  the  maximum  lengths  herein  provided  shall 
not  apply  when  the  outer  court  is  bounded  on  one  side  for 
its  entire  length  by  a  lot  line ;  provided,  further,  that  if 
an  outer  court  is  bounded  by  a  public  alley  or  public  park, 
the  width  of  such  public  alley  or  public  park  may  be  con- 
sidered a  part  of  the  lot  in  determining  the  required  width 
of  the  outer  court. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS. 


395 


(v)  Minimum  Size  of  Inner  Court. — Sec.  23.  The  min- 
imum size  of  every  inner  court  for  tenement  houses  here- 
after erected  shall  be  as  follows : 


Height   of  building   based   on   the   full 
number  of  stories   in   the  building 
measured     upward     from     and 
including  the  lowest  story 
in  which   there   is  an 
apartment     or 
apartments. 

Minimum 
width    of   court 

Minimum     area 
of  court 
in   square   feet. 

1    storv 

6  ft.  0  in 

75  square  feet 

2   stories  

6  ft.  0  in. 

75  square  feet 

3   stories  

7  ft.  0  in. 

120  square  feet 

4   stories  

8  ft.  0  in. 

160  square  feet 

5   stories     

12  ft.  0  in. 

250  square  feet 

6   stories                                               

16  ft.  0  in. 

400  square  feet 

7  stories                                               

20  ft.  0  in. 

625  square  feet 

8  stories  and  more.... 

24  ft.  0  in. 

840  sauare  feet 

Provided,  however,  that  the  minimum  size  of  every  in- 
ner court  which  is  bounded  on  one  side  for  its  entire  length 
by  a  lot  line  may  be  as  follows : 


Height   of  building   based   on    the  full 
number  of  stories  in   the  building 
measured     upward     from     and 
including  the  lowest  story 
in  which   there   is  an 
apartment     or 
apartments. 

Minimum 
width  of  court 

Minimum    area 
of  court. 

1    story    

5  ft.  0  in. 

75  square  feet 

2   stories  

5  ft    0  in. 

75  square  feet 

3   stories  

6  ft.  0  in. 

120  square  feet 

4   stories   

7  ft.  0  in. 

160  square  feet 

5   stories       .       .                                

9  ft.  0  in. 

250  square  feet 

6  stories                                               

16  ft.  0  in. 

400  square  feet 

7  stories                                              

20  ft.  0  in. 

625  square  feet 

8  stories  and  more  

24  ft.  0  in. 

840  sauare  feet 

Every  inner  court  hereafter  constructed  and  every 
inner  court  or  vent  shaft  now  in  any  tenement  house  shall 
be  provided  with  a  door  or  window  at  or  near  the  bottom 
thereof,  giving  sufficient  access  to  such  court  or  vent  shaft 
as  to  enable  it  to  be  properly  cleaned  out. 

(w)  Recess. — Sec.  24.  Every  recess  from  a  court, 
yard  or  street  in  a  tenement  house  hereafter  erected  shall, 
unless  it  conforms  to  the  requirements  of  this  act  for  an 
inner  court,  or  an  outer  court,  be  not  less  in  width  than 
its  depth.  Every  such  recess  shall  be  open  and  unob- 
structed to  the  sky  from  a  point  not  more  than  two  feet 


396  BUSINESS  LAW  FOE  BUSINESS  MEN. 

above  the  floor  line  of  the  lowest  story  in  the  building 
in  which  there  are  rooms  the  said  recess  proposes  to 
serve. 

(x)  Intakes  for  Inner  Court. — Sec.  25.  Every  inner 
court  in  a  tenement  house  hereafter  erected  shall  be  pro- 
vided with  one  or  more  horizontal  intakes  at  the  bottom 
of  the  court,  as  follows : 


Inner  court  areas. 

Minimum 
number  of 
intakes. 

Net    aggregate 
area  of  intakes. 

Each  not  exceeding  300  square  feet  

One 

19  %  square  feet 

Each  not  ejtceediny  800  square  feet  

Two 

40      square  feet 

Each  exceeding  800  sauare  feet.... 

Two 

60      sauare  feet 

Every  such  intake  shall  always  extend  directly  to  the 
front  of  lot  or  front  yard,  or  rear  yard,  or  to  a  side  yard, 
or  to  a  street,  or  to  a  public  alley  or  public  park.  When- 
ever more  than  one  intake  is  required,  one  such  intake 
shall  extend  to  the  front  of  lot  or  front  yard,  and  one  to 
the  rear  yard,  public  alley,  public  park,  or  to  the  other 
street,  and  the  court  ends  of  the  air  intakes  shall  be  as 
far  apart  as  possible. 

Each  such  intake  shall  consist  of  an  unobstructed  duct 
or  passageway  having  a  minimum  width  of  three  feet  in 
all  its  parts  and  a  minimum  height  of  six  feet  six  inches. 

Every  such  intake  shall  be  constructed  of  approved 
incombustible  materials,  or  shall  be  lined  with  at  least 
number  twenty-six  (gauge)  galvanized  iron  on  the  inside 
thereof.  Such  air  intakes  may  be  closed  at  each  end  with 
a  gate  or  grill  having  not  less  than  seventy-five  per  cent 
of  open  work. 

In  case  the  inner  court  does  not  extend  below  the 
second  floor  level,  then  each  such  air  intake  may  consist  of 
an  unobstructed  open  duct,  constructed  of  approved  in- 
combustible materials  or  lined  with  at  least  number  twen- 
ty-six (gauge)  galvanized  iron  on  the  inside  thereof,  hav- 
ing an  interior  area  of  not  less  than  nineteen  and  one-half 
square  feet,  and  in  no  dimension  less  than  twelve  inches, 
and  covered  at  each  end  with  a  wire  screen  of  not  less 
than  one  inch  mesh. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  397 

Every  air  intake  shall  be  drained  and  so  constructed 
and  arranged  as  to  be  readily  cleaned  out. 

(y)  Cellars. — Sec.  26.  In  no  tenement  house  shall  any 
room  in  the  cellar  be  constructed,  altered,  converted  or 
occupied  for  living  or  sleeping  purposes. 

Every  cellar  shall  be  illuminated  and  ventilated.  The 
walls  and  floor  of  every  cellar  hereafter  constructed, 
which  are  below  the  ground  level,  shall  be  made  water- 
proof and  dampproof,  and  whenever  deemed  necessary, 
and  so  ordered  by  the  department  charged  with  the  en- 
forcement of  this  act,  the  walls  and  ceilings  thereof  shall 
be  plastered. 

(z)  Basements. — Sec.  27.  In  no  tenement  house  shall 
any  room  in  the  basement  be  constructed,  altered,  con- 
verted or  occupied  for  living  or  sleeping  purposes,  unless 
such  room  conforms  to  all  of  the  requirements  of  this  act 
for  rooms  in  other  parts  of  the  building  and  that  the  ceil- 
ing of  each  such  room  be  in  all  parts  not  less  than  seven 
feet  above  the  adjoining  ground  level. 

Every  basement  shall  be  illuminated  and  ventilated. 
The  walls  and  floors  of  every  basement  hereafter  con- 
structed, which  are  below  the  ground  level,  shall  be  made 
waterproof  and  dampproof,  and  whenever  deemed  neces- 
sary, and  so  ordered  by  the  department  charged  with  the 
enforcement  of  this  act,  the  walls  and  ceilings  thereof 
shall  be  plastered. 

(aa)  Ventilation  Beneath  Floor. — Sec.  28.  In  every 
tenement  house  hereafter  erected,  the  lowest  floor  thereof 
shall  be  at  least  eighteen  inches  above  the  surface  soil  ad- 
joining and  under  the  floor,  and  the  entire  space  under 
such  floor  shall  be  kept  dry,  drained,  clean  and  free  from 
any  accumulation  of  rubbish,  debris  or  filth. 

Such  space  under  the  floor  shall  be  enclosed  and  pro- 
vided with  a  sufficient  number  of  openings  with  remov- 
able screens  or  similar  provisions  of  a  size  to  insure 
ample  ventilation;  provided,  however,  that  in  any  such 
building  the  lowest  floor  thereof  may  be  less  than  eighteen 
inches  above  the  surface  soil,  but  in  no  case  less  than  six 


398  BUSINESS  LAW  FOR  BUSINESS  MEN. 

indies,  except  where  masonry  floors  are  laid  directly  on 
the  soil,  if  the  said  floor  is  made  impervious  to  the  ingress 
of  rats  or  other  vermin  as  follows : 

(a)  Foundation  walls  shall  be  constructed  of  concrete 
or  of  brick  or  stone  or  other  masonry  laid  in  a  good 
mortar  or  constructed  of  some  other  equally  as  rat  proof 
material. 

(b)  The  said  foundation  walls  shall  be  not  less  than 
six  inches  in  thickness  at  the  top  nor  less  than  twelve 
inches  in  thickness  at  the  bottom,  nor  extend  less  than 
twelve  inches  below  the  surface  soil,  and,  except  where 
masonry  floors  are  laid  directly  on  the  soil,  shall  extend 
not  less  than  six  inches  above  the  surface  soil, 

(c)  Every  opening  in  the  foundation  walls,  for  venti- 
lation or  for  other  purposes,  shall  be  made  rat  proof  with 
suitable  metal  screens  or  with  some  other  similar  rat 
proof  material.  Door  or  window  openings  in  such  walls 
shall  have  tight  fitting  doors  or  windows. 

(d)  The  said  lowest  floor  or  differing  levels  thereof, 
forming  a  complete  floor  between  the  outside  walls  of  the 
building,  shall  be  constructed  either  of  masonry,  or  cov- 
ered with  concrete  not  less  than  one  and  one-half  inches 
thick,  or  constructed  of  two  layers  of  flooring  with  a 
layer  of  galvanized  iron  or  galvanized  iron  wire  cloth  or 
other  approved  equally  as  rat  proof  material  placed  be- 
tween the  two  layers  of  flooring.    Or,  in  lieu  of  the  floor 
being  constructed  as  herein  prescribed,  the  entire  ground 
area  under  the  floor  shall  be  covered  with  concrete  not 
less  than  two  inches  thick,  except  where  the  surface  of 
the  soil  is  composed  of  rock.    The  rat-proofing  material 
shall  always  extend  under  the  plates  of  the  exterior  walls 
and  supporting  partitions. 

(e)  All  openings  throughout  the  said  floor  for  chim- 
neys, plumbing,  water  pipes,  or  for  any  other  purpose, 
shall  be  closed  up  tight  in  the  same  manner  and  with  the 
same  kind  of  materials  as  required  under  the  plates  of 
the  exterior  walls  and  supporting  partitions,  and  if  the 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  399 

rat-proofing  material  used  for  closing  of  openings  is  other 
than  masonry,  it  shall  extend  beyond  and  underlap  the 
flooring  all  around  the  opening,  not  less  than  two  inches. 

(bb)  Floor  Area  of  Rooms. — Sec.  29.  In  every  apart- 
ment in  every  tenement  house  hereafter  erected  there 
shall  be  at  least  one  room  containing  not  less  than  one  hun- 
dred twenty  square  feet  of  superficial  floor  area,  and  every 
other  room  shall  contain  at  least  ninety  square  feet  of 
superficial  floor  area,  except  water-closet,  bath  or  slop- 
sink  compartments,  and  except  kitchens,  closets,  recesses 
from  rooms,  or  dressing  rooms. 

Every  kitchen  shall  contain  not  less  than  fifty  square 
feet  of  superficial  floor  area. 

Every  room  shall  at  every  point  be  not  less  than  seven 
feet  in  width,  nor  less  than  nine  feet  in  height,  measured 
from  the  finished  floor  to  the  finished  ceiling :  except  that 
attic  rooms  and  rooms  where  sloping  ceilings  occur  need 
be  nine  feet  in  height  in  but  one-half  the  area  of  the  room ; 
provided,  lioivever,  that  the  provisions  of  this  paragraph 
shall  not  apply  to  water-closet,  bath  or  slop-sink  compart- 
ments, nor  to  closets,  nor  to  recesses  from  rooms,  nor  to 
dressing  rooms,  nor  shall  the  provisions  of  this  paragraph 
as  to  minimum  width  apply  to  kitchens. 

Every  water-closet  compartment  shall  be  not  less  than 
thirty-six  inches  in  clear  width,  and  every  such  water- 
closet  compartment,  bath  or  slop-sink  compartment,  or 
closet,  or  recess  from  a  room,  or  dressing  room,  shall  have 
a  height  of  not  less  than  seven  feet  six  inches,  measured 
from  the  finished  floor  to  the  finished  ceiling.  Every 
closet,  recess  from  a  room,  or  dressing  room,  which  con- 
tains more  than  twenty-five  square  feet  of  superficial  floor 
area  (built-in  dressers,  clothes  presses  and  similar  fea- 
tures which  are  a  substantial  part  of  the  structure  shall 
not  be  deemed  to  be  a  part  of  the  floor  area  of  a  closet, 
recess  from  a  room)  or  dressing  room  shall  conform  to 
all  of  the  provisions  of  this  act  as  to  rooms,  and  shall  con- 
tain not  less  than  ninety  square  feet  of  superficial  floor 
area. 


400  BUSINESS  LAW  FOE  BUSINESS  MEN. 

No  part  of  any  room  in  any  tenement  house  shall  here- 
after be  enclosed  or  subdivided  wholly,  or  in  part,  by  a 
curtain,  portiere,  fixed  or  movable  partition,  or  other  con- 
trivance or  device,  for  any  purpose  contrary  to  any  of  the 
provisions  of  this  act. 

Entertainment,  amusement  or  reception  rooms  here- 
after constructed,  altered  or  converted  in  any  tenement 
house  shall  conform  to  the  provisions  of  section  thirty- 
three  of  this  act. 

(cc)  Windows. — Sec.  30.  In  every  tenement  house 
hereafter  erected  every  room,  kitchen,  and  every  water- 
closet  compartment,  toilet  or  shower  room,  and  bath  or 
slop-sink  room  (except  in  the  cellar)  shall  have  at  Jeast 
one  window  of  the  area  hereinafter  required  opening  di- 
rectly upon  a  street,  or  upon  a  yard  or  court,  of  the 
dimensions  specified  in  this  act  and  located  on  the  same 
lot. 

All  windows  required  by  this  act  shall  be  located  so  as 
to  properly  light  all  portions  of  the  rooms,  and  shall  be 
made  so  as  to  open  in  all  parts  and  so  arranged  that  at 
least  one-half  of  each  such  window  may  be  opened  unob- 
structed; provided,  however,  that  the  windows  required 
by  this  section  in  a  water-closet  compartment,  toilet  or 
shower  room,  and  bath  or  slop-sink  room,  may  open  di- 
rectly into  a  vent  shaft,  such  vent  shaft  to  be  of  the  mini- 
mum size  and  constructed  of  the  materials  and  in  the  man- 
ner prescribed  by  section  sixty-one  of  this  act ;  provided, 
further,  that  windows  required  to  open  onto  a  street, 
yard,  or  an  outer  court,  except  windows  from  kitchens, 
may  open  through  porches,  provided  that  said  porches 
do  not  exceed  seven  feet  in  depth  measured  at  right  angles 
to  the  windows  and  that  at  least  seventy-five  per  cent  of 
the  entire  side  of  the  porch,  bounded  by  the  street,  yard, 
or  outer  court,  is  left  open  except  that  the  open  space 
may  be  enclosed  with  mosquito  screens. 

(del)  Window  Areas. — Sec.  31.  In  every  tenement 
house  hereafter  erected  the  total  window  area  in  each 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  401 

room  except  in  a  water-closet  compartment,  bath,  toilet, 
slop-sink  room  or  shower  room  shall  be  at  least  one- 
eighth  of  the  superficial  floor  area  of  the  room. 

The  aggregate  window  area  in  each  room  shall  be  not 
less  than  twelve  square  feet,  and  no  single  window  shall 
be  less  than  six  square  feet  in  area. 

All  measurements  for  window  area  shall  be  taken  to 
outside  of  sash. 

Sec.  32.  In  every  tenement  house  hereafter  erected 
each  window  in  a  water-closet  compartment  or  bath, 
toilet  or  slop-sink  room,  or  shower  room,  shall  be  not 
less  than  three  square  feet  in  area.  The  aggregate  area 
of  windows  for  each  such  compartment  or  room  shall  be 
not  less  than  six  square  feet.  In  each  such  compartment 
or  room  containing  more  than  one  water-closet,  bath, 
urinal  or  slop-sink,  the  aggregate  window  area  shall  be 
equivalent  to  three  square  feet  for  each  water-closet, 
bath,  urinal  or  slop-sink  therein,  except  that  at  no  time 
need  the  aggregate  window  area  exceed  one-fourth  of  the 
superficial  floor  area  of  such  compartment  or  room. 

Sec.  33.  In  every  tenement  house  hereafter  erected, 
the  total  window  area  in  each  room  used  for  the  purpose 
of  amusment,  entertainment  or  as  a  reception  room,  or 
any  room  used  for  similar  purposes,  which  room  has  a 
superficial  floor  area  not  exceeding  one  hundred  eighty 
square  feet,  shall  be  at  least  one-eighth  of  the  superficial 
floor  area  of  such  room. 

Every  such  room  which  has  a  superficial  floor  area 
exceeding  one  hundred  eighty  square  feet  shall  have  an 
aggregate  window  area  not  less  than  that  required  for 
a  room  of  one  hundred  eighty  square  feet  of  superficial 
floor  area. 

Amusement,  entertainment  or  reception  rooms  and 
rooms  used  for  similar  purposes,  in  lieu  of  being  provid- 
ed with  windows,  as  in  this  section  prescribed,  may  be 
provided  with  a  fan  exhaust  system  of  ventilation.  Such 
fan  exhaust  svstem  of  ventilation  shall  consist  of  inde- 


402  BUSINESS  LAW  FOR  BUSINESS  MEN. 

pendent  inlet  ducts,  extending  from  the  outer  air  to  each 
such  room  and  exhaust  ducts  extending  from  each  such 
room  to  the  outer  air  above  the  highest  roof  of  the  build- 
ing. 

All  of  the  inlet  ducts  and  exhaust  ducts  shall  be  con- 
structed of  galvanized  iron  or  other  smooth-surfaced, 
nonabsorbent  material  and  so  arranged  that  they  may 
be  readily  cleaned  out. 

The  exhaust  ducts  shall  always  be  connected  to  an  ex- 
haust fan  mechanically  operated,  so  designed  and  oper- 
ated as  to  provide  a  complete  change  of  air  in  not  to  ex- 
ceed fifteen  minutes  for  each  such  room. 

Any  person  in  charge  of  a  building  in  which  a  system 
of  fan  exhaust  ventilation,  as  in  this  section  is  required, 
who  fails,  neglects  or  refuses  to  operate  and  maintain  the 
said  system  of  ventilation  in  good  order  and  repair  so  that 
the  ventilation  (complete  change  of  air)  herein  specified 
is  provided  in  each  such  room  at  all  times,  shall  be 
deemed  guilty  of  a  misdemeanor  and  subject  to  all  of  the 
penalties  fixed  by  this  act. 

Every  amusement,  entertainment  or  reception  room, 
or  any  room  used  for  similar  purposes,  shall  have  a  mini- 
mum height  between  the  finished  floor  and  the  finished 
ceiling  of  not  less  than  nine  feet.  No  such  room  or  part 
thereof  shall  be  used  for  living  or  sleeping  apartments, 
except  that  said  room  or  part  thereof  complies  with  all 
of  the  other  provisions  of  this  act,  for  living  and  sleeping 
apartments. 

(ee)  Windows  in  Public  Hallway. — Sec,  34.  In  every 
tenement  house  hereafter  erected,  every  public  hallway 
on  any  floor  where  there  are  more  than  three  apart- 
ments shall  have  at  least  one  window  opening  directly 
upon  a  street,  or  upon  a  yard  or  a  court  of  the  dimensions 
specified  in  this  act  and  located  on  the  same  lot;  such 
windows  shall  be  at  the  end  of  the  public  hallway  and 
placed  so  as  to  secure  the  maximum  light  into  the  hall- 
way ;  provided,  lioivever,  that  in  tenement  houses  not  ex- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  403 

ceeding  two  stories  in  height,  the  public  hallway  may,  in 
lieu  of  such  windows,  be  lighted  and  ventilated  by  one  or 
more  skylights  constructed  in  accordance  with  the  pro- 
visions of  this  act. 

Every  window  required  by  this  act  in  a  public  hallway 
shall  be  not  less  than  twenty-nine  inches  in  clear  width, 
nor  less  than  fifty-eight  inches  in  height,  and  the  finished 
sill  of  same  shall  not  be  more  than  thirty  inches  above  the 
adjoining  finished  floor.  Every  such  window  shall  be 
made  so  as  to  open  and  so  arranged  that  at  least  one-half 
of  the  window  may  be  opened  unobstructed. 

Every  skylight  provided  for  in  this  section  shall  have 
an  effective  horizontal  area  of  glass  of  not  less  than  fif- 
teen square  feet,  and  shall  have  ridge  ventilators  or  fixed 
or  movable  louvres  so  as  to  provide  a  ventilating  area  of 
not  less  than  five  hundred  square  inches.  Such  skylights 
shall  be  so  located  that  no  portion  of  the  hallway  be  dis- 
tant more  than  twenty  feet  (measured  from  a  vertical 
line)  from  a  skylight  opening. 

Any  part  of  a  public  hallway  which  is  offset,  recessed, 
or  cut  off  from  any  other  part  of  a  hallway  where  such 
offset  or  recess  is  more  in  length  than  one  and  one-half 
times  the  width  of  the  public  hallway  from  which  it  off- 
sets or  recesses,  shall  be  deemed  a  separate  public  hall- 
way within  the  meaning  of  this  section. 

French  windows  or  doors,  if  arranged  to  open  arid 
glazed  to  give  the  areas  of  opening  and  glass  required  by 
this  act  for  windows  in  public  hallways,  may  be  used  in 
lieu  of  windows  therein. 

(ff)  Ventilating  Skylight. — Sec.  35.  In  every  tene- 
ment house  two  or  more  stories  in  height  hereafter  erect- 
ed, where  there  are  more  than  three  apartments  on  any 
one  floor,  there  shall  be  provided  at  the  roof  over  each 
stairway  a  ventilating  skylight,  placed  directly  as  prac- 
ticable over  same,  having  a  minimum  effective  horizontal 
area  of  glass  at  least  twenty  square  feet  in  area  for  build- 
ings two  stories  in  height,  and  the  area  of  glass  in  such 


404  BUSINESS  LAW  FOR  BUSINESS  MEN. 

skylight  shall  be  increased  at  a  ratio  of  six  square  feet 
for  each  additional  story  in  height.  In  every  such  sky- 
light the  ventilating  area  shall  be  not  less  than  five  hun- 
dred square  inches. 

Every  such  skylight  and  the  ventilating  openings  and 
the  shutters  and  the  closing  and  opening  devices  for  the 
ventilating  openings  shall  be  made  of  approved  incom- 
bustible materials,  and  so  arranged  that  the  entire  venti- 
lating area  may  be  readily  opened  from  at  least  the  top- 
most and  first  story  levels,  except  that  in  tenement  houses 
not  exceeding  four  stories  in  height  the  ventilators  may 
be  arranged  so  as  to  open  from  at  least  the  first  story, 
or  the  ventilators  may  be  fixed  permanently  in  an  open 
position. 

Skylights  as  in  this  section  prescribed  may  be  omitted 
in  case  that  windows  are  provided  of  the  size  fixed  by  sec- 
tion thirty-four  hereof  and  located  adjoining  the  stair- 
ways, and  that  each  window  adjoining  the  stairway  be 
provided  with  an  open  louvre  or  ventilator  providing  a 
ventilating  area  of  not  less  than  one  hundred  square 
inches  or  such  louvre  or  ventilator  may  be  placed  in  the 
roof  over  the  stairway,  in  which  event  the  ventilating 
area  shall  be  not  less  than  five  hundred  square  inches. 

Whenever  a  skylight  is  required  as  in  this  section  pro- 
vided there  shall  be  constructed  a  stair  well,  the  clear 
open  area  of  which  shall  be  at  each  floor  equal  to  one- 
third  of  the  area  of  glass  in  the  skylight. 

(gg)  Water-closets. — Sec.  36.  In  every  tenement 
house  hereafter  erected,  every  apartment  shall  be  so  ar- 
ranged that  access  may  be  had  to  every  living  room,  and 
to  at  least  one  waj;er-closet  compartment,  without  pass- 
ing through  a  bedroom;  provided,  however,  that  nothing 
in  this  section  shall  be  so  construed  as  to  prohibit  pass- 
ing through  a  bedroom  in  going  from  a  kitchen  to  a  bath- 
room or  water-closet  compartment. 

(hh)  Water-closet  for  Each  Compartment. — Sec.  37. 
In  everv  tenement  house  hereafter  erected  there  shall  bo 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  405 

installed  one  water-closet  within  each  apartment  located 
in  a  separate  compartment  or  located  in  a  compartment 
with  a  bathtub,  shower  or  lavatory,  used  exclusively  by 
the  occupants  of  the  apartment. 

No  door  or  other  opening  to  a  water-closet  compart- 
ment shall  open  from  or  into  any  room  in  which  food  is 
prepared  or.  stored.  The  walls  enclosing  a  water-closet 
compartment  shall  be  well  plastered  or  constructed  of 
some  nonabsorbent  material,  except  that  the  ordinary 
wood  trim  of  openings  may  be  used  in  such  compartment. 
Every  such  compartment  shal  be  provided  and  equipped 
with  a  full  door,  properly  hung,  and  provided  with  a  lock 
or  bolt  to  lock  same. 

The  floor  of  every  such  water-closet  compartment  shall 
be  made  waterproof  with  asphalt,  tile,  marble,  terrazzo, 
cement,  or  some  other  similar  nonabsorbent  material, 
and  such  waterproofing  shall  extend  not  less  than  six 
inches  on  the  vertical  walls  of  the  room.  No  water-closet 
fixture  shall  be  enclosed  with  woodwork. 

Sec.  38.  In  every  tenement  house  erected  prior  to  the 
passage  of  this  act  there  shall  be  provided  at  least  one 
water-closet  in  a  separate  compartment,  located  on  the 
public  hallway  of  the  same  floor,  for  every  three  apart- 
ments or  fractional  part  thereof  on  such  floor  which  are 
not  provided  with  private  water-closets.  Where  two  or 
more  water-closets  are  required  by  the  provisions  of  this 
section  to  be  located  on  a  public  hallway,  one  of  such 
water-closets  shall  be  distinctly  marked  "for  men"  and 
one  of  the  water-closets  distinctly  marked  "for  women"; 
provided,  hoivevcr,  that  the  housing  department  charged 
with  the  enforcement  of  this  act  may  exempt  any  tene- 
ment house  existing  at  the  time  of  the  passage  of  this  act 
from  fully  complying  with  the  provisions  of  this  para- 
graph when,  in  its  discretion,  such  deviation  will  not  be 
detrimental  to  the  health  of  the  occupants  thereof  or  to 
the  sanitation  of  the  said  tenement  house  or  premises. 


406  BUSINESS  LAW  FOE  BUSINESS  MEN. 

Nothing  in  this  section  shall  be  construed  as  permit- 
ting such  exemptions  to  apply  to  any  addition  or  exten- 
sion to  any  tenement  house. 

Every  water-closet  hereafter  placed  in  a  tenement 
house  erected  prior  to  the  passage  of  this  act  shall  comply 
with  every  provision  of  this  act  relative  to  water-closets 
installed  in  tenement  houses  hereafter  erected,  except 
that  if  a  water-closet  is  installed  in  the  top  story  of  any 
such  building,  the  compartment  in  which  it  is  installed 
may  be  ventilated  by  a  skylight  with  fixed  louvres  in  lieu 
of  a  window ;  provided,  however ,  that  a  new  water-closet 
may  be  installed  to  replace  a  defective  or  antiquated  fix- 
ture in  the  same  location. 

Every  tenement  house  erected  prior  to  the  passage 
of  this  act,  or  hereafter  erected,  where  a  connection 
with  the  sewer  is  possible,  shall  discontinue  the  use  of 
any  school  sink,  privy  vault  or  any  similar  receptacle 
used  to  receive  fecal  matter,  urine  or  sewage,  and  every 
such  receptacle  shall  be  completely  removed  and  the  place 
where  it  was  located  be  properly  disinfected.  All  such 
receptacles  shall  be  replaced  by  individual  water-closets 
of  durable  nonabsorbent  material,  properly  connected, 
trapped,  vented  and  provided  witn  flush  tanks,  the  same 
as  is  required,  by  the  provisions  of  this  act,  in  tenement 
houses  hereafter  erected. 

(ii)  Bathtub  or  Shower. — Sec.  39.  In  every  tenement 
house  hereafter  erected  there  shall  be  a  bathtub  or  shower 
within  each  apartment,  and  such  bathtub  or  shower 
shall  be  located  in  a  separate  compartment,  or  there  may 
be  provided  one  such  bathtub  or  shower  in  a  separate 
compartment  for  every  three  such  apartments  which  are 
not  provided  with  private  baths  or  showers;  provided, 
that  said  bathtub  or  shower  is  on  the  same  floor  and  is 
accessible  from  each  apartment  through  the  public  hall- 
way. 

In  every  tenement  house  hereafter  erected  there  shall 
be  at  least  one  kitchen  sink  within  each  apartment. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  407 

The  walls,  floors  and  openings  to  every  bath,  shower 
or  slop-sink  room  hereafter  constructed  shall  conform  to 
all  of  the  provisions  of  this  act  relative  to  the  water- 
proofing of  the  walls  and  floors,  and  of  the  construction  of 
the  doors  of  water-closet  compartments  in  tenement 
houses  hereafter  erected. 

Sec.  40.  In  every  tenement  house  erected  prior  to  the 
passage  of  this  act  there  shall  be  provided  at  least  one 
bathtub  or  shower  in  a  separate  compartment,  located  on 
the  same  floor,  for  every  five  apartments,  or  fractional 
part  thereof,  which  are  not  provided  with  private  baths  or 
showers,  on  each  such  floor,  and  there  shall  be  provided  at 
least  one  kitchen  sink  in  each  apartment ;  provided,  how- 
ever, that  the  department  charged  with  the  enforcement 
of  this  act  may  exempt  any  tenement  house  existing  at 
the  time  of  the  passage  of  this  act  from  fully  complying 
with  the  provisions  of  this  section  when,  in  its  discretion, 
such  deviation  will  not  be  detrimental  to  the  health  of  the 
occupants  thereof  or  to  the  sanitation  of  the  said  tene- 
ment house  or  premises ;  provided,  further,  that  no  such 
exemption  shall  apply  to  any  addition  or  extension  to  a 
tenement  house. 

(jj)  Running  Water. — Sec.  41.  In  every  tenement 
house  hereafter  erected  every  plumbing  fixture  shall  be 
provided  with  running  water,  and  there  shall  be  provided 
faucets,  with  running  water,  sufficient  in  number  so  that 
all  of  the  yards,  courts  and  passageways  may  be  washed. 
Faucets  shall  be  of  the  hose  bibb  type,  not  less  than  three- 
quarter  inch  size. 

Every  plumbing  fixture  affecting  the  sanitary  drain- 
age system  in  tenement  houses  hereafter  erected,  shall  be 
properly  connected  with  the  street  sewer,  if  a  street 
sewer  exists  in  the  street  abutting  the  lot  on  which  the 
building  is  located  and  is  ready  to  receive  connections. 
When  it  is  impracticable  to  connect  such  plumbing  fix- 
tures with  a  street  sewer,  then  the  plumbing  fixtures  shall 
be  connected  and  drained  into  a  cesspool  constructed  sat- 
isfactorily to  the  department  charged  with  the  enforce- 


408  BUSINESS  LAW  FOE  BUSINESS  MEN. 

ment  of  this  act ;  or  some  other  means  of  sewage  disposal 
satisfactory  to  the  department  charged  with  the  enforce- 
ment of  this  act  may  be  made  until  such  time  as  it  may 
become  practicable  and  possible  to  connect  with  the  street 
sewer. 

Sec.  42.  In  every  tenement  house  erected  prior  to  the 
passage  of  this  act,  every  plumbing  fixture  shall  be  pro- 
vided with  running  water,  and  there  shall  be  provided 
faucets,  with  running  water,  sufficient  in  number  so  that 
all  of  the  yards,  courts  and  passageways  may  be  washed. 
Faucets  shall  be  of  the  hose  bibb  type,  not  less  than  three- 
quarter  inch  size. 

Sec.  43.  Water-closets,  baths,  showers,  sinks,  slop- 
sinks,  faucets  and  other  plumbing  fixtures  required  by 
this  act  need  not  be  installed  in  the  event  that  the  tene- 
ment house  hereafter  erected  or  an  existing  tenement 
house,  as  the  case  may  be,  is  situated  where  there  is  no 
running  water  and  where  there  is  no  practical  means  of 
sewage  disposal,  until  such  time  as  it  becomes  practicable 
and  possible  to  obtain  running  water  and  means  of  sew- 
age disposal;  provided,  in  every  such  case  the  depart- 
ment charged  with  the  enforcement  of  this  act  shall  de- 
cide whether  or  not  it  is  practicable  and  possible  to  pro- 
vide running  water  and  proper  means  of  sewage  disposal. 
A  special  permit  in  writing  shall  be  obtained  in  every 
such  case  from  the  department  charged  with  the  enforce- 
ment of  this  act,  which  permit  shall  be  made  in  duplicate, 
and  a  copy  thereof  shall  remain  on  file  in  the  department 
issuing  it ;  provided,  further,  that  proper,  separate  toilet 
facilities  for  each  sex  shall  be  provided  for  the  use  of  the 
occupants  of  such  building.  Such  facilities  shall  be  made 
sanitary.  A  privy,  or  toilet  other  than  a  water-closet, 
erected  under  the  authority  of  this  section  shall  consist 
of  a  pit  at  least  three  feet  deep,  with  suitable  shelter  over 
the  same  to  afford  privacy,  and  protection  from  the  ele- 
ments. The  openings  of  the  shelter  and  pit  shall  be  en- 
closed by  mosquito  screening,  and  the  door  to  the  shelter 
shall  be  made  to  close  automatically  by  means  of  a  spring 


BUSINESS  CONTEACTS  AND  LEGAL  OBLIGATIONS.  409 

or  other  device.  No  privy  pit  shall  be  allowed  to  become 
filled  with  excreta  to  nearer  than  one  foot  from  the  sur- 
face of  the  ground,  and  the  excreta  in  the  pit  shall  be 
covered  with  earth,  ashes,  lime  or  similar  substances  at 
regular  intervals.  All  drainage  water  shall  be  conveyed 
from  the  premises  by  means  of  a  covered  drain  to  a  cov- 
ered cesspool. 

(kk)  Plumbing  Fixtures  Made  Sanitary. — Sec.  44.  In 
every  tenement  house  hereafter  erected  all  plumbing  fix- 
tures affecting  the  sanitary  drainage  system  shall  be 
properly  trapped  and  vented  and  made  sanitary  in  every 
particular.  In  any  tenement  house  hereafter  erected,  and 
in  any  tenement  house  erected  prior  to  the  passage  of  this 
act  no  plumbing  fixtures  shall  be  enclosed  with  woodwork, 
but  the  space  under  and  around  same  must  be  left  entirely 
open.  All  woodwork  enclosing  a  water-closet,  sink,  slop- 
sink,  wash  tray  or  lavatory  shall  be  removed  and  the  floor 
and  wall  surface  beneath  and  around  such  water-closet, 
sink,  slop-sink,  wash  tray  or  lavatory  shall  be  maintained 
in  good  repair,  and  if  of  wood,  well  painted  with  a  light 
colored  paint  of  sufficient  body  to  make  it  nonabsorbent. 
All  wooden  seats,  attached  to  water-closet  bowls,  shall  be 
varnished  or  enameled,  or  by  some  other  method  be  made 
nonabsorbent. 

In  every  tenement  house  hereafter  erected  water- 
closets  shall  have  earthenware  bowls  and  shall  hav/e 
earthenware  seats  integral  with  the  bowls,  or  wooden 
seats  varnished  or  enameled  so  as  to  be  nonabsorbent,  or 
seats  made  of  some  nonabsorbent  material  attached  di- 
rectly to  the  bowls.  No  wooden  wash  trays  or  wooden 
kitchen  sinks  shall  be  permitted  in  such  buildings.  All 
plumbing  connections  hereafter  made  in  buildings  shall 
be  of  standard  lead,  iron,  steel  or  brass;  and  every  gas 
and  water  service  connection  hereafter  made  shall  be  of 
steel  or  iron,  and  shall  be  equipped  with  cut-off  valves 
placed  outside  of  the  building  and  such  cut-off  valves 
shall  be  readily  accessible. 


410  BUSINESS  LAW  FOB  BUSINESS  MEN. 

Whenever  any  plumbing  fixture  becomes  insanitary 
the  department  charged  with  the  enforcement  of  this  act 
is  hereby  empowered  to  order  the  same  removed  and  to 
order  that  it  be  replaced  by  a  fixture  conforming  to  the 
provisions  of  this  act. 

(11)  Two  Means  of  Egress. — Sec.  45.  Every  tenement 
house  hereafter  erected,  three  or  more  stories  in  height 
and  in  which  there  are  three  or  more  apartments  on  any 
one  floor,  shall  be  so  designed  and  constructed  that  every 
apartment  in  such  building  shall  have  not  less  than  two 
means  of  egress,  either  by  stairways  or  fire  escapes,  con- 
structed in  accordance  with  the  provisions  of  this  act. 
Such  means  of  egress  shall  be  accessible  from  every 
apartment,  either  directly  or  through  a  public  hallway, 
and  so  located  that  should  one  egress  be  or  become 
blocked,  the  other  egress  shall  be  available. 

(mm)  Stairways. — Sec,  46.  Every  tenement  house 
hereafter  erected  shall  have  not  less  than  two  stairways. 

Every  fireproof  tenement  house  hereafter  erected 
shall  have  not  less  than  one  stairway,  not  less  than  three 
feet  six  inches  wide,  for  each  six  thousand  square  feet, 
or  fractional  part  thereof,  of  floor  area  in  any  one  floor 
above  the  first  floor  thereof. 

Every  semifireproof  tenement  house  hereafter  erected 
shall  have  not  less  than  one  stairway,  not  less  than  three 
feet  six  inches  wide,  for  each  four  thousand  square  feet, 
or  fractional  part  thereof,  or  floor  area  in  any  one  floor 
above  the  first  floor  thereof. 

Every  wopden  tenement  house  hereafter  erected  shall 
have  not  less  than  one  stairway,  not  less  than  three  feet 
six  inches  wide,  for  each  three  thousand  square  feet,  or 
fractional  part  thereof,  of  floor  area  in  any  one  floor 
above  the  first  floor  thereof. 

Every  tenement  house  hereafter  erected  shall  have  not 
less  than  one  stairway  leading  from  the  outside  to  every 
basement  or  cellar  thereof. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  411 

Sec.  47.  The  largest  floor  area  above  the  ground  floor 
shall  be  used  as  the  basis  for  computing  the  number  of 
stairways  required  in  every  tenement  house  hereafter 
erected ;  provided,  that  if  all  floors  above  the  largest  floor 
area  of  the  building  are  diminished  in  area,  the  stairway 
or  stairways  from  that  portion  of  the  building  containing 
a  smaller  area  may  be  computed  on  the  basis  of  the 
largest  floor  area  in  that  portion  of  the  building. 

Sec.  48.  All  stairways  hereafter  constructed  shall  be 
located  so  as  to  furnish  the  best  means  of  egress  from  the 
building,  and  shall  be  as  far  removed  from  each  other  as 
practicable,  and  shall  be  as  follows : 

Access  to  stairway  shall  be  provided  at  every  floor  by 
means  of  a  public  hallway,  corridor,  or  passageway,  and 
the  public  hallway,  corridor,  passageway  and  stairway 
from  the  ground  exit  level  to  the  top  story  or  roof  shall 
be  accessible  at  all  times. 

No  stairway  shall  abut  on  more  than  one  side  of  an 
elevator  shaft,  except  on  the  lowest  and  topmost  stories, 
provided  that  the  stairway  is  so  located  that  it  can  be  ap- 
proached from  the  street  entrance  without  passing  by  or 
in  front  of  the  open  side  of  the  said  elevator  shaft. 

No  stairway  shall  be  located  over  a  steam  boiler,  gas 
meter  or  gas  heater  or  furnace,  unless  such  boiler,  gas 
meter,  gas  heater,  or  furnace  be  located  in  a  room,  the 
walls  and  ceiling  of  which  are  constructed  as  required  for 
a  boiler  room  by  section  sixty-three  of  this  act.  No  stair- 
way leading  from  any  other  portion  of  the  building  shall 
terminate  in  or  pass  through  a  boiler  room. 

Sec.  49.  Every  stairway  hereafter  constructed  shall  be 
as  follows :  have  a  rise  of  not  more  than  eight  inches  and 
a  run  of  not  less  than  nine  inches,  without  change  in  the 
run  or  rise  between  floors;  and  shall  be  provided  with 
head  room  of  not  less  than  six  feet  six  inches  measured 
from  the  nearest  nosing  of  the  stairway  to  the  nearest 
soffit. 


412  BUSINESS  LAW  FOR  BUSINESS  MEN. 

The  depth  of  every  landing  in  a  stairway  shall  be  not 
less  than  the  width  of  the  stairway,  and  all  treads  shall  be 
of  equal  width  for  every  run  of  stairs,  and  shall  not  vary 
in  width  in  the  width  of  the  stairs. 

Stairways  required  by  this  act  shall  be  continuous 
from  the  ground  floor  to  the  top  story,  i.  e.,  the  flights  of 
such  stairways  shall  be  constructed  one  directly  above  the 
other,  or  shall  be  constructed  so  that  each  flight  shall  be 
in  plain  view  of  each  succeeding  flight;  provided,  hoiv- 
ever,  that  half  of  the  stairways  from  the  upper  floors  may 
terminate  at  the  second  floor,  in  the  event  that  the  stair- 
ways from  the  first  to  .the  second  floor  be  increased  in 
width  not  less  than  fifty  per  cent. 

Every  stairway  shall  have  at  least  one  handrail,  and 
if  the  stairway  be  five  feet  or  more  in  width,  shall  have  a 
handrail  on  each  side  thereof. 

The  underside  and  soffits  of  wooden  stairways  and  the 
outside  stringers  of  open  stairways  except  outside  stair- 
way, in  semifireproof  and  wooden  tenement  houses  shall 
be  metal  lathed  and  plastered  not  less  than  three-quarters 
inch  thick  including  the  lath,  or  lathed  with  an  approved 
plaster  board  and  plastered  not  less  than  three-quarters 
inch  thick  including  the  plaster  board. 

The  width  of  stairways  shall  be  measured  in  the  clear 
of  all  projections  except  the  baseboards,  and  except  that 
handrails  and  newel  posts  may  project  not  more  than  four 
inches. 

Sec.  50.  No  closet  of  any  kind  shall  be  constructed  in 
any  tenement  house  under  any  wooden  stairway,  but  such 
space  shall  be  kept  entirely  open,  and  be  kept  clean  and 
free  from  all  encumbrances;  or  such  space  shall  be  effec- 
tually closed  with  walls  of  studs,  lathed  and  plastered, 
with  no  door  or  opening  of  any  kind  therein;  provided, 
hoivtver,  that  the  provisions  of  this  section  as  to  a  closet 
under  a  stairway  shall  not  apply  to  any  tenement  house 
not  more  than  two  stories  in  height,  in  which  not  more 
than  two  families  live  above  the  first  floor  thereof. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  413 

Sec.  51.  In  every  tenement  house  hereafter  erected 
more  than  two  stories  in  height,  the  stairway  nearest  to 
the  main  entrance  of  the  building  shall  be  carried  to  the 
roof  level  and  shall  give  egress  to  the  roof  through  a 
penthouse  or  roof  structure. 

In  every  such  building  not  exceeding  two  stories  in 
li eight  there  shall  be  constructed  a  scuttle  in  the  public 
hallway  near  the  stairway.  Such  scuttle  shall  be  not  less 
than  two  feet  by  three  feet  in  area,  and  shall  be  cut 
through  the  ceiling  and  roof. 

Penthouses  over  stairways  shall  be  built  either  of  fire- 
proof materials  or  of  wood  studs,  lathed  with  metal  lath 
or  approved  plaster  board  and  plastered  not  less  than 
three-quarters  inch  thick  including  the  lath  or  plaster 
board  on  the  inside  and  outside  thereof;  or  such  pent- 
houses may  be  covered  in  the  same  manner  and  with  the 
same  kind  of  materials  as  required  by  this  act  for  the 
doors  from  such  penthouses. 

The  door  to  the  roof  from  a  penthouse  or  roof  struc- 
ture shall  be  self-closing  and  shall  open  outward  to  the 
roof,  and  shall  be  covered  on  both  sides  and  edges  with 
tin  or  other  metal. 

The  frames  and  trim  of  such  door  opening  shall  be 
similarly  constructed  and  all  glass  in  such  door  shall  be 
wired  glass  not  less  than  one-fourth  inch  thick. 

Every  tenement  house  of  more  than  two  stories  in 
height,  erected  prior  to  the  passage  of  this  act,  shall  have 
in  the  roof  a  penthouse  or  a  scuttle,  which  scuttle  shall 
be  not  less  than  two  feet  by  three  feet  in  area,  located  in 
the  ceiling  of  a  public  hallway.  There  shall  be  provided 
a  stairway  or  a  stationary  ladder,  leading  from  the  top 
floor  of  such  tenement  house  to  the  roof  thereof.  Such 
stairway  or  stationary  ladder  shall  be  made  readily  ac- 
cessible to  all  the  tenants  of  the  building.  No  scuttle  or 
penthouse  door  shall  at  any  time  be  locked  with  a  key, 
but  may  be  fastened  on  the  inside  by  a  movable  bolt  or 
lock. 


414  BUSINESS  LAW  FOB  BUSINESS  MEN. 

(nn)  Hallivays,  Etc.,  From  Stairways. — Sec.  52.  Pub- 
lic hallways,  landings  and  corridors  from  stairways  shall 
be  of  the  same  width  and  measured  in  the  same  manner  as 
the  stairways,  as  provided  in  section  fifty  hereof. 

(oo)  Fire  Escapes. — Sec.  53.  On  every  tenement 
house  hereafter  erected  more  than  two  stories  in  height, 
which  contains  more  than  three  apartments,  there  shall 
be  provided  at  least  one  fire  escape.  If  such  tenement 
house  exceeds  three  thousand  square  feet  of  floor  area  on 
any  one  floor  above  the  second  floor  thereof,  such  build- 
ing shall  be  provided  with  one  additional  fire  escape  for 
each  four  thousand  square  feet  of  floor  area  or  fractional 
part  thereof. 

Fire  escapes  required  by  this  act  shall  be  of  one  of 
the  following  types : 

Type  1.  Metallic  throughout  and  fastened  securely  to 
the  exterior  walls  of  the  building,  with  a  balcony  at  each 
story  above  the  first  story  thereof,  with  inclined  stair- 
ways connecting  all  balconies  and  a  goose-neck  ladder 
connecting  the  topmost  balcony  to  the  roof.  The  lowest 
balcony  of  such  fire  escape  to  be  not  more  than  fourteen 
feet  above  the  street  or  ground  level  directly  under  same. 

All  metallic  balconies  shall  be  not  less  than  forty-four 
inches  in  width  nor  less  than  thirty-three  square  feet  in 
area.  The  stairway  openings  therein  shall  be  not  less 
than  twenty-one  inches  wide  and  forty  inches  in  length. 
The  balcony  balustrade  shall  be  not  less  than  thirty-four 
inches  high,  with  no  opening  in  such  balustrade  greater 
than  eight  inches  in  horizontal  dimension. 

There  shall  be  no  opening  greater  than  one  inch  in 
width  in  a  fire  escape  balcony  platform,  except  the  stair 
well  opening. 

There  shall  be  no  opening  greater  than  one  inch  in 
width  in  the  lowest  fire  escape  balcony  platform,  except 
that  there  be  attached  a  counterbalanced  or  permanent 
ladder  reaching  to  the  street  or  ground  below. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  415 

Every  balcony  platform  shall  be  fastened  to  the  out- 
side walls  of  the  building  by  building  in  and  anchoring  to 
such  walls  the  balcony  platform  and  the  balustrade  fram- 
ing, or  by  securely  bolting  same  thereto.  Every  balcony 
shall  be  supported  by  brackets,  braces,  or  struts  fastened 
to  or  built  in  and  anchored  to  the  walls. 

The  inclined  stairways  shall  be  not  less  than  eighteen 
inches  in  width  and  placed  in  no  part  nearer  than  twenty- 
one  inches  from  the  face  of  the  wall.  Such  inclined  stair- 
ways shall  have  an  inclination  of  not  less  than  four  inches 
and  not  more  than  six  inches  horizontally  to  each  twelve 
inches  of  vertical  height.  The  treads  shall  be  not  less 
than  four  inches  wide,  placed  not  more  than  twelve  inches 
apart.  Each  side  of  such  stairways  shall  be  provided 
with  a  handrail  not  less  than  one  inch  in  diameter  fast- 
ened to  the  stair  stringers  and  continued  around  the  well 
hole  openings  of  balcony  platform. 

The  goose-neck  ladder  shall  be  not  less  than  fifteen 
inches  wide  and  extend  vertically  from  the  topmost  bal- 
cony to  three  feet  above  the  fire  wall  or  roof  above,  and 
then  be  brought  down  and  fastened  to  the  inside  face  of 
the  fire  wall  or  to  the  roof.  The  rungs  of  the  goose-neck 
ladder  shall  be  not  less  than  five-eighths  inch  round  iron 
or  steel,  placed  not  more  than  fourteen  inches  apart.  The 
goose-neck  ladder  shall  be  securely  braced  and  fastened 
to  the  outside  wall,  and  in  no  case  shall  such  ladder  pass 
in  front  of  any  opening  in  the  wall  to  the  interior  of  the 
building.  The  cornice  opening  for  the  passage  of  such 
ladder  shall  be  not  less  than  twenty-four  inches  in  width 
and  twenty-four  inches  in  the  clear  outside  of  the  ladder. 

Such  fire  escape  shall  be  framed  and  riveted  or  bolted 
together  in  a  solid,  substantial  manner  and  properly  sup- 
ported, braced  and  fastened  to  the  outside  walls  so  as  to 
be  rigid,  durable  and  secure  and  carry  the  loads  imposed. 

All  metallic  fire  escapes  shall  be  painted  with  not  less 
than  two  coats  of  good,  durable  paint ;  or  such  fire  escapes 
may  be  galvanized. 


416  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Type  2.  Metallic  ladders  and  stairways  conforming 
to  the  provisions  set  forth  for  type  one  and  with  rein- 
forced concrete  or  iron  or  steel  fireproofed  balconies,  with 
fastenings  of  similar  materials.  Such  balconies  to  meas- 
ure the  full  size  inside  of  balustrades.  Floor  openings 
and  well  holes  provided  and  protected  similarly  to  the 
requirements  for  metallic  balconies. 

Type  3.  Any  type  of  an  enclosed  approved  metallic 
spiral  fire  escape  which  consists  of  a  rigid  form  of  an 
inclined  chute  or  chutes  constructed  entirely  of  incom- 
bustible material;  securely  attached  to  the  outside  walls 
of  building ;  provided  with  proper  mean's  of  ingress  there- 
to from  the  building  and  egress  therefrom  at  the  bottom ; 
having  means  enabling  firemen  to  reach  the  roof  thereby 
from  the  ground ;  equipped  with  standpipes ;  painted  the 
same  as  provided  for  metallic  fire  escapes ;  and  satisfac- 
tory to  the  department  charged  with  the  enforcement  of 
this  act  as  being  as  solid,  substantial  and  durable  and  as 
fireproof  in  construction,  and  providing  at  least  as  safe 
and  efficient  means  of  escape  from  the  building  for  the 
occupants  thereof,  and  furnishing  all  the  protection  and 
utility  of  the  metallic  fire  escapes  described  as  "type 
one"  in  this  act. 

Type  4.  Fire  and  smoke  towers,  consisting  of  a  fire 
escape  stairway  not  less  than  twenty  inches  in  width,  con- 
structed of  reinforced  concrete,  iron  or  steel,  or  a  com- 
bination of  these  materials ;  and  in  all  other  details  as 
required  in  this  act  for  metallic  fire  escape  stairways; 
said  stairways  being  continuous  the  full  height  of  the 
building  from  the  first  floor  exit  level  to  the  roof,  and 
with  handrails  on  each  side  thereof  the  full  length  of 
same.  Such  stairways  to  be  constructed  at  a  point  adjoin- 
ing the  exterior  walls  of  the  building  and  be  entirely  en- 
closed with  walls  of  brick,  terra  cotta  tile,  concrete  or 
reinforced  concrete  not  less  than  twelve  inches  thick; 
such  walls  to  be  continuous  from  the  basement  up  to  and 
extending  three  feet  above  the  roof  of  the  building,  with 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  417 

no  covering  of  any  kind  over  same,  and  with  no  openings 
in  the  walls  of  such  tower  into  the  building.  The  enclos- 
ing walls  of  such  tower  not  to  be  used  to  carry  or  support 
any  floor  joist,  beam,  girder  or  other  structural  feature 
of  the  building,  nor  to  be  chased  for  any  pipe,  conduit  or 
other  purpose ;  to  have  an  exit  from  the  enclosure  at  the 
first  floor  line  opening  directly  to  a  street  or  yard,  and 
having  an  entrance  by  means  of  an  outside  balcony  at 
each  floor,  such  balconies  to  have  a  solid  floor  and  in  all 
other  details  and  kind  of  materials  to  be  as  in  this  act 
required  for  metallic  fire  escape  balconies.  The  balconies 
to  be  located  and  arranged  to  connect  with  a  door  opening 
from  a  public  hallway  in  the  interior  of  the  building  and 
with  a  door  opening  leading  from  the  balcony  to  the 
tower,  such  door  opening  from  the  building  to  the  balcony 
and  from  the  balcony  to  the  tower  to  be  not  less  than 
thirty  inches  wide  by  seventy-two  inches  high  and  be 
equipped  with  metal-lined  doors  and  with  a  frame  and 
threshold  of  such  door  openings  constructed  of  fireproof 
materials. 

Type  5.  A  fire  and  smoke  tower  in  every  way  similar 
to  "tj-pe  four"  of  this  section,  except  that  instead  of  the 
outside  balcony  there  be  built  a  vestibule  with  enclosing 
walls  continuous  with  and  of  the  same  kind  of  materials 
and  of  the  same  thickness  as  the  enclosing  walls  of  the 
fire  tower;  that  the  vestibule  opening  be  direct  from  a 
public  hallway  and  be  equipped  with  metal-lined  doors. 
The  vestibule  floor  to  be  of  masonry  construction.  The 
enclosure  to  have  an  opening  at  each  floor  through  the 
exterior  wall  of  the  building,  such  opening  to  extend  from 
the  floor  to  the  ceiling  and  be  not  less  in  width  than  three- 
fourths  of  the  width  of  the  tower,  said  opening  to  be  pro- 
tected with  an  open  metallic  balustrade  similar  to  that 
specified  for  metallic  fire  escape  balconies. 

Sec.  54.  In  any  tenement  house  hereafter  erected  in 
which  there  is  constructed  a  fire  escape  of  "type  four" 
or  "type  five,"  as  prescribed  in  this  act,  such  fire  escape 


418  BUSINESS  LAW  FOB  BUSINESS  MEN. 

may  be  used  and  constructed  as  a  stairway  and  a  fire 
escape  combined ;  provided,  that  there  is  at  least  one  other 
stairway  or  one  other  fire  escape  constructed  in  accord- 
ance with  the  provisions  of  this  act,  in  the  said  building. 

Sec.  55.  Every  fire  escape  required  by  this  act  shall 
be  located  on  the  building  so  as  to  furnish  the  best  means 
of  escape  therefrom  for  the  occupants,  and  at  least  one 
such  fire  escape  shall  be  located  on  a  street  front.  Every 
fire  escape  shall  have  egress  thereto  from  a  public  hall- 
way or  passageway  not  less  than  three  feet  wide,  or  such 
fire  escapes  in  lieu  of  being  located  on  a  public  hallway, 
shall  be  so  located  that  each  apartment  has  direct  egress 
thereto  without  passing  through  another  apartment,  or  if 
a  pubic  parlor,  public  lobby  or  similar  room  is  connected 
directly  with  the  public  hall,  corridor  or  passageway 
through  a  clear  and  unobstructed  opening,  without  doors, 
then  egress  may  be  had  thereby  to  a  fire  escape.  Signs 
both  pointing  towards  and  marking  the  locations  of  fire 
escapes  shall  be  placed  on  each  floor. 

Sec.  56.  The  largest  floor  area  above  the  second  floor 
shall  be  used  as  a  basis  for  computing  the  number  of  fire 
escapes  required  by  this  act;  provided,  that  if  all  floors 
above  the  largest  floor  area  are  diminished  in  size,  the 
number  of  fire  escapes  from  that  portion  of  the  building 
containing  the  smaller  area  may  be  computed  on  the  basis 
of  the  largest  floor  area  in  that  portion  of  the  building. 

Sec.  57.  All  parts  of  each  balcony  platform  of  a  fire 
escape  shall  be  designed  to  carry,  in  addition  to  the  dead 
load  thereof,  a  live  load  of  one  hundred  pounds  per 
square  foot  over  the  entire  area  thereof  (using  outside 
dimensions)  and  the  live  and  dead  loads  from  the  ladders 
or  stairs  supported  thereon. 

Each  ladder  shall  be  designed  to  withstand  a  horizon- 
tal pressure  of  one  hundred  pounds  per  square  foot. 

Each  stairway  shall  be  designed  to  carry,  in  addition 
to  the  dead  load  thereof,  a  live  load  of  one  hundred  fifty 
pounds  per  square  foot  of  horizontal  projection. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  419 

Top  rails  of  balcony  balustrades  shall  be  designed  to 
withstand  a  horizontal  pressure  of  one  hundred  pounds 
per  lineal  foot  of  railing. 

Each  balcony  shall  be  independently  supported. 

All  fastenings  of  fire  escape  balconies  to  the  building 
shall  be  designed  to  carry  twenty-five  per  cent  greater 
load  than  the  total  dead  and  live  loads  carried  by  the 
balconies.  The  balcony  anchorage  shall  be  direct  to  the 
structural  steel  or  iron  members  of  the  balustrades  and 
platforms  extended  into  the  walls  and  anchored  into  the 
structural  work  of  the  building. 

The  level  of  the  inside  sill  of  the  door  or  window  giv- 
ing access  to  a  fire  escape  balcony  or  the  balcony  floor 
shall  be  not  more  than  thirty  inches  above  the  adjoining 
floor  in  the  building.  Every  such  door  or  window  opening 
shall  be  not  less  than  twenty-nine  inches  in  clear  width, 
nor  less  than  fifty-eight  inches  in  height. 

Where  double-hung  windows  are  used  in  such  open- 
ings, the  lower  sash  shall  be  at  least  the  size  of  the  upper 
sash  and  shall  slide  to  the  top  of  such  opening.  Any  lock 
used  on  any  such  window  shall  be  of  a  type  which  can  be 
readily  opened  from  the  interior  of  the  building  without 
the  use  of  a  key  or  other  tool. 

Sec.  58.  Every  fire  escape  in  or  on  tenement  houses 
hereafter  erected,  or  in  or  on  tenement  houses  erected 
prior  to  the  passage  of  this  act,  shall  at  all  times  be  main- 
tained in  good  order  and  repair,  well  painted  and  clear 
and  unobstructed  at  all  times,  and  be  readily  accessible. 

(pp)  Standpipes. — Sec.  59.  On  every  tenement  house 
hereafter  erected  four  or  more  stories  in  height,  there 
shall  be  provided  one  or  more  metallic  standpipes.  Each 
such  standpipe  shall  be  not  less  than  four  inches  in  inter- 
nal diameter,  and  shall  have  a  Siamese  inlet  valve  near 
the  sidewalk  or  the  ground  directly  under  same,  and  an 
outlet  valve  at  each  story  above  the  first  story  and  on 
the  roof. 


420  BUSINESS  LAW  FOR  BUSINESS  MEN. 

One  such  standpipe  shall  be  placed  ou  or  in  the  ex- 
terior walls  of  the  building  at  one  fire  escape  on  each 
street  frontage,  and  the  outlet  valves  shall  be  readily 
accessible  from  the  balconies  of  the  fire  escape. 

The  inlet  and  outlet  valves  on  every  standpipe  shall  be 
threaded  and  brought  to  a  size  which  will  meet  the  stand- 
ard connections  of  the  local  fire  department  of  the  munici- 
pality in  which  such  tenement  house  is  being  erected. 

The  standpipes  required  by  this  section  need  not  be 
installed  in  any  tenement  house  which  is  situated  where 
there  is  no  running  water  and  where  it  is  not  practicable 
or  possible  to  obtain  water  for  efficient  use  of  such  stand- 
pipes  in  case  of  fire,  until  such  time  as  it  is  practicable 
and  possible  to  obtain  running  water;  and  the  depart- 
ment charged  with  the  enforcement  of  this  act  shall  de- 
cide whether  or  not  it  is  possible  or  practicable  to  obtain 
running  water. 

(qq)  Elevator  Shafts. — Sec.  60.  In  every  fireproof 
tenement  house  hereafter  erected,  every  elevator  shaft, 
dumb-waiter  shaft  or  other  interior  shaft  shall  be  enclosed 
in  walls  constructed  of  concrete,  reinforced  concrete, 
brick,  terra  cotta  tile  or  other  similar  hard  incombustible 
materials,  or  shall  be  constructed  of  metal  studs  lathed 
either  with  metal  lath  or  an  approved  plaster  board  and 
plastered  on  both  sides  so  as  to  make  a  solid  partition 
not  less  than  two  inches  thick. 

In  every  semifireproof  or  wooden  tenement  house 
hereafter  erected,  every  such  shaft  shall  be  enclosed  by 
walls  constructed  as  provided  by  this  act  for  fireproof 
tenement  houses,  or  such  walls  may  be  constructed  with 
wood  studs,  with  wood  firestops  the  same  size  as  the 
studs,  cut  in  between  the  studs  at  each  floor  and  half  way 
between  each  floor,  lathed  on  both  sides  with  metal  lath 
or  an  approved  plaster  board  and  be  plastered  not  less 
than  three-quarters  inch  thick  including  the  lath  or  the 
plaster  board. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  421 

Every  opening  from  any  shaft  into  the  building  shall 
be  equipped  with  a  metal  door  and  with  door  frame  and 
trim  entirely  of  metal ;  or  such  door  and  door  frame  shall 
be  constructed  of  wood  covered  with  metal  on  the  shaft 
side  thereof  and  if  there  is  any  glass  therein,  such  glass 
shall  be  wired  glass  not  less  than  one-fourth  (i/4)  inch 
thick.  Every  door  or  window  therein  shall  be  made  to 
close  tight,  and  every  door  except  elevator  doors  therein 
shall  be  self-closing. 

Every  window  in  such  shaft  shall  be  of  wired  glass, 
not  less  than  one-fourth  (i/4)  inch  thick,  set  in  a  metal 
sash  or  a  sash  metal  covered  on  the  shaft  side  thereof. 
At  the  roof  over  every  elevator  shaft  there  shall  be  con- 
structed a  ventilating  skylight  or  a  ventilator  with  open 
louvres. 

(rr)  Vent  Shafts. — Sec.  61.  In  every  tenement  house 
hereafter  erected  every  vent  shaft  shall  be  enclosed  with 
walls  constructed  the  same  as  required  by  this  act  for  ele- 
vator shaft  in  the  same  class  of  building.  Such  vent 
shafts  may,  in  a  semifireproof  or  wooden  tenement  house, 
be  lined  on  the  outside  thereof  (weather  side)  with  metal 
in  lieu  of  metal  lath  and  plaster ;  also,  that  portion  of  such 
shaft  extending  from  the  ceiling  joists  to  the  top  thereof 
may  be  lined  with  metal  in  the  same  manner  as  is  required 
for  the  weather  side  of  such  vent  shaft. 

Every  opening  from  any  vent  shaft  into  the  building 
or  any  window  therein,  shall  be  equipped  in  the  same 
manner  as  required  by  this  act  for  elevator  shafts  in  the 
same  class  of  building. 

Plaster  on  the  weather  side  of  any  such  shaft  shall  be 
cement  plaster. 

Every  vent  shaft  required  by  this  act  shall  be  not  less 
than  four  feet  in  any  direction  and  be  at  least  sixteen 
square  feet  in  area.  If  such  vent  shaft  exceeds  fifty  feet 
in  height,  measured  from  the  bottom  to  the  top  of  the 
walls  of  such  shaft,  then  such  vent  shaft  shall  throughout 
its  entire  height  be  increased  in  area  three  square  feet  for 


422  BUSINESS  JLAW  FOR  BUSINESS  MEN. 

each  additional  ten  feet  or  fractional  part  thereof  above 
fifty  feet. 

Every  such  vent  shaft  shall  be  provided  with  an  air 
intake  or  duct  at  or  near  the  bottom  thereof,  communicat- 
ing with  the  street  or  yard  or  a  court.  Such  intake  shall 
be  not  less  than  three  square  feet  in  total  area,  and  may 
be  divided  into  not  more  than  three  separate  ducts  run- 
ning between  the  joists  or  otherwise,  and  shall  in  all  cases 
be  placed  as  nearly  horizontal  as  possible.  Every  such 
intake  or  duct  shall  be  constructed  of  approved  fireproof 
material  or  shall  be  of  metal  or  metal  lined,  and  be  pro- 
vided with  a  wire  screen  of  not  less  than  one  inch  mesh  at 
each  end.  Plumbing,  gas,  steam,  or  other  similar  pipes 
may  be  placed  in  such  vent  shaft. 

Every  such  vent  shaft  shall  have  a  door  or  a  window 
at  or  near  the  bottom  of  the  shaft,  so  arranged  as  to  per- 
mit of  its  being  readily  cleaned  out. 

(ss)  Walls  of  Inner  Court. — Sec.  62.  The  walls  of 
every  inner  court  in  a  fireproof  tenement  house  hereafter 
erected  shall  be  constructed  of  concrete,  reinforcd  con- 
crete, brick,  terra  cotta  tile  or  other  similar  hard  incom- 
bustible material.  In  a  semifireproof  or  in  a  wooden  tene- 
ment house  such  inner  court  walls,  if  surrounded  on  four 
sides  by  the  walls  of  the  same  building,  shall  be  construct- 
ed as  provided  for  fireproof  tenement  houses,  or  may  be 
of  wood  studs,  with  wood  firestops  the  same  sizes  as  the 
studs,  cut  in  between  the  studs  at  each  floor  and  half  way 
between  each  floor,  lathed  on  both  sides  with  metal  lath, 
or  an  approved  plaster  board,  and  be  plastered  not  less 
than  three-quarters  inch  thick  including  the  lath  or  the 
plaster  board.  Plaster  on  the  weather  side  of  such  inner 
court  walls  shall  be  cement  plaster,  or  such  inner  court 
walls  may  be  lined  on  the  weather  side  with  not  less  than 
the  number  twenty-six  (gauge)  metal,  in  lieu  of  metal 
lath  and  plaster. 

(tt)  Boiler  Room. — Sec.  63.  In  every  tenement  house 
hereafter  erected,  every  boiler  used  for  purposes  of  heat' 


BUSINESS  CONTBACTS  AND  LEGAL  OBLIGATIONS.  423 

ing  the  building,  using  fuel  other  than  gas,  and  every 
heating  furnace  or  water-heating  apparatus,  using  oil  for 
fuel,  shall  be  installed  in  a  room,  the  walls  of  which  room 
shall  be  buit  of  concrete,  reinforced  concrete,  brick,  stone 
or  terra  cotta  tile,  not  less  than  six  (6)  inches  thick,  and 
such  walls  shall  extend  from  the  floor  of  the  boiler  room 
to  the  ceiling  over  same.  The  entire  ceiling  of  such  room 
shall  be  built  of  similar  materials  as  the  walls,  or  shall 
be  built  with  a  double  ceiling,  with  a  space  of  not  less 
than  seven-eighths  inch  between  t,he  two  ceilings;  each 
ceiling  shall  be  metal  lathed  or  lathed  with  an  approved 
plaster  board  and  be  plastered  not  less  than  three-quar- 
ters inch  thick,  including  the  lath  or  plaster  board.  The 
floor  of  a  boiler  room  shall  be  of  concrete  not  less  than 
two  (2)  inches  thick. 

Any  door  in  the  wall  of  such  room  shall  be  a  fire- 
resisting  door,  constructed  of  three  (3)  thicknesses  of 
seven-eighths  (%)  inch  by  not  more  than  six  (6)  inches, 
tongued  and  grooved,  matched  redwood  boards  entirely 
covered  on  the  sides  and  edges  with  lock-jointed  tin; 
every  such  door  shall  be  self-closing,  so  hung  as  to  over- 
lap the  walls  of  the  room  at  least  three  (3)  inches,  and 
any  glass  in  any  such  door  or  any  glass  in  any  window 
or  opening  in  the  walls  of  a  boiler  room  shall  be  wired 
glass,  not  less  than  one-fourth  (i/4)  inch  thick,  set  in  a 
metal  or  metal  covered  sash. 

All  such  doors  shall  have  hinges,  hangers,  latches  and 
other  hardware  of  wrought  iron,  bolted  to  the  doors,  and 
shall  have  steel  tracks,  when  sliding  doors  are  used,  with 
wrought-iron  stops  and  binders  bolted  through  the  wall. 
Swinging  doors  shall  have  wall  eyes  of  wrought  iron, 
built  into  or  bolted  through  the  wall. 

Every  such  boiler  room  shall  have  a  sill  across  each 
door  not  less  than  four  (4)  inches  high.  Such  sill  shall 
be  of  masonry,  and  the  doors  shall  overlap  same  at  least 
three  (3)  inches,  or  in  lieu  of  a  masonry  sill  a  steel  or 
iron  sill  may  be  used,  in  which  case  the  bottom  of  the 


424  BUSINESS  LAW  FOB  BUSINESS  MEN. 

door  shall  close  tight  on  top  of  same.  Every  swinging 
door  in  a  boiler  room  shall  open  outward  from  the  boiler 
room. 

Where  oil  or  other  fluid  fuel  is  burned,  the  oil  or  other 
fluid  fuel  shall  not  be  fed  by  a  gravity  flow. 

(uu)  Garages. — Sec.  64.  In  every  tenement  house 
hereafter  erected  any  portion  of  such  building,  in  which 
there  is  kept  or  stored  any  automobile  or  automobiles, 
shall  be  a  room,  the  enclosing  partitions  of  which  shall 
be  built  of  concrete,  reinforced  concrete,  brick,  stone  or 
terra  cotta  tile,  not  less  than  six  (6)  inches  thick,  or  may 
be  of  wood  studs  lined  on  the  automobile  storage  room 
side  with  redwood  boards  not  less  than  seven-eighths  (%) 
of  an  inch  thick  covered  with  asbestos  paper  one-eighth 
(%)  of  an  inch  thick,  and  then  covered  with  No.  26 
(gauge)  galvanized  iron,  and  such  enclosing  partitions 
shall  extend  from  the  floor  of  the  room  to  the  ceiling  of 
the  same.  The  entire  ceiling  of  such  room  shall  be  built 
of  material  similar  to  that  used  in  the  construction  of 
its  walls,  or  shall  be  either  metal  lathed  and  be  well  plas- 
tered or  be  lathed  with  an  approved  plaster  board  and 
be  well  plastered.  The  floor  of  every  such  room  shall  be 
of  concrete  not  less  than  two  (2)  inches  thick. 

Every  door,  window  or  other  opening  in  the  walls  of 
such  room,  opening  to  the  interior  of  the  building,  shall 
be  protected  in  the  same  manner  as  required  by  section 
sixty-three  hereof  for  doors,  windows  and  other  open- 
ings in  a  boiler  room. 

Sec.  65.  In  any  tenement  house  erected  prior  to  the 
passage  of  this  act,  every  additional  room  or  hallway 
that  is  hereafter  constructed  or  created,  may  be  of  the 
same  height  as  the  other  rooms  or  hallways  on  the  same 
story  of  such  tenement  house. 

(vv)  Windows  in  Tenement  Already  Erected. — 
Sec.  66.  Every  room  in  a  tenement  house  erected  prior 
to  the  passage  of  this  act  shall,  if  the  said  room  be  here- 
after occupied  for  living  or  sleeping  purposes,  have  a 


BUSINESS  CONTBACTS  AND  LEGAL  OBLIGATIONS.  425 

window  of  an  area  not  less  than  eight  square  feet,  open- 
ing directly  upon  a  street,  a  yard,  a  court  or  upon  a  vent 
shaft  not  less  than  twenty-five  square  feet  in  area,  which 
vent  shaft  shall  in  no  part  be  less  than  four  feet  wide  and 
open  and  unobstructed,  without  roof  or  skylight  over 
same ;  except  that  if  such  room  be  located  on  the  top  floor 
of  the  building,  such  room  may  be  ventilated  by  a  sky- 
light with  fixed  louvres  directly  to  the  outer  air,  or  may 
have  a  window  opening  upon  a  vent  shaft  not  less  than 
ten  square  feet  in  area,  if  such  window  from  the  room  be 
not  more  than  three  feet  below  the  top  of  the  wall  of  such 
vent  shaft. 

Every  public  hallway  in  every  tenement  house  erected 
prior  to  the  passage  of  this  act,  which  does  not  conform 
to  the  provisions  for  public  hallways  in  buildings  here- 
after erected,  shall  be  provided  with  light  and  ventilation 
to  the  outer  air.  Such  light  and  ventilation  shall  be  pro- 
vided by  the  placing  of  windows  or  skylights,  or  by 
making  such  alterations  as  in  the  judgment  of  the  housing 
department  may  be  deemed  necessary  to  accomplish  the 
result. 

(ww)  Cooking  in  Bath  Unlawful. — Sec.  67.  It  shall 
be  unlawful  for  any  person  to  cook  or  to  prepare  food, 
or  to  permit  or  suffer  any  person  to  cook  or  to  prepare 
food  in  any  bath,  shower,  slop-sink  or  toilet  room,  water- 
closet  compartment;  or  in  any  closet,  or  recess  from  a 
room,  or  dressing  room,  which  does  not  conform  to  all 
the  provisions  of  this  act  as  to  size  of  kitchens  and  win- 
dows opening  to  a  street,  yard  or  court,  or  in  any  other 
place  in  such  building  which,  in  the  judgment  of  the  de- 
partment charged  with  the  enforcement  of  this  act,  is 
detrimental  to  the  proper  sanitation  of  such  building. 

It  shall  be  unlawful  for  any  person  to  live  or  sleep, 
or  permit  or  suffer  any  person  to  live  or  sleep,  in  any 
cellar,  bath  or  shower  compartment  or  slop-sink  room, 
water-closet  compartment,  hallway,  closet,  kitchen,  recess 
from  a  room  or  dressing  room,  except  when  such  re- 


426  BUSINESS  LAW  FOR  BUSINESS  MEN. 

cess  from  a  room  or  dressing  room  has  not  less  than 
ninety  square  feet  of  superficial  floor  area  and  complies 
with  every  other  requirement  of  this  act  for  rooms,  or 
in  any  other  place  which,  in  the  judgment  of  the  depart- 
ment charged  with  the  enforcement  of  this  act,  would  be 
dangerous  or  prejudicial  to  life  or  health  by  reason  of 
want  of  light,  windows,  ventilation,  drainage,  or  on  ac- 
count of  dampness  or  offensive,  obnoxious  or  poisonous 
odors,  or  in  any  room  that  shall  be  so  overcrowded  as  to 
afford  less  than  the  following  floor  space  for  each  occu- 
pant, in  accordance  with  the  age  of  the  said  occupant : 


Number  of  persons 
over  12  years  of  age 


Number  of  persons 
under  12  years   of  age 


Superficial  floor 
area  required 


1  or   |  2 

2  or   |  4 

3  or  i  6 

4  or   (  8 

5  or   j  10 

6  or   .                                           I  12 


Additional  floor  area  in  the  same  ratio  shall  be  provided  for  addi- 
tional persons. 

(xx)  Lighting  of  Halhcays. — Sec.  68.  In  every  tene- 
ment house  there  shall  be  installed  and  kept  burning  from 
sunrise  to  sunset  throughout  the  year  artificial  light 
sufficient  in  volume  to  properly  illuminate  every  public 
hallway,  stairway,  fire  escape  egress,  elevator,  passage- 
way, public  water-closet  compartment,  or  toilet  room, 
whenever  there  is  insufficient  natural  light  to  permit  a 
person  to  read  in  any  part  thereof. 

In  every  tenement  house  there  shall  be  installed  and 
kept  burning  from  sunset  to  sunrise  throughout  the  year 
artificial  light  sufficient  in  volume  to  properly  illuminate 
every  public  hallway,  stairway,  fire  escape  egress,  eleva- 
tor, public  water-closet  compartment,  or  toilet  room  and 
exterior  passageway  on  the  lot. 

(yy)  Light  Colored  Material  on  Walls. — Sec.  69.  The 
walls  and  ceilings  of  every  sleeping  room  in  every  tene- 
ment house  shall  (except  when  there  is  sufficient  natural 
light  to  permit  a  person  to  read  in  any  part  thereof  dur- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  427 

ing  daytime)  be  calcimined  or  painted  or  papered  with  a 
light-colored  material,  and  such  calcimine,  paint  or  paper, 
as  the  case  may  be,  shall  be  renewed  as  often  as  necessary 
to  maintain  the  same  of  a  light  color  and  clean  and  free 
from  vermin. 

The  walls  of  courts  and  shafts,  unless  built  of  light- 
colored  materials,  shall  be  painted  of  a  light  color  or 
whitewashed,  and  such  painting  or  whitewashing  shall  be 
renewed  as  often  as  is  necessary  to  maintain  the  same  of 
a  light  color. 

(zz)  Repapering. — Sec.  70.  No  wall,  partition  or  ceil- 
ing of  any  room  in  any  tenement  house  shall  be  re- 
papered,  calcimined,  or  have  any  other  covering  placed 
thereupon  unless  the  old  wall  paper  or  other  covering 
shall  have  first  been  removed  therefrom,  and  the  said 
wall,  partition  or  ceiling  cleaned,  disinfected  and  freed 
from  bugs,  insects  or  vermin. 

(aaa)  Repairs. — Sec.  71.  Every  tenement  house  shall 
be  maintained  in  good  repair.  The  roofs  shall  be  kept 
waterproof  and  all  storm  or  casual  water  properly 
drained  and  conveyed  therefrom  to  the  street  sewer, 
storm  drain  or  street  gutter. 

All  portions  of  the  lot  about  a  tenement  house,  in- 
cluding the  yards,  areaways,  vent  shafts,  courts  and 
passageways,  shall  be  properly  graded  and  drained ;  and 
whenever  the  department  charged  with  the  enforcement 
of  this  act  deems  it  necessary  for  the  protection  of  the 
health  of  the  occupants  of  such  building,  or  for  the  proper 
sanitation  of  the  premises,  it  may  require  that  the  said 
lot,  yards,  areaways,  vent  shafts,  courts  and  passageways 
be  graveled  or  properly  paved  and  surfaced  with  con- 
crete, asphalt  or  similar  materials. 

(bbb)  Metal  Mosquito  Screening. — Sec.  72.  There 
shall  be  provided,  whenever  it  is  deemed  necessary  for 
the  health  of  the  occupants  of  any  tenement  house  or  for 
the  proper  sanitation  or  cleanliness  of  any  such  building, 
metal  mosquito  screening  of  at  least  sixteen  mesh,  set  in 


428  BUSINESS  LAW  FOR  BUSINESS   MEN 

tight-fitting  removable  sash,  for  each  exterior  door,  win- 
dow or  other  opening  in  the  exterior  walls  of  the  building. 

(ccc)  Garbage  Cans. — Sec.  73.  In  every  tenement 
house  there  shall  be  provided  by  the  occupants,  or  tenants, 
such  number  of  tight  metal  receptacles  with  close-fitting 
metal  covers  for  garbage,  refuse,  ashes  and  rubbish  as 
may  be  deemed  necessary  by  the  department  charged 
with  the  enforcement  of  this  act,  or  in  lieu  of  such  metal 
receptacles  there  may  be  constructed  a  garbage  chute  or 
shaft  approved  by  the  housing  department.  Each  of  said 
receptacles  shall  be  kept  in  a  clean  condition  by  the  occu- 
pants, or  tenants,  and  in  the  case  of  a  chute  or  shaft  by 
the  person  in  charge  or  in  control  of  the  building. 

(ddd)  Rooms,  Etc.,  to  Be  Kept  Clean. — Sec.  74. 
Every  room,  hallway,  passageway,  stairway,  wall,  parti- 
tion, ceiling,  floor,  skylight,  glass  window,  door,  carpet, 
rug,  matting,  window  curtain,  water-closet  compartment 
or  room,  toilet  room,  bathroom,  slop-sink,  or  wash-room, 
plumbing  fixture,  drain,  roof,  closet,  cellar,  or  basement 
in  any  tenement  house  or  on  the  lot,  yard,  court  or  any 
of  the  premises  thereof,  shall  be  kept  in  every  part  clean 
and  sanitary,  and  free  from  all  accumulation  of  debris, 
filth,  rubbish,  garbage  or  other  offensive  matter. 

No  person  shall,  or  cause  or  permit  any  person  to, 
deposit  any  swill,  garbage,  bottles,  ashes,  cans  or  other 
improper  substances  in  any  water-closet,  sink,  slop- 
hopper,  bathtub,  shower,  catch-basin,  or  in  any  plumbing 
fixture  connection  or  drain  therefrom;  or  otherwise  to 
obstruct  the  same;  or  to  place  or  cause  or  permit  to  be 
placed  any  filth,  urine  or  other  foul  matter  in  any  place 
other  than  the  place  provided  for  same;  or  to  keep  or 
cause  or  permit  to  be  kept  any  urine  or  filth  or  foul 
matter  in  any  room  or  apartment  in  any  tenement  house, 
or  in  or  about  the  said  building  or  premises  thereof,  for 
such  length  of  time  as  to  create  a  nuisance. 

Sec.  75.  In  every  tenement  house,  every  part  of  every 
bed,  including  the  mattress,  sheets,  blankets  and  bedding, 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  42i) 

shall  be  kept  in  a  clean,  dry,  and  sanitary  condition,  free 
from  filth,  urine  or  other  foul  matter,  hi  or  upon  the 
the  same ;  and  free  from  the  infection  of  lice,  bedbugs  or 
other  insects. 

(eee)  Dangerous  Articles  Not  to  Be  Kept. — Sec.  76. 
In  no  tenement  house  or  any  part  thereof,  or  in  the  lot, 
yard,  court  or  any  portion  thereof,  shall  there  be  kept, 
stored  or  handled  any  article  dangerous  or  detrimental 
to  life  or  to  the  health  of  the  occupants  thereof;  nor  shall 
there  be  stored,  kept  or  handled  any  feed,  hay,  straw, 
excelsior,  cotton,  paper  stock,  rags  or  junk,  except  upon 
a  written  permit  so  to  do,  obtained  from  the  fire  com- 
missioner or  other  department  authorized  to  issue  such 
permit.  Every  such  permit  shall  be  deemed  to  be  a  public 
record,  made  in  duplicate,  and  a  copy  thereof  shall  re- 
main on  file  in  the  office  of  the  fire  commissioner  or  de- 
partment issuing  same. 

Sec.  77.  No  horse,  cow,  calf,  swine,  sheep,  goat,  rab- 
bit, mule  or  other  animal,  chicken,  pigeon,  goose,  duck  or 
other  poultry  shall  be  kept  in  any  tenement  house  or  any 
part  thereof;  nor  shall  any  such  animal  or  poultry,  nor 
shall  any  stable  be  kept  or  maintained  on  the  same  lot, 
yard,  court  or  premises  of  a  tenement  house  or  within 
twenty  feet  of  any  window  or  door  of  such  building,  nor1 
shall  there  be  hereafter  constructed,  altered,  converted 
or  maintained  in  any  tenement  house  any  public  automo- 
bile garage  or  machine  shop,  or  automobile  repair  shop. 

No  bakery  or  place  of  business  in  which  fat  is  boiled 
shall  be  constructed  or  maintained  in  any  tenement  house, 
unless  such  bakery  or  place  of  business  in  which  fat  is 
boiled  is  constructed  of  approved  fireproof  materials, 
with  no  openings  connecting  into  the  tenement  house,  and 
so  separated  and  arranged  as  to  prevent  odors  from 
entering  such  building. 

No  tenement  house  shall  be  constructed  with  or  have 
any  door,  window  or  transom  opening  to  any  part  of  a 
building  wherein  spirituous  liquors,  drugs,  paint  or  oil 


430  BUSINESS  LAW  FOR  BUSINESS  MEN. 

are  stored  or  kept  for  the  purpose  of  sale  or  otherwise. 

(fff)  Housekeeper  in  Charge. — Sec.  78.  In  every 
tenement  house  in  which  eight  (8)  or  more  families  re- 
side, and  in  which  the  owner  does  not  live,  there  shall  be 
a  janitor,  housekeeper  or  other  responsible  person,  who 
shall  reside  in  such  tenement  house  or  on  the  same  lot 
or  premises  thereof  and  have  charge  of  same. 

(ggg)  Fine  a  Lien. — Every  fine  imposed  by  judgment 
under  section  six  of  this  act  upon  a  tenement  house  owner 
shall  be  a  lien  upon  the  house  in  relation  to  which  the 
fine  is  imposed,  from  the  time  of  the  filing  of  a  certified 
copy  of  said  judgment  in  the  office  of  the  recorder  of  the 
county  in  which  said  tenement  house  is  situated,  subject 
only  to  taxes  and  assessments  and  water  rates,  and  to 
such  mortgage  and  mechanics '  liens  as  may  exist  thereon 
prior  to  such  filing ;  and  it  shall  be  the  duty  of  the  depart- 
ment charged  with  the  enforcement  of  the  provisions  of 
this  act,  upon  the  entry  of  such  judgment,  to  file  forth- 
with the  copy  as  aforesaid,  and  such  copy  upon  filing 
shall  be  forthwith  indexed  by  the  recorder  in  the  index  of 
mechanics'  liens. 

(hhh)  Name  of  Owner  to  be  Filed. — Every  owner  of 
a  tenement  house  and  every  lessee  of  the  whole  house,  or 
other  person  having  control  of  a  tenement  house,  shall 
file  in  the  housing  department  a  notice,  containing  his 
name  and  address,  and  also  a  description  of  the  property, 
by  street  and  number  and  otherwise,  as  the  case  may  be, 
in  such  manner  as  will  enable  the  department  charged 
with  the  enforcement  of  this  act  easily  to  find  the  same ; 
and  also  the  number  of  apartments  in  each  house,  the 
number  of  rooms  in  each  apartment,  and  the  number  of 
families  occupying  the  apartments.  In  case  of  a  transfer 
of  any  tenement  house,  it  shall  be  the  duty  of  the  grantee 
of  said  tenement  house  to  file  in  the  housing  department 
a  notice  of  such  transfer,  stating  the  name  of  the  new 
owner,  within  thirty  days  after  such  transfer.  In  case 
of  the  devolution  of  the  said  property  by  will,  it  shall  be 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  431 

the  duty  of  the  executor  and  the  devisee,  if  more  than 
twenty-one  years  of  age,  and  in  the  case  of  devolution  of 
such  property  by  inheritance  without  a  will,  it  shall  be 
the  duty  of  the  heirs,  or  in  case  all  the  heirs  are  under 
age,  it  shall  be  the  duty  of  the  administrator  of  the  de- 
ceased owner  of  said  property,  to  file  in  said  department 
a  notice,  stating  the  death  of  said  owner  and  the  names 
of  those  who  have  succeeded  to  his  interests,  within 
thirty  (30)  days  after  the  death  of  the  decedent,  in  case 
he  died  intestate,  and  within  thirty  days  after  the  probate 
of  his  will,  if  he  died  testate. 

(iii)  Name  of  Agent  Filed. — Every  owner,  agent  or 
lessee  of  a  tenement  house  shall  file  in  the  housing  depart- 
ment a  notice  containing  the  name  and  address  of  such 
agent  of  such  house,  for  the  purpose  of  receiving  service 
of  process,  and  also  a  description  of  the  property,  by 
street  and  number  or  otherwise,  as  the  case  may  be,  in 
such  manner  as  will  enable  the  department  charged  with 
the  enforcement  of  this  act  easily  to  find  the  same.  The 
name  of  the  owner  or  lessee  may  be  filed  as  agent  for 
this  purpose. 

(jjj)  Notices. — Every  notice  or  order  in  relation  to  a 
tenement  house  shall  be  served  five  days  before  the  time 
for  doing  the  thing  in  relation  to  which  it  shall  have  been 
issued. 

(kkk)  Minimum  Requirements. — Sec.  87.  The  pro- 
visions of  this  act  shall  be  held  to  be  the  minimum  require- 
ments adopted  for  the  protection,  the  health  and  the 
safety  of  the  community,  and  for  the  protection,  the 
health  and  the  safety  of  the  occupants  of  tenement  houses* 
Nothing  in  this  act  contained  shall  be  construed  as  pro- 
hibiting the  local  legislative  body  of  any  incorporated 
town,  incorporated  city,  incorporated  city  and  county,  or 
county,  from  enacting,  from  time  to  time,  supplementary 
ordinances  or  laws  imposing  further  restrictions,  or  pro- 
viding for  fees  to  be  charged  for  permits,  certificates,  or 
other  papers  recfuired  by  this  act ;  but  no  ordinance,  law, 


432  BUSINESS  LAW  FOR  BUSINESS  MEN. 

regulation  or  ruling  of  any  municipal  department,  au- 
thority, officer  or  officers,  shall  repeal,  amend,  modify  or 
dispense  with  any  of  the  provisions  of  this  act. 

All  statutes  of  the  state  and  all  ordinances  of  incor- 
porated towns,  incorporated  cities,  incorporated  cities 
and  counties,  and  counties,  as  far  as  inconsistent  with  the 
provisions  of  this  act,  are  hereby  repealed;  provided, 
that  nothing  in  this  act  contained  shall  be  construed  as 
repealing  or  abrogating  any  present  law  or  ordinance  of 
any  incorporated  town,  incorporated  city,  incorporated 
city  and  county,  or  county  in  the  state  which  further 
restricts  the  percentage  of  the  lot  to  be  covered  by  a 
tenement  house,  the  number  of  stories  or  height  of  such 
tenement  house  or  number  of  apartments  therein,  the 
occupation  thereof,  the  materials  to  be  used  in  its  con- 
struction, or  increasing  the  size  of  the  yards  or  courts, 
the  floor  space  to  each  person  occupying  a  room,  the 
requirements  as  to  sanitation,  ventilation,  light  and  pro- 
tection against  fire. 

Nothing  in  this  act  contained  shall  be  construed  as 
abrogating,  diminishing,  minimizing  or  denying  the 
power  of  any  incorporated  town,  incorporated  city,  in- 
corporated city  and  county,  or  county,  by  ordinance  or 
law,  to  further  restrict  the  percentage  of  the  lot  to  be 
covered  by  a  tenement  house  within  said  municipality, 
the  number  of  stories  or  height  of  such  tenement  house 
or  number  of  apartments  therein,  the  occupation  thereof, 
the  materials  to  be  used  in  its  construction,  or  increasing 
the  size  of  the  yards  or  courts,  the  floor  space  to  each 
person  occupying  a  room,  the  requirements  as  to  sani- 
tation, ventilation,  light  and  protection  against  fire. 

Act  of  the  Legislature,  approved  May  31,  1917 ; 
in  effect  September  1,  1917. 

Section  437. — DWELLING  HOUSE  ACT. — The  Legisla- 
ture of  California  in  1917  passed  a  law  to  regulate  the 
construction,  occupancy,  and  use  of  dwelling  houses  in 


BUSINESS  CONTEACTS  AND  LEGAL  OBLIGATIONS.  433 

this  State,  providing  as  follows : 

Section  1.  This  act  shall  be  known  as  the  "State 
Dwelling  House  Act,"  and  its  provisions  shall  apply  to 
incorporated  towns,  incorporated  cities,  and  incorporated 
cities  and  counties,  of  this  State. 

Section  2  of  the  act  provides  for  its  enforcement  by 
the  building  departments  of  cities  and  towns. 

(a)  Unlawful    to    Construct   Dwelling    Contrary    to 
Act. — Sec.  3.    It  shall  be  unlawful  for  any  person,  firm  or 
corporation,  whether  as  owner,  agent,  contractor,  builder, 
architect,   engineer,   superintendent,   foreman,   plumber, 
tenant,  lessee,  lessor,  occupant,  or  in  any  other  capacity 
whatsoever  to  erect,  construct,  reconstruct,  alter,  build 
upon,  move,  convert,  use,  occupy  or  maintain,  or  to  cause, 
permit  or  suffer  to  be  erected,  constructed,  reconstructed, 
altered,  built  upon,  moved,  converted,  used,  occupied  or 
maintained  any  dwelling  or  any  portion  thereof  contrary 
to  the  provisions  of  this  act,  or  to  commit  or  maintain 
or  cause  or  permit  to  be  committed  or  maintained  any 
nuisance  in  or  upon  any  dwelling  or  any  portion  thereof, 
or  any  of  the  premises,  which  are  a  part  thereof,  or  which 
are  required  by  the  provisions  of  this  act ;  or  to  do  or  to 
cause  to  be  done,  or  to  use  or  cause  to  be  used,  any  privy, 
sewer,  cesspool,  plumbing  or  house  drainage  affecting  the 
sanitary  condition  of  any  dwelling  or  any  portion  thereof, 
or  of  the  premises  thereof,  contrary  to  any  of  the  pro- 
visions of  this  act. 

(b)  Alterations. — Sec.  4.     It  shall  be  unlawful  for 
any  person  to  make  any  alterations  or  changes  of  any 
kind  whatsoever,  to  any  dwelling  erected  prior  to  the 
passage  of  this  act,  or  to  any  dwelling  hereafter  erected, 
in  any  manner  which  would  be  inconsistent  with  any  of 
the  provisions  of  this  act,  or  in  violation  of  the  said  pro- 
visions of  this  act ;  or  in  any  manner  to  diminish  the  size 
of  the  windows,  or  to  remove  any  window  or  windows 
from  the  rooms  contrary  to  any  of  the  provisions  of 
this  act. 


434  BUSINESS  LAW  FOE  BUSINESS  MEN. 

(c)  Building  Converted  to  Use  as  Dwelling. — Sec.  5. 
A  building  not  erected  for,  or  which  is  not  used  as  a 
dwelling  at  the  time  of  the  passage  of  this  act,  if  here- 
after converted  to  or  altered  for  such  use,  shall  there- 
upon become  subject  to  all  the  provisions  of  this  act 
affecting  a  dwelling  hereafter  erected. 

A  building  used  as  a  dwelling  at  the  time  of  the  pas- 
sage of  this  act,  if  moved,  shall  be  made  to  conform  to  all 
of  the  provisions  of  this  act  affecting  dwellings  hereafter 
erected,  in  so  far  as  they  pertain  to  unoccupied  area. 

(d)  Penalty  for  Violation. — Sec.  6.    Any  person,  firm 
or  corporation  violating  any  of  the  provisions  of  this  act 
shall  be  deemed  guilty  of  a  misdemeanor,  and  upon  con- 
viction thereof  shall  be  punished  by  a  fine  not  exceeding 
five  hundred  dollars,  or  by  imprisonment  in  a  county  jail 
not  exceeding  six  months,  or  by  both  such  fine  and  im- 
prisonment. 

Section  7  gives  city  department  officers  and  the  owner 
authority  to  enter  dwellings  to  secure  compliance  with  the 
provisions  of  this  Act. 

(e)  Definitions. — Sec.  8.    For  the  purpose  of  this  act, 
certain  words  and  phrases  are  defined  as  follows,  unless 
it  shall  be  apparent  from  their  context  that  they  have  a 
different  meaning: 

"Apartment"  is  a  room  or  suite  of  rooms  which  is 
occupied,  or  is  intended  or  designed  to  be  occupied,  by 
one  family  for  living  and  sleeping  purposes. 

"Basement"  is  any  story  or  portion  thereof  partly 
below  the  level  of  the  curb  or  the  actual  adjoining  ground 
level,  the  ceiling  of  which  in  no  part  is  less  than  seven 
feet  above  the  curb  level  or  actual  adjoining  ground 
levels.  If  the  adjoining  ground  is  excavated  to  or  below 
the  curb  level,  such  excavated  space  shall  have  not  less 
than  the  minimum  width  and  length  required  in  this  act 
for  outer  courts. 

"Building"  is  a  dwelling. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  435 

"Cellar"  is  any  story  or  portion  thereof,  the  ceiling 
of  which  is  less  than  seven  feet  above  the  curb  level  and 
actual  adjoining  ground  levels. 

"Curb  level"  is  the  curb  level  opposite  the  center  of 
the  front  of  lot,  and  in  the  event  that  a  curb  has  not  been 
established  shall  be  deemed  to  be  the  average  ground 
level  at  the  front  of  lot. 

"Dwelling"  is  as  follows: 

(a)  Any  house  or  building,  or  any  portion  thereof, 
which  contains  not  more  than  two  apartments,  or  not 
more  than  five  guest  rooms,  or, 

(b)  Any  house  or  building  or  any  portion  thereof, 
not  more  than  one  story  in  height,  which  contains  more 
than  two  apartments,  or, 

(c)  Any  house  or  building,  or  any  portion  thereof,  of 
more  than  one  story  and  not  more  than  two  stories  in 
height,  which  is  designed,  built,  rented,  leased,  let  or 
hired  out  to  be  occupied,  or  is  occupied,  as  the  home  or 
residence  of  not  more  than  four  families   (four  apart- 
ments), and  which  is  so  arranged  that  each  of  the  said 
families  live  independently   of  each  other,   and  which 
building  is  constructed  and  arranged  so  that  a  separate 
section  is  or  may  be  kept  as  a  home  or  a  residence  of  a 
separate  family.     Each  such  section  having  an  entirely 
independent  and  separate  entrance,  and  if  a  stairway  is 
required,  one  separate  stairway  leading  to  each  section 
from  the  street  or  from  an  outside  vestibule  on  the  level 
of  the  first  floor  of  said  building,  and  with  no  room,  hall- 
way, bathroom,  water-closet  or  kitchen  used  in  common 
by  two  or  more  families  occupying  the  said  building. 

"Family"  is  one  person  living  alone  or  a  group  of 
two  or  more  persons  living  together  in  an  apartment, 
whether  related  to  each  other  by  birth  or  not. 

"Guest"  is  any  person  hiring  and  occupying  a  room 
for  sleeping  purposes,  and  shall  include  both  boarders 
and  lodgers. 


436  BUSINESS  LAW  FOR  BUSINESS  MEX. 

"Guest  room"  is  a  room  which  is  occupied,  or  is  in- 
tended, arranged  or  designed  to  be  occupied,  for  sleeping 
purposes  by  one  or  more  guests. 

"Lot"  is  a  parcel  or  area  of  land  on  which  is  situated 
a  dwelling,  together  with  the  land,  and  unoccupied  spaces 
for  such  a  dwelling,  as  required  by  this  act ;  all  of  which 
land  shall  be  owned  by  or  be  under  the  absolute  lawful 
control  and  in  the  lawful  possession  of  the  dwelling. 

"Nuisance"  embraces  public  nuisance  as  known  at 
common  law  or  in  equity  jurisprudence,  and  whatever  is 
dangerous  to  human  life  or  detrimental  to  health,  and 
shall  also  embrace  the  overcrowding  with  occupants  of 
any  room,  insufficient  ventilation,  or  inadequate  or  in- 
sanitary sewerage  or  plumbing  facilities,  or  uncleanli- 
ness,  and  whatever  renders  air,  food  or  drink  unwhole- 
some or  detrimental  to  the  health  of  human  beings. 

"Street"  is  any  public  street,  alley,  thoroughfare  or 
park  having  a  minimum  width  of  sixteen  feet,  measured 
from  the  front  of  lot  to  the  opposite  front  of  lot,  and  shall 
have  been  dedicated  or  deeded  to  the  public  for  public  use. 

Sec.  9.  Every  dwelling  hereafter  erected  shall  be 
constructed  in  a  substantial  manner;  and  the  building 
shall  be  so  constructed  as  to  provide  shelter  to  the  occu- 
pants against  the  elements,  and  so  as  to  exclude  damp- 
ness in  inclement  weather. 

Sec.  10.  In  no  dwelling  shall  any  room  in  the  cellar 
be  constructed,  altered,  converted  or  occupied  for  living 
or  sleeping  purposes. 

(f)  Rooms  in  Basement. — Sec.  11.  In  no  dwelling 
shall  any  room  in  the  basement  be  constructed,  altered, 
converted  or  occupied  for  living  purposes  unless  it  con- 
forms to  all  of  the  requirements  of  this  act  for  rooms  in 
other  parts  of  the  building,  and  that  the  ceiling  of  each 
such  room  be  in  all  parts  not  less  than  seven  feet  above 
the  adjoining  ground  levels. 

All  the  walls  below  the  ground  level  and  the  floors  of 
such  a  basement  shall  be  dampproofed  and  waterproofed. 


BUSINESS  CONTRACTS  AND  LEGAL,  OBLIGATIONS.  437 

Such  dampproofing  and  waterproofing  shall  run  through 
the  walls  and  up  as  high  as  the  ground  level  and  continue 
throughout  the  floor. 

Every  basement  in  such  buildings  shall  be  illuminated 
and  ventilated. 

(g)  Ventilation  Beneath  Floor. — Sec.  12.  In  every 
dwelling  hereafter  erected  there  shall  be  provided  a  clear 
air  space  under  the  lowest  floor  thereof  of  at  least  six 
inches,  except  where  there  is  a  ventilated  basement  or 
cellar  underneath  such  floor,  which  clear  air  space  shall 
be  enclosed  and  provided  with  a  sufficient  number  of 
openings  with  removable  screens,  or  similar  provisions, 
of  a  size  to  insure  ample  ventilation.  The  surface  under- 
neath the  floor  shall  be  kept  dry,  drained,  clean  and  free 
from  any  accumulation  of  rubbish,~debris  or  filth. 

The  provisions  of  this  section  shall  not  be  deemed  to 
apply  to  masonry  floors  laid  directly  on  the  soil,  nor  to 
any  self-supporting  masonry  floor. 

(h)  Width  and  Height. — Sec.  13.  In  every  dwelling 
hereafter  erected,  every  room  used  for  living  or  sleeping 
purposes  shall  contain  at  least  ninety  square  feet  of 
superficial  floor  area. 

Every  such  room  shall  at  every  point  be  not  less  than 
seven  feet  in  width,  nor  less  than  eight  feet  in  height 
measured  from  the  finished  floor  to  the  finished  ceiling; 
except  that  attic  rooms  and  rooms  where  sloping  ceilings 
occur  need  be  eight  feet  in  height  in  but  one-half  the  area 
of  the  room. 

Every  water-closet  compartment  shall  be  not  less  than 
thirty-six  inches  in  width  and  every  such  compartment 
and  bath  or  shower  compartment  shall  have  a  height  of 
not  less  than  seven  feet  six  inches  measured  from  the 
finished  floor  to  the  finished  ceiling. 

(i)  Windoius — Sec.  14.  In  every  dwelling  hereafter 
erected,  every  room  used  for  living  or  sleeping  purposes 
and  every  kitchen,  water-closet  compartment,  shower  or 
bathroom,  shall  have  at  least  one  window,  of  the  area  fixed 


438  BUSINESS  LAW  FOR  BUSINESS  MEN 

by  this  act,  opening  directly  upon  a  street,  or  upon  un- 
occupied area  not  less  than  four  feet  in  its  least  dimension 
and  containing  an  area  of  not  less  than  thirty-six  square 
feet,  and  located  on  the  same  lot. 

A  cornice  may  extend  into  the  unoccupied  area  two 
inches  for  each  one  foot  in  width  of  such  unoccupied  area. 

Windows  herein  required  shall  be  located  so  as  prop- 
erly to  light  all  portions  of  the  room,  and  shall  be  made 
so  as  to  open  in  all  parts  and  so  arranged  that  at  least 
one-half  of  the  window  may  be  opened  unobstructed; 
provided,  however,  that  the  windows  required  by  this 
section  in  a  water-closet  compartment  or  bath  or  shower 
room  may  be  opened  directly  into  a  vent  shaft,  such  vent 
shaft  to  be.  in  no  dimension  less  than  eighteen  inches ; 
provided,  further,  that  windows  required  to  open  onto  a 
street  or  onto  unoccupied  area  may  open  through  porches, 
provided  that  the  said  porches  do  not  exceed  seven  feet 
in  depth,  measured  at  right  angles  to  the  windows  and 
that  at  least  seventy-five  per  cent  of  the  entire  side  of  the 
porch,  bounded  by  the  street  or  unoccupied  area  is  left 
open,  except  that  the  open  space  may  be  enclosed  with 
mosquito  screens. 

Sec.  15.  In  every  dwelling  hereafter  erected  the  total 
window  area  in  each  room  used  for  living  or  sleeping 
purposes  shall  be  at  least  one-eighth  of  the  superficial 
floor  area  of  the  room. 

All  measurements  for  window  area  shall  be  taken  to 
outside  of  sash. 

Sec.  16.  In  every  dwelling  hereafter  erected,  the 
window  area  in  a  water-closet  compartment  or  bathroom 
shall  be  not  less  than  three  square  feet. 

(j)  Water  Closets. — Sec.  17.  Every  dwelling  here- 
after erected  shall  be  provided  with  one  water-closet  for 
each  family  living  therein. 

(k)  Plumbing  Fixtures. — Sec.  18.  In  every  dwelling 
hereafter  erected  every  plumbing  fixture  shall  be  pro- 
vided with  running  water. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  439 

Every  plumbing  fixture  affecting  the  sanitary  drain- 
age system  in  dwellings  hereafter  erected  shall  be  prop- 
erly connected  with  the  street  sewer,  if  a  street  sewer 
exists  in  the  street  abutting  the  lot  on  which  the  building- 
is  located  and  is  ready  to  receive  connections.  When  it 
is  impracticable  to  connect  such  plumbing  fixtures  with 
a  street  sewer,  then  the  plumbing  fixtures  shall  be  con- 
nected and  drained  into  a  cesspool  constructed  satisfac- 
torily to  the  department  charged  with  the  enforcement 
of  this  act ;  or  some  other  means  of  sewage  disposal  satis- 
factory to  the  department  charged  with  the  enforcement 
of  this  act  may  be  made  until  such  time  as  it  may  become 
practicable  and  possible  to  connect  with  the  street  sewer. 

Sec.  19.  Water-closets,  baths,  showers,  sinks,  slop- 
sinks,  faucets  and  other  plumbing  fixtures  required  by 
this  act  need  not  be  installed  in  the  event  that  the  dwell- 
ing hereafter  erected,  or  an  existing  dwelling,  as  the  case 
may  be,  is  situated  where  there  is  no  running  water  and 
where  there  is  no  practical  means  of  sewage  disposal, 
until  such  time  as  it  becomes  practicable  and  possible  to 
obtain  running  water  and  means  of  sewage  disposal; 
provided,  in  every  such  case  the  department  charged  with 
the  enforcement  of  this  act  shall  decide  whether  or  not 
it  is  practicable  and  possible  to  provide  running  water, 
or  proper  means  of  sewage  disposal;  provided,  further, 
that  proper  toilet  facilities  shall  be  provided  for  the  use 
of  the  occupants  of  such  building.  Such  facilities  shall 
be  made  sanitary.  A  privy,  or  toilet  other  than  a  water- 
closet,  erected  under  the  authority  of  this  section  shall 
consist  of  a  pit  at  least  three  feet  deep,  with  suitable 
shelter  over  the  same  to  afford  privacy  and  protection 
from  the  elements.  The  openings  of  the  shelter  and  pit 
shall  be  enclosed  by  fly  screening,  and  the  door  to  the 
shelter  shall  be  made  to  close  automatically,  by  means  of 
a  spring  or  other  device.  No  privy  pit  shall  be  allowed 
to  become  filled  with  excreta  to  nearer  than  one  foot  from 
the  surface  of  the  ground,  and  the  excreta  in  the  pit  shall 


440  BUSINESS  LAW  FOE  BUSINESS  MEN. 

be  covered  with  earth,  ashes,  lime  or  similar  substances 
at  regular  intervals. 

(1)  Earthenware  Bowls  and  Seats. — Sec.  20.  In 
every  dwelling  hereafter  erected,  and  in  every  dwelling 
now  existing,  all  plumbing  fixtures  shall  be  properly 
trapped  and  vented  and  all  such  plumbing  made  sanitary 
in  every  particular.  Water-closets  hereafter  installed 
shall  have  earthenware  bowls  and  shall  have  earthenware 
seats,  or  seats  made  of  some  nonabsorbent  material 
integral  with  the  bowls,  or  wooden  seats,  enameled  or 
varnished  or  otherwise  made  nonabsorbent,  attached  di- 
rectly to  the  bowls.  All  connections  shall  be  of  standard 
lead,  iron,  steel  or  brass. 

No  plumbing  fixtures  shall  be  enclosed  with  wood- 
work, but  the  space  under  and  around  the  same  must  be 
left  entirely  open. 

(m)  Cooking  in  Bath  Compartment. — Sec.  21.  It 
shall  be  unlawful  for  any  person  to  cook  or  to  prepare 
food,  or  to  permit  or  suffer  any  person  to  cook  or  to 
prepare  food  in  any  bath,  shower,  slop-sink  or  water- 
closet  compartment,  or  in  any  other  place  in  the  building 
which,  in  the  judgment  of  the  department  charged  with 
the  enforcement  of  this  act,  is  detrimental  to  the  proper 
sanitation  of  such  building. 

It  shall  be  unlawful  for  any  person  to  live  or  sleep, 
or  to  permit  or  suffer  any  person  to  live  or  sleep,  in  any 
cellar,  bath,  shower  or  slop-sink  room,  water-closet  com- 
partment, hallway,  closet  or  kitchen,  or  in  any  other  place 
which,  in  the  judgment  of  the  department  charged  with 
the  enforcement  of  this  act,  would  be  dangerous  or  preju- 
dicial to  life  or  health  by  reason  of  want  of  light,  win- 
dows, ventilation,  drainage,  or  on  account  of  dampness, 
offensive,  obnoxious  or  poisonous  odors  or  in  any  room 
that  shall  be  so  overcrowded  as  to  afford  less  than  the 
following  floor  space  for  each  occupant  in  accordance 
with  the  age  of  the  said  occupant; 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS. 


441 


Number    of    persons    over 
12  years  of  age. 

Number  of 
persons  under 
12    years    of 
age. 

Superficial   flooi 
area  required. 

1 

2 

60  square  feet 

2     

4 

120  square  feet 

3     

6 

180  square  feet 

4     .                           

8 

240  square  feet 

5     .... 

10 

300  square  feet 

6     

12 

360  square  feet 

Additional  floor  area  in  the  same  ratio  shall  be  pro- 
vided for  additional  persons. 

(n)  Repapering. — Sec.  22.  No  wall,  partition  or  ceil- 
ing of  any  room  in  any  dwelling  shall  be  repapered,  cal- 
cimined,  or  have  any  other  covering  placed  thereupon 
unless  the  old  wall  paper  or  other  covering  shall  have 
first  been  removed  therefrom,  and  the  said  wall,  parti- 
tion or  ceiling  cleaned,  disinfected  and  freed  from  bugs, 
insects  or  vermin. 

(o)  Repairs. — Sec.  23.  Every  dwelling  shall  be  main- 
tained in  good  repair.  The  roofs  shall  be  kept  waterproof 
and  all  storm  or  casual  water  properly  drained  and  con- 
veyed therefrom  to  the  street  sewer,  storm  drain  or  street 
gutter. 

Every  water-closet,  bathtub,  sink,  slop-hopper  or  other 
similar  plumbing  fixture  shall  at  all  times  be  kept  clean, 
sanitary  and  in  good  working  order. 

(p)  Metal  Mosquito  Screening. — Sec.  24.  There  shall 
be  provided,  whenever  it  is  deemed  necessary  for  the 
health  of  the  occupants  of  any  dwelling  or  for  the  proper 
sanitation  or  cleanliness  of  any  such  building,  metal  mos- 
quito screening  of  at  least  sixteen  mesh,  set  in  tight- 
fitting  removable  sash,  for  each  exterior  door,  window  or 
other  opening  in  the  exterior  walls  of  the  building. 

(q)  Garbage  Cans. — Sec.  25.  There  shall  be  provided 
by  the  occupant  or  tenant  for  each  dwelling  a  tight  metal 
receptacle,  with  close-fitting  metal  cover,  for  garbage, 
refuse,  ashes  and  rubbish  as  may  be  deemed  necessary  by 
the  department  charged  with  the  enforcement  of  this  act. 


442  BUSINESS  LAW  FOR  BUSINESS  MEN. 

The  receptacles  shall  be  kept  in  a  clean  condition  by  the 
occupants  or  tenants. 

(r)  Sanitary  Regulations. — Sec.  26.  Every  room, 
hallway,  passageway,  stairway,  wall,  partition,  ceiling, 
floor,  skylight,  glass  window,  door,  carpet,  rug,  matting, 
window  curtain,  water-closet,  compartment  or  room, 
toilet  room,  bathroom,  slop-sink  or  wash-room,  plumbing 
fixture,  drain,  roof,  closet,  cellar,  or  basement  in  any 
dwelling,  and  the  lot,  and  the  premises  thereof,  shall  be 
kept  in  every  part  clean  and  sanitary  and  free  from  all 
accumulation  of  debris,  filth,  rubbish,  garbage  or  other 
offensive  matter. 

No  person  shall  deposit,  or  cause  or  permit  any  per- 
son to  deposit,  any  swill,  garbage,  bottles,  ashes,  cans  or 
other  improper  substance  in  any  water-closet,  sink,  slop- 
hopper,  bathtub,  shower,  catch-basin,  or  in  any  plumbing 
fixture  connection  or  drain  therefrom,  or  otherwise  to 
obstruct  the  same;  or  to  place  or  cause  or  permit  to  be 
placed  any  filth,  urine  or  other  foul  matter  in  any  place 
other  than  the  place  provided  for  same;  or  to  keep  or 
cause  or  permit  to  be  kept  any  urine  or  filth  or  foul  matter 
in  any  room  or  apartment  in  any  dwelling  or  in  or  about 
the  said  building  or  premises  thereof  for  such  length  of 
time  as  to  create  a  nuisance. 

Sec.  27.  No  horse,  cow,  calf,  swine,  sheep,  goat,  rab- 
bit, mule  or  other  animal,  chicken,  pigeon,  goose,  duck  or 
other  poultry  shall  be  kept  in  any  dwelling  house  or  any 
part  thereof;  nor  shall  any  such  animal  or  poultry,  nor 
shall  any  stable,  be  kept  or  maintained  within  twenty 
feet  of  any  window  or  door  of  such  building. 

(s)  Fine  a  Lien. — Sec.  29.  Every  fine  imposed  by 
judgment  under  section  six  of  this  act  upon  a  dwelling 
owner  shall  be  a  lien  upon  the  house  in  relation  to  which 
the  fine  is  imposed,  from  the  time  of  the  filing  of  a  cer- 
tified copy  of  said  judgment  in  the  office  of  the  recorder 
of  the  county  in  which  said  dwelling  is  situated,  subject 
only  to  taxes  and  assessments  and  water  rates,  and  to 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  443 

such  mortgage  and  mechanics'  liens  as  may  exist  thereon 
prior  to  such  filing ;  and  it  shall  be  the  duty  of  the  depart- 
ment charged  with  the  enforcement  of  the  provisions  of 
this  act,  upon  the  entry  of  such  judgment,  to  file  forth- 
with the  copy  as  aforesaid,  and  such  copy  upon  filing- 
shall  be  forthwith  indexed  by  the  recorder  in  the  index 
of  mechanics'  liens. 

Sec.  31.  Every  notice  or  order  in  relation  to  a  dwell- 
ing shall  be  served  five  days  before  the  time  for  doing  the 
thing  in  relation  to  which  it  shall  have  been  issued. 

(t)  Minimum  Requirements. — Sec.  33.  The  provi- 
sions of  this  act  shall  be  held  to  be  the  minimum  require- 
ments adopted  for  the  protection,  the  health  and  the 
safety  of  the  community,  and  for  the  protection,  the 
health  and  the  safety  of  the  occupants  of  dwellings. 
Nothing  in  this  act  contained  shall  be  construed  as  pro- 
hibiting the  local  legislative  body  of  any  incorporated 
town,  incorporated  city,  or  incorporated  city  and  county, 
from  enacting  from  time  to  time,  supplementary  ordi- 
nances or  laws  imposing  further  restrictions,  or  pro- 
viding for  fees  to  be  charged  for  permits,  certificates  or 
other  papers  required  by  this  act ;  but  no  ordinance,  law, 
regulation  or  ruling  of  any  municipal  department,  author- 
ity, officer  or  officers,  shall  repeal,  amend,  modify  or  dis- 
pense with  any  of  the  provisions  of  this  act. 

Nothing  in  this  act  contained  shall  be  construed  as 
abrogating,  diminishing,  minimizing  or  denying  the  power 
of  any  incorporated  town,  incorporated  city,  or  incor- 
porated city  and  county,  by  ordinance  or  law,  to  further 
restrict  the  percentage  of  the  lot  to  be  covered  by  a  dwell- 
ing within  said  municipality,  the  occupation  thereof,  the 
materials  to  be  used  in  its  construction,  or  increasing  the 
floor  space  to  each  person  occupying  a  room,  the  require- 
ments as  to  sanitation,  ventilation,  light  and  protection 
against  fire. 

Act  of  the  Legislature,  approved  May  31,  1917; 
in  effect  September  1,  1917. 


444  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Section  438. — HOTEL  AND  LODGING  HOUSE  ACT. — The 
Legislature  of  California  in  1917  passed  a  law  to  regulate 
the  erection,  occupancy  and  use  of  hotels  and  lodging 
houses  in  this  State.  On  account  of  its  length,  it  had  to 
be  omitted  from  this  book.  A  printed  copy  of  the  law 
can  be  obtained  from  the  Secretary  of  State  at  Sacra- 
mento. 

Section  439. — EMBEZZLEMENT  BY  CONTRACTOR. — Any 
contractor  who  appropriates  money  paid  to  him  for  any 
use  or  purpose,  other  than  for  that  which  he  received  it, 
is  guilty  of  embezzlement,  and  the  payment  of  laborers 
and  materialmen  for  work  performed  or  material  fur- 
nished in  the  performance  of  any  contract  is  hereby  de- 
clared to  be  the  use  and  purpose  to  which  the  contract 
price  of  such  contract,  or  any  part  thereof,  received  by 
the  contractor  shall  be  applied. 

Act  of  the  Legislature,  approved  May  27,  1919 ; 
in  effect  July  27,  1919. 

MECHANICS'  LIENS. 

Section  440. — THE  PERSONS  ENTITLED  TO  LIENS.— 
Mechanics,  material-men,  contractors,  sub-contractors, 
artisans,  architects,  machinists,  builders,  miners,  team- 
sters and  draymen,  and  all  persons  and  laborers  of  every 
class  performing  labor  upon,  or  bestowing  skill  or  other 
necessary  services,  or  furnishing  materials  to  be  used 
or  consumed  in  or  furnishing  appliances,  teams  and 
power  contributing  to  the  construction,  alteration,  addi- 
tion to  or  repair,  either  in  whole  or  in  part,  of  any  build- 
ing, wharf,  bridge,  ditch,  flume,  aqueduct,  well,  tunnel, 
fence,  machinery,  railroad,  wagon  road  or  other  struc- 
ture, shall  have  a  lien  upon  the  property  upon  which  they 
have  bestowed  labor  or  furnished  materials,  for  the  value 
of  such  labor  done  and  materials  furnished  and  for  the 
value  of  the  use  of  such  appliances,  teams  or  power, 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  445 

whether  at  the  instance  of  the  owner,  or  of  any  other 
person  acting  by  his  authority  or  under  him,  as  contractor 
or  otherwise ;  and  every  contractor,  sub-contractor,  archi- 
tect, builder  or  other  person  having  charge  of  the  con- 
struction, alteration,  addition  to  or  repair  either  in  whole 
or  in  part  of  any  building,  or  other  improvement  as  afore- 
said, shall  be  held  to  be  the  agent  of  the  owner  for  the 
purposes  of  this  law. 

Act  of  the  Legislature,  approved  May  1, 1911. 

Section  441. — MINING  CLAIM  LIENS. — Any  person  who 
performs  labor  in  any  mining  claim  or  claims,  or  in  or 
upon  any  real  property  worked  as  a  mine,  either  in  the 
development  thereof  or  in  working  thereon  by  the  sub- 
tractive  process,  or  furnishes  materials  to  be  used  or  con- 
sumed therein,  has  a  lien  upon  the  same  and  the  works 
owned  and  used  by  the  owners  for  milling  or  reducing  the 
ores  from  the  same,  for  the  value  of  the  work  or  labor 
done  or  materials  furnished  by  each  respectively,  whether 
done  or  furnished  at  the  instance  of  the  owner  of  such 
mining  claim  or  claims  or  real  property  worked  as  a  mine, 
or  his  agent ;  and  every  contractor,  sub-contractor,  super- 
intendent or  other  person  having  charge  of  anv  mining 
or  work  or  labor  performed  in  and  about  such  mininic 
claim  or  claims  or  real  propertv  worked  as  a  mine,  either 
as  lessee  or  under  a  working  bond  or  contract  thereon, 
shall  be  held  to  be  the  agent  of  the  owner. 

Act  of  the  Legislature,  approved  May  1, 1911 . 

Section  442. — LIMIT  OF  LIENS. — The  liens  provided 
for  shall  be  direct  liens,  and  shall  not  in  the  case  of  any 
claimants,  other  than  the  contractor,  be  limited,  as  to 
amount,  by  any  contract  price  agreed  upon  between  the 
contractor  and  the  owner  except  as  hereinafter  provided ;. 
but  said  several  liens  shall  not  in  any  case  exceed  in 
amount  the  reasonable  value  of  the  labor  done  or 
material  furnished,  or  both,  for  which  the  lien  is  claimed, 
nor  the  price  agreed  upon  for  the  same  between  the 


44()  BUSINESS  LAW  FOR  BUSINESS  MEN. 

claimant  and  the  person  by  whom  he  was  employed ;  nor 
in  any  case,  where  the  claimant  was  employed  by  a  con- 
tractor, or  sub-contractor,  shall  the  lien  extend  to  any 
labor  or  materials  not  embraced  within  or  covered  by 
the  original  contract  between  the  contractor  and  the 
owner,  or  any  modification  thereof  made  by  or  with 
the  consent  of  such  owner,  and  of  which  such  contract, 
or  modification  thereof  the  claimant  shall  have  had  actual 
notice  before  the  performance  of  such  labor  or  the  fur- 
nishing of  such  materials. 

Act  of  the  Legislature,  approved  May  1, 1911. 

Section  443. — FILING  OF  CONTRACT  AND  BOND. — The 
filing  of  the  original  contract,  or  modification  thereof, 
in  the  office  of  the  county  recorder  of  the  county  where 
the  property  is  situated,  before  the  commencement  of  the 
work,  shall  be  equivalent  to  the  giving  of  actual  notice 
by  the  owner  to  all  persons  performing  work  or  furnish- 
ing materials  thereunder.  In  case  said  original  contract 
shall,  before  the  work  is  commenced,  be  so  filed,  together 
with  a  bond  of  the  contractor  with  good  and  sufficient 
sureties  in  an  amount  not  less  than  50  per  cent  of  the 
contract  price  named  in  said  contract  (which  bond  shall 
in  addition  to  any  conditions  for  the  performance  of  the 
contract,  be  also  conditioned  for  the  payment  in  full  of 
the  claims  of  all  persons  performing  labor  upon  or  fur- 
nishing materials  to  be  used  in  such  work,  and  shall  also 
by  its  terms  be  made  to  inure  to  the  benefit  of  any  and 
all  persons  who  perform  labor  upon  or  furnish  materials 
to  be  used  in  the  work  described  in  said  contract  so  as  to 
give  such  persons  a  right  of  action  to  recover  upon  said 
bond  in  any  suit  brought  to  foreclose  the  liens  or  in  a 
separate  suit  brought  on  said  bond),  then  the  court  must, 
where  it  would  be  equitable  so  to  do,  restrict  the  recovery 
under  such  liens  to  an  aggregate  amount  equal  to  the 
amount  found  to  be  due  from  the  owner  to  the  contractor, 
and  render  judgment  against  the  contractor  and  his 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  447 

sureties  on  said  bond  for  any  deficiency  or  difference 
there  may  remain  between  said  amount  so  found  to  be 
due  to  the  contractor  and  the  whole  amount  found  to  be 
due  to  claimants  for  such  labor  or  materials  or  both. 
No  change  or  alteration  of  the  work  or  modification  of 
any  such  contract  between  the  owner  and  his  contractor 
shall  release  or  exonerate  any  surety  or  sureties  upon 
any  bond  given  under  this  section. 

Act  of  the  Legislature,  approved  May  1, 1911. 

Section  444. — LIMIT  TO  OWNER 's  LIABILITY. — -It  is  the 
intent  and  purpose  of  this  section  to  limit  the  owner's 
liability,  in  all  cases,  to  the  measure  of  the  contract  price, 
where  he  shall  have  filed  or  caused  to  be  filed  in  good 
faith  with  his  original  contract  a  valid  bond  with  good 
and  sufficient  sureties  in  the  amount  and  upon  the  con- 
ditions as  herein  provided.  It  shall  be  lawful  for  the 
owner  to  protect  himself  against  any  failure  of  the  con- 
tractor to  perform  his  contract  and  make  full  payment 
for  all  work  done  and  materials  furnished  thereunder  by 
exacting  such  bond  or  other  security  as  he  may  deem 
satisfactory. 

Act  of  the  Legislature,  approved  May  1,  1911. 

Section  445. — NOTICE  TO  OWNER  OP  LABOR  PERFORMED 
AND  MATERIALS  FURNISHED. — Any  of  the  persons  entitled 
to  liens,  except  the  contractor,  may  at  any  time  before 
the  time  for  filing  liens  expires  give  to  the  owner  a  notice 
that  they  have  performed  labor  or  furnished  materials, 
or  both,  to  the  contractor  or  other  person  acting  by  the 
authority  of  the  owner,  or  that  they  have  agreed  to  do 
so,  stating  in  general  terms  the  kind  of  labor  and  ma- 
terials and  the  name  of  the  person  to  or  for  whom  the 
same  was  done  or  furnished,  or  both,  and  the  amount  in 
value,  as  near  as  may  be,  of  that  already  done  or  fur- 
nished, or  both,  and  of  the  whole  agreed  to  be  done  or 
furnished,  or  both,  and  any  of  said  persons  who  shall  on 
the  written  demand  of  the  owner  refuse  to  give  such 


448  BUSINESS  LAW  FOB  BUSINESS  MEN. 

notice  shall  thereby  deprive  himself  of  the  right  to  claim 
a  lien  under  this  chapter.  Such  notice  must  be  verified 
by  the  claimant,  or  by  some  person  acting  in  his  behalf, 
and  may  be  given  by  delivering  the  same  to  said  owner 
personally,  or  by  leaving  it  at  his  residence  or  place  of 
business  with  some  person  in  charge,  or  by  delivering  it 
to  his  architect,  if  any;  provided,  however,  that  in  all 
cases  in  which  said  work  is  being  done  under  a  contract 
with  the  state,  or  with  any  public  board,  commission,  or 
officer  thereof,  or  with  any  political  subdivision  thereof, 
such  notice  must  be  filed,  within  said  time,  in  the  office 
of  the  controller,  auditor  or  other  public  disbursing 
officer  whose  duty  it  is  to  make  payments  under  the  pro- 
visions of  such  contract.  No  such  notice  shall  be  invalid 
by  reason  of  any  defect  in  form,  provided  it  is  sufficient 
to  inform  the  owner  of  the  substantial  matters  herein 
provided  for.  Upon  such  notice  being  given  it  shall  be 
lawful  for  the  owner  to  withhold,  and  in  the  case  of  prop- 
erty which,  for  reasons  of  public  policy  or  otherwise,  is 
not  subject  to  liens  in  this  chapter  provided  for,  the 
owner  or  person  who  contracted  with  the  contractor,  shall 
withhold  from  his  contractor  sufficient  money  due  or  that 
may  become  due  to  such  contractor  to  answer  such  claim 
and  any  lien  that  may  be  filed  therefor  including  the 
reasonable  cost  of  any  litigation  thereunder. 

(a)  Time  of  Commencing  Action. — No  action  to  en- 
force the  payment  of  any  such  claim  shall  be  commenced 
against  the  owner,  nor  against  the  state  or  any  public 
board,  commission,  or  officer  thereof,  nor  against  any 
political  subdivision  of  the  state  or  the  disbursing  officer 
thereof  whose  duty  it  is  to  make  payments  under  pro- 
visions of  such  contract,  prior  to  the  expiration  of  the 
period  within  which  claims  of  lien  must  be  filed  for 
record,  nor  shall  any  such  suit  be  commenced  later  than 
ninety  days  following  the  expiration  of  such  period.  Any 
number  of  persons  who  have  given  such  notices  may  join 
in  the  same  action  and  when  separate  actions  are  com- 
menced the  court  first  acquiring  jurisdiction  may  con- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  449 

solidate  them.  Upon  the  demand  of  the  owner  the  court 
shall  require  all  claimants  to  the  moneys  withheld  by  the 
owner  in  response  to  such  notices  to  be  impleaded  in  said 
action,  to  the  end  that  the  respective  rights  of  all  parties 
may  be  adjudicated  and  settled  therein. 

(b)  Pro  Rata  Distribution  When  Moneys  Insufficient. 
In  the  event  the  moneys  so  withheld  by  the  owner  shall 
be  insufficient  to  pay  in  full  the  valid  demands  of  all  the 
persons  by  whom  such  notices  were  given,  the  same  shall 
be  distributed  among  such  persons  in  the  same  ratio  that 
their  respective  claims  bear  to  the  aggregate  of  such  valid 
demands.     Such  pro  rata  distribution  of  said  moneys- 
shall  be  made  amonar  the  persons  entitled  to  share  therein, 
without  regard  to  the  order  of  priority  in  which  their 
respective  notices  mav  have  been  given  or  their  respective 
actions,  if  any,  commenced. 

(c)  Riaht    to    Recover    Deficit. — Nothing   contained 
herein  shall  be  construed  to  impair  in  any  manner  the 
rig-lit  of  anv  person  by  whom  such  notice  has  been  given 
to  recover  from  the  contractor  and  the  suretv  or  sureties 
unon  his  bond  anv  deficit  that  mav  remain  unpaid  after 
such  pro  rata  distribution;  provided,  that  anv  person  who 
shall  wilfullv  give  a  false  notice  of  his  claim  to  the  owner 
or   who    shall   wilfully   include   in   his    claim   work    or 
materials  not  performed  upon  or  furnished  for  the  prop- 
erty described  in  such  notice  shall  forfeit  all  right  to 
participate  in  the  distribution  of  such  monevs. 

Act  of  the  Legislature,  approved  May  10,  1919 ; 
in  effect  July  22, 1919. 

Section  446. — LAND  SUBJECT  TO  LIEN. — The  land  upon 
which  any  building,  improvement,  well  or  structure  is 
constructed,  together  with  a  convenient  space  about  the 
same,  or  so  much  as  may  be  required  for  the  convenient 
use  and  occupation  thereof,  to  be  determined  by  the  court 
on  rendering  judgment,  is  also  subject  to  the  lien,  if  at 
the  commencement  of  the  work,  or  of  the  furnishing  of 


450  BUSINESS  LAW  FOE  BUSINESS  MEN. 

the  material  for  the  same,  the  land  belonged  to  the  person 
who  caused  said  building,  improvement,  well  or  structure 
to  be  constructed,  altered  or  repaired ;  but  if  such  person 
owned  less  than  fee  simple  estate  in  such  land,  then  only 
his  interest  therein  is  subject  to  such  lien,  except  as  here- 
inafter provided. 

Act  of  the  Legislature,  approved  May  1, 1911. 

Section  447. — WHEN  LIEN  MUST  BE  FILED. — Every 
original  contractor,  claiming  the  benefit  of  this  law,  with- 
in sixty  days  after  the  completion  of  his  contract;  and 
every  person  save  the  original  contractor  within  thirty 
days  after  he  has  ceased  to  labor  or  has  ceased  to  furnish 
materials,  or  both,  or  at  his  option,  within  thirty  days 
after  the  completion  of  the  original  contract,  if  any,  under 
which  he  was  employed,  must  file  for  record  with  the 
county  recorder  of  the  county  or  city  and  county  in  which 
such  property  or  some  part  thereof  is  situated  a  claim 
of  lien. 

Act  of  the  Legislature,  approved  May  3,  1919 ; 
in  effect  July  22,  1919. 

Section  448. — CLAIM  OF  LIEN. — The  claim  of  lien  must 
be  in  writing,  and  must  contain  a  statement  of  his  demand 
after  deducting  all  just  credits  and  offsets,  with  the  name 
of  the  owner  or  reputed  owner,  if  known,  also  the  name 
of  the  person  by  whom  he  was  employed,  or  to  whom  he 
furnished  the  materials,  a  general  statement  of  the  work 
clone  or  materials  furnished,  and  also  a  description  of  the 
property  to  be  charged  with  the  lien,  sufficient  for  identi- 
fication, which  claim  must  be  verified  by  the  oath  of  him- 
self or  of  some  other  person. 

Act  of  the  Legislature,  approved  May  3,  1919; 
in  effect  July  22,  1919. 

Section  449. — COMPLETION. — Any  trivial  imperfection 
in  the  said  work,  or  in  the  completion  of  any  contract  by 
any  lien  claimant,  or  in  the  construction  of  any  building, 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  451 

improvement  or  structure,  or  of  the  alteration,  addition 
to,  or  repair  thereof,  shall  not  be  deemed  such  a  lack  of 
completion  as  to  prevent  the  filing  of  any  lien.  And,  in 
all  cases,  any  of  the  following  shall  be  deemed  equivalent 
to  a  completion  for  all  the  purposes  of  this  law:  the 
occupation  or  use  of  a  building,  improvement,  or  struc- 
ture, by  the  owner,  or  his  representative  accompanied  by 
cessation  of  labor  thereon;  or  the  acceptance  by  said 
owner  or  said  agent,  of  said  building,  improvement,  or 
structure;  or  cessation  from  labor  for  thirty  days  upon 
any  contract  or  upon  any  building,  improvement  or 
structure,  or  the  alteration,  addition  to,  or  repair  thereof; 
or  the  riling  of  the  owner's  notice  of  completion. 

Act  of  the  Legislature,  approved  May  3,  1919 ; 
in  effect  July  22,  1919. 

Section  450. — OWNER'S  NOTICE  OF  COMPLETION. — The 
owner  shall  within  ten  days  after  completion  of  any  con- 
tract, or  within  ten  days  after  there  has  been  a  cessation 
from  labor  thereon  for  a  period  of  thirty  days,  file  for 
record  in  the  office  of  the  county  recorder  of  the  county 
where  the  property  is  situated,  a  notice  setting  forth  the 
date  when  the  same  was  completed,  or  on  which  cessation 
from  labor  occurred,  together  with  his  name  and  the 
nature  of  his  title,  and  a  description  of  the  property 
sufficient  for  identification,  which  notice  shall  be  verified 
by  himself  or  some  other  person  on  his  behalf. 

The  fee  for  recording  the  same  shall  be  one  dollar. 

In  case  such  notice  be  not  so  filed,  then  all  persons 
claiming  the  benefit  of  this  chapter  shall  have  ninety  days 
after  the  completion  of  said  improvement  within  which  to 
file  their  claims  of  lien. 

Act  of  the  Legislature,  approved  May  3,  1919; 
in  effect  July  22,  1919. 

Section  451. — How  LONG  LIEN  CONTINUES. — No  lien 
binds  any  property  for  a  longer  period  than  ninety  days 
after  the  same  has  been  filed,,  unless  proceedings  be  com- 


452  BUSINESS  LAW  FOR  BUSINESS  MEN. 

menced  in  a  proper  court  within  that  time  to  enforce  the 
same ;  or,  if  a  credit  be  given,  then  ninety  days  after  the 
expiration  of  such  credit;  but  no  lien  continues  in  force 
for  a  longer  time  than  one  year  from  the  time  the  work 
is  completed,  by  any  agreement  to  give  credit.  In  case 
such  proceedings  be  not  prosecuted  to  trial  within  two 
years  after  the  commencement  thereof,  the  court  may  in 
its  discretion  dismiss  the  same  for  want  of  prosecution, 
and  in  all  cases,  the  dismissal  of  such  action  (unless  it  be 
expressly  stated  that  the  same  is  without  prejudice)  or 
a  judgment  rendered  therein  that  no  lien  exists,  shall  be 
equivalent  to  the  cancellation  and  removal  from  the 
record  of  such  lien. 

Act  of  the  Legislature,  approved  May  1,  1911. 

Section  452. — WHEN  BUILDING  WILL  BE  HELD  TO  HAVE 
BEEN  CONSTRUCTED  AT  OWNER'S  INSTANCE. — Every  build- 
ing or  other  improvement  or  work,  constructed,  altered 
or  repaired  upon  any  land  with  the  knowledge  of  the 
owner  or  of  any  person  having  or  claiming  any  estate 
therein,  and  the  work  or  labor  done  or  materials  fur- 
nished with  the  knowledge  of  the  owner  or  persons  hav- 
ing or  claiming  any  estate  in  the  land,  shall  be  held  to 
have  been  constructed,  performed  or  furnished  at  the  in- 
stance of  such  owner  or  person  having  or  claiming  any 
estate  therein;  and  such  interest  owned  or  claimed  shall 
be  subject  to  any  lien  filed,  unless  such  owner  or  person 
having  or  claiming  any  estate  therein  shall,  within  ten 
days  after  he  shall  have  obtained  knowledge  of  such  con- 
struction, alteration  or  repair  or  work  or  labor,  give 
notice  that  he  will  not  be  responsible  for  the  same  by 
posting  a  notice  in  writing  to  that  effect  in  some  con- 
spicuous place  upon  the  property,  and  shall  also,  within 
the  same  period,  file  for  record  a  verified  copy  of  said 
notice  in  the  office  of  the  county  recorder  of  the  said 
county  in  which  said  property  or  some  part  thereof  is 
situated.  Said  notice  shall  contain  a  description  of  the 
property  affected  thereby  sufficient  for  identification, 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  453 

with  the  name,  and  the  nature  of  the  title  or  interest  of 
the  person  giving  the  same.  The  notice  so  recorded  may 
be  verified  by  anyone  having  a  knowledge  of  the  facts, 
on  behalf  of  the  owner  or  person  for  whose  protection 
the  notice  is  given. 

Act  of  the  Legislature,  approved  May  1,  1911. 

Section  453. — CONTRACTOR  MAY  RECOVER  ONLY  AMOUNT 
DUE  HIM. — Any  contractor  shall  be  entitled  to  recover, 
upon  a  lien  filed  by  him,  only  such  amount  as  may  be 
due  him  according  to  the  terms  of  his  contract,  after 
deducting  all  claims  of  other  parties  for  work  done  and 
materials  furnished,  as  aforesaid,  and  embraced  within 
his  contract;  and  in  all  cases  where  a  lien  shall  be  filed 
under  this  act  for  work  done  or  for  materials  furnished 
to  any  contractor,  he  shall  defend  any  action  brought 
thereon  at  his  own  expense;  and  during  the  pendency  of 
such  action,  the  owner  may  withhold  from  the  contractor 
the  amount  of  money  for  which  such  lien  is  filed ;  and  in 
case  of  judgment  against  the  owner  or  his  property  upon 
the  lien,  the  said  owner  shall  be  entitled  to  deduct  from 
any  amount  due,  or  to  become  due  by  him  to  the  con- 
tractor, the  amount  of  such  judgment  and  costs;  and  if 
the  amount  of  such  judgment  and  costs  shall  exceed  the 
amount  due  by  him  to  the  contractor,  or  if  the  owner 
shall  have  settled  with  the  contractor  in  full,  he  shall  be 
entitled  to  recover  back  from  the  contractor,  or  his  bonds- 
men or  sureties  on  any  bond  given  for  the  faithful  per- 
formance of  his  contract,  any  amount  so  paid  by  him,  in 
excess  of  the  contract  price,  and  for  which  the  contractor 
was  originally  the  party  liable.  No  act  done  by  such 
owner  in  compliance  with  any  of  the  provisions  of  this 
law  shall  be  held  to  be  a  prevention  of  the  performance 
of  any  such  contract  by  the  contractor,  or  to  have  exon- 
erated the  sureties  on  any  bond  given  for  faithful  per- 
formance, or  for  the  payment  of  liens  of  persons  perform- 
ing labor  or  furnishing  materials,  or  both;  provided  that 


454  BUSINESS  LAW   FOR  BUSINESS  MEN. 

such  act  was  done  in  good  faith  and  without  design  to 
injure  or  harass  any  one. 

Act  of  the  Legislature,  approved  May  1,  1.911. 

Section  454. — DEFICIENCY  OF  PROCEEDS  UNDER  DECREE 
OF  FORECLOSURE. — Whenever  on  the  sale  of  the  property 
subject  to  liens,  under  the  judgment  or  decree  of  fore- 
closure of  such  lien,  there  is  a  deficiency  of  proceeds, 
judgment  for  the  deficiency  may  be  docketed  against  the 
party  personally  liable  therefor  in  like  manner  and  with 
like  effect  as  in  action  for  the  foreclosure  of  mortgages. 
Act  of  the  Legislature,  approved  May  1,  1911. 

Section  455. — CLAIMANTS  MAY  JOIN  IN  SUIT. — Any 
number  of  persons  claiming  liens  may  join  in  the  same 
action,  and  when  separate  actions  are  commenced,  the 
court  may  consolidate  them.  The  court  must  also  allow, 
as  a  part  of  the  costs,  the  money  paid  for  verifying  and 
recording  the  lien,  such  costs  to  be  allowed  to  each 
claimant  whose  lien  is  established,  whether  he  be  plaintiff 
or  defendant,  or  whether  they  all  join  in  one  action  dr 
separate  actions  are  consolidated. 

Act  of  the  Legislature,  approved  May  1,  1911. 

Section  456. — PERSONAL  ACTION  TO  RECOVER  DEBT.— 
Nothing  contained  in  this  law  shall  be  construed  to  impair 
or  affect  the  right  of  any  person  to  whom  any  debt  may  be 
due  for  work  done  or  materials  furnished  to  maintain 
a  personal  action  to  recover  said  debt  against  the  person 
liable  therefor;  and  the  person  bringing  such  personal 
action  may  take  out  an  attachment  therefor,  notwith- 
standing his  lien,  and  in  his  affidavit  to  procure  an  attach- 
ment need  not  state  that  his  demand  is  not  secured  by  a 
lien;  but  the  judgment,  if  any,  obtained  by  the  plaintiff 
in  such  personal  action  shall  not  be  construed  to  impair 
or  merge  any  lien  held  by  plaintiff;  provided,  only,  that 
any  money  collected  on  said  judgment  shall  be  credited 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  455 

on  the  amount  of  such  lien  in  any  action  brought  to  en- 
force the  same. 

Act  of  the  Legislature,  approved  May  1,  1911. 

Section  457. — FALSE  NOTICE  OP  CLAIM. — Any  person 
who  shall  wilfully  give  a  false  notice  of  his  claim  to  the 
owner  shall  forfeit  his  lien.  Any  person  who  shall 
wilfully  include  in  his  claim  work  or  materials  not  per- 
formed upon  or  furnished  for  the  property  described  in 
the  claims  shall  forfeit  his  lien. 

Act  of  the  Legislature,  approved  May  1,  1911. 

Section  458. — MISTAKES  IN  STATEMENT  NOT  TO  INVALI- 
DATE LIEN. — No  mistake  or  errors  in  the  statement  of  the 
demand,  or  of  the  amount  of  credits  and  offsets  allowed 
or  of  the  balance  asserted  to  be  due  to  claimant,  nor  in 
the  description  of  the  property  against  which  the  claim 
is  filed,  shall  invalidate  the  lien,  unless  the  court  finds 
that  such  mistake  or  error  in  the  statement  of  the  de- 
mand, credits  and  offsets,  or  of  the  balance  due,  was  made 
with  the  intent  to  defraud,  or  the  court  shall  find  that 
an  innocent  third  party,  without  notice,  direct  or  con- 
structive, has  since  the  claim  was  filed  become  the  bona 
fide  owner  of  the  property  liened  upon,  and  that  the 
notice  of  claim  was  so  deficient  that  it  did  not  put  the 
party  upon  further  inquiry  in  any  manner. 

Section  459. — LIEN  LAW  TO  BE  LIBERALLY  CONSTRUED. 
The  provisions  of  this  act  shall  be  liberally  construed 
with  a  view  to  effect  its  purpose.  They  are  not  intended 
as  a  re-enactment  of  the  provisions  of  former  statutes, 
with  the  policy  heretofore  impressed  upon  the  same  by 
the  courts  of  this  state,  but  are  intended  to  reverse  that 
policy  to  the  extent  of  making  the  liens  provided  for 
direct,  and  independent  of  any  account  of  indebtedness 
between  the  owner  and  contractor,  thereby  making  the 
policy  of  this  state  conform  to  that  of  Nevada  and  the 
other  Pacific  Coast  states. 

Act  of  the  Legislature,  approved  May  1,  1911. 


456  BUSINESS  LAW  FOR  BUSINESS  MEN. 


Section  460. — SECURITY  FOR  PAYMENT  BY  CONTRACTORS 
ON  PUBLIC  WORK. — There  is  no  lien  against  a  public 
building.  But  the  law  provides,  instead  of  a  lien,  certain 
security,  by  means  of  a  bond  required  from  every  public 
contractor.  Every  contractor,  person,  company,  or  cor- 
poration, to  whom  is  awarded  a  contract  for  the  improve- 
ment, erection  or  construction  of  any  building,  road, 
excavating,  or  other  mechanical  work  for  this  state,  or 
for  any  political  subdivision  or  agency  of  the  state  shall, 
before  entering  upon  the  performance  of  such  work,  file 
with  the  commissioners,  managers,  trustees,  officers, 
board  of  supervisors,  board  of  trustees,  common  council,- 
or  other  body  by  whom  such  contract  was  awarded,  a 
good  and  sufficient  bond,  to  be  approved  by  such  contract- 
ing body,  officers  or  board,  in  a  sum  not  less  than  one-half 
of  the  total  amount  payable  by  the  terms  of  the  contract ; 
such  bond  shall  be  executed  by  the  contractor,  and  either 
at  least  two  sureties  or  by  corporate  surety  as  provided 
by  law,  in  an  amount  not  less  than  the  sum  specified  in 
the  bond,  and  must  provide  that  if  the  contractor,  person, 
company,  or  corporation,  or  his  or  its  subcontractor,  fails 
to  pay  for  any  materials,  provisions,  provender  or  other 
supplies,  or  teams,  used  in,  upon,  for  or  about  the  per- 
formance of  the  work  contracted  to  be  done,  or  for  any 
work  or  labor  done  thereon  of  any  kind,  that  the  surety 
or  sureties  will  pay  the  same  in  an  amount  not  exceeding 
the  sum  specified  in  the  bond,  and  also,  in  case  suit  is 
brought  upon  such  bond,  a  reasonable  attorney's  fee,  to 
be  fixed  by  the  court.  Unless  such  bond  is  filed  as  herein 
provided,  no  claim  in  favor  of  the  contractor  arising 
under  such  contract  shall  be  audited,  allowed,  or  paid  by 
any  public  officer  of  this  state,  or  of  any  political  sub- 
division or  state  agency,  but  persons  who  have  in  good 
faith  performed  work  upon  such  contract,  or  supplied 
materials  for  the  execution  thereof,  shall,  upon  giving 
the  notice  prescribed,  be  entitled  to  receive  payment  of 
their  respective  claims. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  457 

(a)  Claims  of  Materialmen,  etc. — Any  mater ialman, 
person,  company  or  corporation  furnishing  materials, 
provisions,  provender  or  other  supplies  used  in,  upon, 
for  or  about  the  performance  of  the  work  contracted  to 
be  executed  or  performed,  or  any  person,  company  or 
corporation  renting  or  hiring  teams  or  implements  or 
machinery  for  or  contributing  to  said  work  to  be  done, 
or  any  person  who  performed  work  or  labor  upon  the 
same,  or  any  person  who  supplies  both  work  and  ma- 
terials, and  whose  claim  has  not  been  paid  by  the  con- 
tractor, company,  or  corporation,  to  whom  the  contract 
has  been  awarded,  or  by  the  subcontractor  of  said  con- 
tractor, company,  or  corporation,  may  at  any  time  prior 
to  the  expiration  of  the  period  within  which  claims  of  lien 
must  be  filed  for  record,  file  with  the  commissioners, 
managers,  trustees,  officers,  board  of  supervisors,  board 
of  trustees,  common  council,  or  other  body  by  whom  such 
contract  was  awarded,  a  verified  statement  of  such  claims, 
together  with  a  statement  that  the  same  have  not  been 
paid.  At  any  time  within  ninety  days  following  the  ex- 
piration of  the  period  for  filing  claims,  the  person,  com- 
pany or  corporation  filing  the  same  may  commence  an 
action  against  the  surety  or  sureties  on  the  bond.  And 
upon  the  trial  of  any  such  action,  the  court  shall  award 
to  the  prevailing  party  a  reasonable  attorney's  fee,  to 
be  taxed  as  costs,  and  to  be  included  in  the  judgment 
therein  rendered. 

Act  of  the  Legislature,  approved  May  10,  1919 ; 
in  effect  July  22,  1919. 

Section  461. — BUILDING  CONSTRUCTED  UNDER  DISTINCT 
CONTRACTS — WHO  Is  ORIGINAL  CONTRACTOR. — Where  a 
building  is  constructed  under  distinct  contracts  for  the 
different  departments  of  work  involved,  each  person  con- 
tracted with  is  an  original  contractor,  and  can  file  his 
claim  of  lien  within  sixty  days  after  the  completion  of 
his  contract,  irrespective  of  the  time  when  the  entire 
building  is  completed.  The  provisions  of  the  Code  re- 


458  BUSINESS  LAW  FOR  BUSINESS  MEN. 

lating  to  mechanics'  liens  do  not  contemplate  that  there 
can  be  no  original  contractor  except  for  the  entire  work 
of  constructing  the  building.  For  the  purpose  of  con- 
structing the  building,  the  owner  may  enter  into  different 
original  contracts,  for  the  different  departments  of  work 
involved.  If  the  owner  should  enter  into  a  contract  with 
one  person  for  the  construction  of  a  building  in  all  its 
parts,  except  the  painting,  and  should  afterwards  enter 
into  a  contract  with  another  person  to  do  the  painting  of 
the  building,  each  of  these  individuals  would  be  an 
original  contractor,  within  the  meaning  of  the  law. 

Section  462. — ATTORNEY'S  FEES. — The  court  cannot 
allow,  in  suits  to  foreclose  mechanics'  liens,  any  attor- 
ney's fees  to  any  lien  claimant.  The  law  had  been  for 
many  years  that  a  person  foreclosing  a  mechanics'  lien 
would  be  allowed  reasonable  attorney's  fees,  in  both  the 
Superior  and  Supreme  Courts ;  but  the  Supreme  Court  of 
California  rendered  a  decision,  in  a  suit  brought  to  fore- 
close a  mechanics'  lien,  declaring  the  law  allowing  an 
attorney's  fee  unconstitutional  and  void.  In  San  Fran- 
cisco, the  Builders'  Supply  Depot  foreclosed  a  lien  for 
materials  and  labor  furnished  in  the  construction  of  a 
building.  The  Superior  Court  allowed  the  plaintiff  attor- 
ney's fees  and  included  such  fees  in  the  judgment.  The 
defendants  appealed  the  case  to  the  Supreme  Court,  and 
that  court  decided  that  attorney's  fees  could  not  be  al- 
lowed, and  that  the  law  giving  such  fees  was  void.  The 
court  says :  '  *  The  court  allowed  an  attorney's  fee  in  each 
of  the  cases,  and  appellants  contend  that  such  allowance 
was  erroneous  because  the  statutory  provision  directing 
the  allowance  of  such  a  fee  is  unconstitutional  and  void. 
In  our  opinion  this  contention  must  be  sustained.  In  a 
few  instances  this  court  has  affirmed  judgment  for  plain- 
tiffs in  mechanics'  lien  cases  which  included  attorney's 
fees;  but  our  attention  has  not  been  called  to  any  case 
where  the  question  of  the  constitutionality  of  the  statute 
providing  for  such  fees  has  been  raised,  or  presented  to 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  459 

the  court  for  adjudication.  In  the  case  at  bar  the  ques- 
tion has  been  for  the  first  time  raised."  The  court  de- 
cided that  the  expense  of  filing  the  liens  may  be  allowed 
as  costs  of  suit,  but  that  no  attorney  fee  can  be  lawfully 
claimed  or  allowed.  (Decided  by  the  Supreme  Court  of 
California  in  the  case  of  Builders'  Supply  Depot  vs. 
Dennis  0 'Conner,  which  decision  is  printed  in  Volume  33, 
California  Decisions,  page  97.) 

It  will  be  observed  in  Section  460,  that  the  new  law, 
in  effect  July  22,  1919,  provides  for  an  attorney  fee  in  a 
suit  upon  a  bond  for  public  work. 

Section  463. — WHEN  LIEN  FOR  MATERIALS  BEGINS.— 
A  lien  for  the  furnishing  of  materials  relates  to  the  date 
of  beginning  to  furnish  them,  and  includes  all  the 
materials  thereafter  furnished  for  the  building;  and  such 
Hen  has  priority  over  a  mortgage  executed  after  the  date 
of  the  commencement  to  furnish  the  materials. 

Section  464. — LIEN  FOR  MOVING  A  HOUSE. — Under  the 
law,  a  contractor  performing  labor  upon  a  house,  by 
moving  it  from  one  place  to  another,  is  entitled  to  a  lien 
thereon. 

Section  465. — LIEN  ON  HOMESTEAD. — A  mechanic's  lien 
may  be  created  on  a  homestead  without  the  joint  action 
of  husband  and  wife.  A  homestead  is  free  from  forced 
sale,  except  as  provided  by  the  statute.  Among  the  cases 
in  which  a  homestead  may  be  sold  under  execution,  pre- 
cisely as  though  it  was  not  a  homestead,  are  those  under 
judgments  obtained  upon  debts  secured  by  liens  of 
"mechanics,  contractors,  artisans,  architects,  builders, 
laborers  of  every  class,  and  materialmen." 

Section  466. — LIEN  AGAINST  RAILROAD. — A  lien  may  be 
Hied  against  a  railroad,  and  where  a  railroad  lies  in  two 
counties,  it  is  not  necessary  to  file  the  lien  in  both 


460  BUSINESS  LAW  FOR  BUSINESS  MEN. 

counties.    It  is  sufficient  if  the  lien  is  filed  in  one  of  the 
counties  only  through  which  the  railroad  runs. 

Section  467. — ABANDONMENT  AND  NEW  CONTRACT.— 
Where  a  building  contract  is  abandoned,  it  is  immaterial 
whether  the  building  is  subsequently  completed  by  the 
owner  or  not ;  and  a  subsequent  contract  by  the  owner  for 
the  completion  of  the  work  is  as  disconnected  with  the 
original  contract  as  if  it  were  for  the  construction  of  a 
different  building. 

Section  468. — WHAT  Is  MEANT  BY  " OWNER."  -When 
the  law  requires  the  claim  of  lien  filed  in  the  recorder's 
office  to  state  "the  name  of  the  owner  or  reputed  owner, 
if  known,"  it  means  the  name  of  the  person  who  is  the 
owner  at  the  time  the  claim  is  filed.  The  law  does  not 
refer  to  the  owner  with  whom  the  contract  for  the  im- 
provement was  made,  or  to  the  owner  at  any  other  time 
than  at  the  date  of  filing  the  claim.  The  object  of  re- 
quiring the  claim  to  be  filed  in  order  to  perfect  the  lien 
is  to  give  notice  of  the  lien  to  those  interested  in  the 
property  upon  which  it  is  claimed ;  and,  as  the  owner  at 
the  time  of  filing  the  claim  is  the  party  to  be  affected  by 
it,  rather  than  one  who  has  parted  with  the  property 
subsequent  to  the  making  of  the  original  contract,  it  is 
reasonable  to  suppose  that  the  Legislature  intended  the 
name  of  the  owner  at  the  time  the  claim  is  filed,  rather 
than  that  of  any  previous  owner. 

Section  469. — REAL  OR  REPUTED  OWNER. — It  was  not 
the  intention  of  the  Legislature  that  in  the  claim  of  lien 
filed  for  record  the  claimant  must  state  the  name  of  the 
real  owner,  at  the  risk  of  losing  his  lien  if  it  shall  turn 
out  that  he  was  in  error.  The  provision  of  the  law  that 
the  claimant  shall  give  the  "name  of  the  owner,  or 
reputed  owner,  if  known,"  implies  that,  if  he  does  not 
know  the  name  of  the  owner,  he  may  state  this  fact,  and 
perfect  his  lien  without  naming  an  owner ;  and  also  that, 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  461 

if  in  good  faith  he  gives  the  name  of  a  reputed  owner,  he 
will  not  lose  his  lien  if  it  afterwards  appears  that  some 
other  person  was  the  owner. 

Section  470. — PRIORITY  OF  MATERIAL-MAN  's  CLAIM  OVER 
MORTGAGE. — The  lien  of  a  material-man  for  lumber  fur- 
nished for  a  dwelling  will  take  precedence  of  a  mortgage 
on  the  land  executed  immediately  upon  a  conveyance 
thereof,  but  after  the  time  when  the  materials  were  com- 
menced to  be  furnished,  notwithstanding  the  mortgage 
was  given  for  the  purchase  price  of  the  land. 

Section  471. — DWELLING-HOUSE  —  LAND  SUBJECT  TO 
LIEN. — Only  so  much  of  the  land  around  a  dwelling-house 
is  subject  to  lien  as  may  be  necessary  for  the  convenient 
use  and  occupation  of  the  house.  So,  where  a  house  was 
situated  on  a  forty-acre  tract,  the  Supreme  Court  has 
said  that  the  whole  tract  was  not  subject  to  the  lien.  The 
statute  does  not  contemplate  anything  of  that  kind.  It 
means  exactly  what  it  says — a  sufficient  space  around  the 
dwelling  for  its  convenient  use  and  occupation.  It  does 
not  contemplate  that  sufficient  land  around  the  dwelling- 
house  to  support  the  owner  while  living  there  be  set 
apart.  Neither  the  productiveness  or  non-productiveness 
of  the  soil,  nor  the  profit  derived  from  the  cultivation  of 
the  land,  is  a  material  element  to  be  considered  in  deter- 
mining the  amount  of  land  to  be  set  apart  with  the 
dwelling-house.  The  statute  simply  allows  the  dwelling- 
house  and  a  quantity  of  land  around  it  sufficient  for  its 
convenient  use,  as  the  subject  of  a  lien. 

Section  472. — ELEVATOR  PART  OF  BUILDING. — Where 
the  original  plans  for  a  large  building  provided  for  an 
elevator,  and  the  contract  for  the  construction  of  the 
elevator  was  let  when  contracts  for  other  work  were  let, 
the  elevator  was  a  substantial  part  of  the  building,  and 
the  building  was  not  completed,  so  that  the  limitations  f Gr- 
illing mechanics'  liens  would  run,  until  it  was  finished. 


462  BUSINESS  LAW  FOR  BUSINESS"  MEN. 

All  elevator  was  called  for  by  the  original  plans  and 
specifications.  A  contract  was  let  for  its  construction  at 
the  same  time  that  other  contracts  were  let.  It  was  at- 
tached to  the  building,  and  formed  an  integral  part  of  it. 
The  fact  that  the  building  might  have  been  used  without 
it,  and  that  it  was  a  convenience  merely,  is  immaterial. 
Conceding  an  elevator  to  be  a  mere  convenience — still 
conveniences  are  a  material  part  of  the  building,  when 
provided  for  by  the  plans  and  specifications;  and,  so 
provided  for,  the  building  is  not  completed  until  the 
demands  of  the  plans  and  specifications  in  this  regard 
have  been  satisfied. 

Section  473. — MATERIALS  MUST  BE  EXPRESSLY  FUR- 
NISHED FOR  STRUCTURE  CHARGED  WITH  LIEN. — In  order 
to  enforce  the  lien  of  a  material-man  against  a  building 
or  structure,  the  materials  must  not  only  have  been  used 
in  the  construction  of  the  building,  but  they  must  have 
been,  by  the  express  terms  of  the  contract,  furnished  for 
the  particular  building  on  which  the  lien  is  claimed. 

Section  474. — ASSIGNMENT  OF  MECHANIC'S  LIEN. — A 
mechanic's  lien  can  be  assigned,  after  the  claim  of  lien 
has  been  filed  for  record,  but  not  before.  Before  the 
claim  of  lien  has  been  filed  for  record,  the  right  to  the 
lien  is  a  mere  personal  privilege,  which  the  laborer, 
mechanic,  or  material-man  may  exercise  or  not,  as  he 
sees  fit;  hence  it  is  not  the  subject  of  assignment.  But 
after  the  claim  of  lien  has  been  filed  for  record,  it  can 
be  assigned,  and  the  assignee  will  have  all  the  rights  of 
the  original  holder  of  the  lien. 

Section  475. — IF  BUILDING  Is  DESTROYED  BY  FIRE,  No 
LIEN  CAN  AFTERWARDS  BE  FILED. — Where  a  building  in 
course  of  construction  is  destroyed  by  fire,  without  any 
fault  of  the  owner,  before  any  mechanic's  lien  has  been 
fijed  thereon,  the  party  who  furnished  materials  for  the 
building,  or  who  performed  labor  upon  it,  can  have  no 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  463 

lien  upon  the  land  upon  which  the  building  was  being 
constructed.  The  benefit  conferred  upon  the  owner,  by 
placing  the  labor  and  materials  in  his  building,  is  the 
true  consideration  in  law  for  conferring  the  right  of  lien 
upon  the  parties  furnishing  such  labor  and  materials.  It 
cannot  be  said  that  this  consideration  exists,  where  the 
building  is  destroyed  before  completion  and  before  de- 
livery to  the  owner.  In  such  case,  the  owner  has  not 
derived  and  can  never  derive  any  benefit  from  the  labor 
and  materials  furnished.  (Decided  by  the  Supreme  Court 
of  California  in  the  case  of  Humboldt  Lumber  Mill  Com- 
pany vs.  Edward  Crisp,  which  decision  is  printed  in 
Volume  29,  California  Decisions,  page  629.) 

Section  476. — LIEN  FOE  WORK  DONE  BY  ORDER  OF 
HEALTH  OFFICER. — A  law  passed  in  1909  provides  as 
follows : 

"Any  health  officer  or  governing  board  of  any  city, 
town  or  sanitary  district,  having  served  written  notice 
upon  the  owner  or  reputed  owner  of  real  estate  .upon 
which  there  is  a  dwelling  house,  and  such  owner  or  re- 
puted owner,  after  thirty  days,  having  refused,  neglected 
or  failed  to  connect  such  dwelling  house,  together  with 
all  toilets,  sinks,  and  other  plumbing  therein,  properly 
vented,  and  in  a  sanitary  manner,  with  the  adjoining 
street  sewer,  may  construct  the  same  at  a  reasonable  cost, 
and  the  person  doing  said  work  at  the  request  of  such 
health  officer  or  governing  board  has  a  lien  upon  said 
real  estate  for  his  work  done  and  materials  furnished." 
Act  of  the  Legislature,  approved  April  19,  1909. 

Section  477. — MINER'S  LIEN  MUST  BE  UPON  THE 
WHOLE  CLAIM. — A  mechanic's  lien  cannot  be  claimed 
upon  part  of  a  structure,  or  upon  a  structure  which  is 
part  of  a  larger  structure,  or  upon  part  of  an  entire 
property.  Therefore,  it  has  been  held  by  the  Supreme 
Court  of  California  that  a  claim  of  lien  for  materials 
furnished  for  the  construction  of  a  mill,  tramway,  board- 


464  BUSINESS  LAW  FOR  BUSINESS  MEN. 

ing-house,  or  reduction  works  upon  a  mining  claim,  should 
be  against  the  mining  claim,  and  not  against  the  specific 
structure  upon  the  mine.  One  contributing  labor  or 
materials  to  a  structure  which  is  an  appurtenance  to  a 
mine,  or  which,  when  constructed,  is  to  form  part  of  it, 
must  be  held  to  have  anticipated  its  future  use,  and 
cannot  claim  a  lien  upon  the  structure  alone.  And  the 
procedures  provided  for  acquiring  liens  upon  structures 
are  not,  in  all  respects,  applicable  to  those  claiming  liens 
upon  mining  claims.  They  cannot  all  date  back  to  the 
commencement  of  the  work.  On  a  mine  the  work  is 
always  going  on,  may  have  commenced  before  the  labor- 
ers were  born,  and  may  continue  indefinitely.  There  is 
no  special  thirty  days,  therefore,  within  which  mining 
lienors  must  record  their  notices  and  claims  of  lien.  The 
labor  cannot  generally  be  said  to  have  contributed  to  the 
creation  of  the  property,  or  added  to  its  value;  on  the 
contrary,  it  may  diminish  its  value — perhaps  render  it 
valueless.  The  Code  does  not  seem  to  have  provided  for 
all  the  cases  which  may  arise  in  regard  to  liens  upon 
mining  claims.  We  can  only  follow  the  procedure  so  far 
as  applicable.  For  that  purpose,  the  mining  claim  must 
stand  in  the  place  of  the  "structure"  as  the  property  to 
be  charged  with  the  lien.  It  is  the  property  which  should 
be  described  in  the  notice  and  claim  of  lien.  One  who 
has  built  a  chimney  in  a  house,  or  a  porch,  or  a  door-step, 
has  helped  to  build  a  structure ;  but  he  cannot  acquire  a 
lien  upon  these  specific  structures,  and  by  detached  sales 
destroy  the  value  of  the  claims  depending  upon  liens 
upon  the  whole  house.  A  structure  may  be  a  part  of 
another  larger  structure,  and  in  reference  to  it  constitute 
but  a  part  of  a  structure.  In  such  cases  it  is  well  settled 
the  lien  must  cover  the  entire  structure.  The  mining 
lien,  if  it  exists  at  all,  extends  to  the  whole  claim.  Strictly 
speaking,  of  course,  a  mining  claim  cannot  be  constructed, 
altered,  or  repaired.  The  intention  of  the  lawmakers 
seems  to  have  been  to  give  a  lien  upon  the  whole  claim, 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  465 

for  labor  performed  on  and  for  materials  furnished  for 
and  used  in  any  structure,  on  or  in  the  mining  claim.  The 
lien  given  by  the  statute  is  upon  the  mining  claim  as  a 
whole,  and  not  upon  the  separate  pieces  of  work  done  in 
its  repairs.  A  claim  of  lien  for  material  furnished,  to 
be  used  in  a  building  upon  a  mining  claim,  should  be 
against  the  mining  claim,  and  not  against  the  specific 
structure  upon  the  mine. 

Section  478. — MINING  GROUND — PATENTED  LAND. — A 
lien  for  work  and  labor  may  be  taken  upon  mining  ground 
owned  by  a  patentee  of  the  United  States.  The  words 
"mining  claim"  in  the  statute  include  "mining  ground" 
and  all  "mines,"  whether  the  title  is  perfect  or  not.  But 
the  lien  will  not  extend  to  adjacent  land  which  is  not 
mineral  in  its  character.  The  words  "mining  claim," 
as  used  in  the  law,  have  no  reference  to  the  different 
stages  in  the  acquisition  of  the  Government  title.  It  in- 
cludes all  mines  where  no  patent  has  been  issued,  as  in 
the  case  of  a  mining  claim  in  its  strict  sense,  and  also 
where  the  patent  has  issued. 

Section  479. — PERSONAL  PROPERTY  LIENS. — Every  per- 
son who,  while  lawfully  in  possession  of  an  article  of 
personal  property  renders  any  service  to  the  owner 
thereof,  by  labor  or  skill,  employed  for  the  protection, 
improvement,  safe  keeping,  or  carriage  thereof,  has  a 
special  lien  thereon,  dependent  on  possession,  for  the 
compensation,  if  any,  which  is  due  to  him  from  the  owner 
for  such  service ;  a  person  who  makes,  alters,  or  repairs 
any  article  of  personal  property,  at  the  request  of  the 
owner,  or  legal  possessor  of  the  property,  has  a  lien  on 
the  same  for  his  reasonable  charges  for  the  balance  due 
for  such  work  done  and  materials  furnished,  and  may 
retain  possession  of  the  same  until  the  charges  are  paid ; 
and  livery  or  boarding  or  feed  stable  proprietors,  and 
persons  pasturing  horses  or  stock,  have  a  lien,  dependent 
on  possession,  for  their  compensation  in  caring  for, 


4GG  BUSINESS  LAW  FOR  BUSINESS  MEN. 

boarding,  feeding,  or  pasturing  such  horses  or  stock ;  and 
laundry  proprietors  and  persons  conducting  a  laundry 
business,  have  a  general  lien,  dependent  on  possession, 
upon  all  personal  property  in  their  hands  belonging  to  a 
customer,  for  the  balance  due  them  from  such  customer 
for  laundry  work;  and  veterinary  proprietors  and  vet- 
erinary surgeons,  shall  have  a  lien,  dependent  on  pos- 
session, for  their  compensation  in  caring  for,  boarding, 
feeding,  and  medical  treatment  of  animals;  and  keepers 
of  garages  for  automobiles,  shall  have  a  lien,  dependent 
on  possession,  for  their  compensation  in  caring  for  and 
safe  keeping  such  automobiles. 

Act  of  the  Legislature,  approved  April  12,  1911. 

Section  480. — FORM  OF  CONTRACTOR'S  BOND. — The  fol- 
lowing is  a  form  of  bond  to  be  given  by  the  contractor  to 
the  owner,  and  to  be  filed  for  record  together  with  the 
contract : 

CONTRACTOR'S  BOND. 
KNOW  ALL  MEN  BY  THESE  PRESENTS :    That 

we, ,  as  principal, 

(Here  insert  name  of  contractor.) 

and .- , 

(Here  insert  name  of  surety.) 

and 

(Here  insert  name  of  surety.) 
as  sureties,  are  held  and  firmly  bound  unto 

(Here  insert  name  of  owner.) 

in  the  sum  of 

(Here  insert  an  amount  not  less  than  fifty  percent  of 
contract  price.) 

Dollars,  lawful  money  of  the  United  States  of  America, 

to  be  paid  to  the  said 

(Here  insert  name  of  owner.) 

for  which  payment  well  and  truly  to  be  made,  we  bind 
ourselves  firmly  by  these  presents. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  407 

Sealed  with  our  seals  and  dated  the day 

of ,19 

The  conditions  of  the  above  obligation  are  such,  that 

whereas,  the  said 

(Name  of  contractor.) 

did  on  the day  of ,19 , 

enter  into  a  contract  with  the  said 

( Name  of  owner. ) 
by  the  terms  of  which  he  agreed  to 


(Here  state  the  substance  of  the  contract,  time  of  pay- 
ments, amounts,  progress  of  work  and  completion,  etc.) 


the  said  contract  shall  be  performed  in  all  respects  by 
said  contractor  as  specified  therein. 

It  is  also  a  condition  of  this  bond  that  the  said 

(Name  of  contractor.) 

shall  pay  in  full  the  claims  of  all  persons  performing 
labor  upon  or  furnishing  materials  to  be  used  in  the  work 
specified  in  said  contract;  and  this  bond  shall  inure  to 
the  benefit  of  any  and  all  persons  who  perform  labor 
upon  or  furnish  materials  to  be  used  in  the  work  described 
in  said  contract,  and  they  and  each  of  them  shall  have  a 
right  of  action  to  recover  upon  this  bond  and  the  sureties 
named  herein,  in  any  lawful  suit  brought  to  foreclose  a 
mechanic's  lien  by  such  persons  or  in  a  separate  suit 
brought  on  this  bond  ;  and  if  these  conditions  above  stated 
are  fulfilled  and  fully  complied  with,  then  the  above  obli- 
gation to  be  void,  otherwise  to  remain  in  full  force  and 
virtue. 

.(Seal.) 

(Seal.) 
(Seal.) 
(Acknowledgment  in  usual  form.) 


468  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Section  481. — FORM  OF  NOTICE  TO  OWNER  OF  AGREE- 
MENT TO  FURNISH  MATERIALS  TO  CONTRACTOR.— 

To 

(Here  insert  name  of  owner.) 

Please  take  notice  that  in  the  month  of , 

19 ,  I,  the  undersigned,  agreed  with 

(Here  insert  name  of  contractor.) 

the  contractor  with  whom  you  contracted  to  construct  the 

building  at Street,  San  Francisco,  California, 

(of  which  building  you  are  the  reputed  owner),  to  supply 
him  with 

(Here  describe  the  materials  which  were  agreed  to  be 
supplied.) 


to  be  used  in  constructing  said  building.  That  the  value 
of  said  materials,  agreed  to  be  supplied  as  aforesaid,  is 
the  sum  of  $ 


Section  482. — FORM  OF  NOTICE  TO  OWNER  OF  MATERIALS 
FURNISHED  TO  CONTRACTOR. — The  following  is  a  form  of 
notice  to  owner  of  materials  furnished  to  the  contractor. 
This  notice  may  be  given  by  delivering  it  to  the  owner 
personally,  or  by  leaving  it  at  his  residence  or  place  of 
business  with  some  person  in  charge,  or  by  delivering  it 
to  his  architect,  or  by  leaving  it  at  the  architect's  office 
with  some  person  in  charge  there : 

To 

(Here  insert  name  of  owner.) 

Please  take  notice  that  in  the  month  of , 

19 ,  I  the  undersigned  sold  and  delivered  at  his  request 

(Here  insert  name  of  contractor.) 
the  contractor  who  was  at  that  time  constructing  that 

certain  building  at  number Mission  Street,  San 

Francisco,   California,    (of  which  building  you  are  the 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  469 

reputed  owner),  all  the  materials  described  as  follows, 
to-wit:  .. 


(Here  insert  description  of  materials.) 


to  be  used  and  which  material  was  used  by  said  con- 
tractor in  constructing  said  building.  And  that  the  value 

of  said  materials  is  $ ,  and  is  and  was  the  value 

of  said  materials  agreed  to  be  furnished  to  said  con- 
tractor by  me.  That  the  first  delivery  of  said  materials 
to  said  contractor  for  use  in  said  building  was  on  the 

day  of ,  19 ,  and  the  last  lot 

of  said  materials  was  delivered  on  the day 

of ,  19 


Section  483. — FORM  OF  NOTICE  TO  OWNER  OF  LABOR 
PERFORMED. — The  following  is  a  form  of  notice  to  owner 
to  be  given  by  the  person  having  performed  labor  upon 
the  building  at  the  instance  of  the  contractor.  This 
notice  may  be  given  by  delivering  it  to  the  owner  per- 
sonally, or  by  leaving  it  at  his  residence  or  place  of  busi- 
ness with  some  person  in  charge,  or  by  delivering  it  to 
his  architect,  or  by  leaving  it  at  the  latter 's  office  with 
some  person  in  charge  there : 

To 

(Here  insert  name  of  owner.) 

Please  take  notice  that  between  the day 

of ,  19 ,  and  the day  of , 

19 ,  I,  the  undersigned,  performed  labor  for 

(Here  insert  name  of  contractor.) 

the  contractor  with  whom  you  agreed  to  construct  that 
building  at  number Mission  Street,  San  Fran- 
cisco, California  (of  which  building  you  are  the  reputed 
owner) ,  to-wit :  


470  BUSINESS  LAW  FOR  BUSINESS  MEN. 

(Here  insert  the  kind  of  labor  performed  in  the  con 
struction  of  said  building.) 

and  he  agreed  to  pay  me  $ for  each  day's  work  of 

hours.    That  I  worked  on  said  building  under 

said  agreement days.    That  the  said 

,  the  contractor, 

has  not  paid  me  anything  on  account  of  said  work.     (Or 
if  anything  has  been  paid,  state  how  much.)  

And  he  is,  at  this  date  indebted  to  me  in  the  sum  of 

$ lawful  money  of  the  United  States,  and  the 

value  of  said  work  was  and  is  $ per  day  for  each 

of  said days,  amounting  to  the  sum  of  $ ... 

Dated  the day  of ,19 


Section  484. — FORM  OF  NOTICE  OF  MECHANIC'S  LIEN 
FOR  LABOR. --The  following  is  a  form  of  notice  of 
mechanic's  lien  for  labor  performed.  The  notice  of  lien 
must  be  filed  for  record  with  the  county  recorder  of  the 
county  or  city  and  county  in  which  the  property  or  some 
part  thereof  is  situated : 

NOTICE  OF  MECHANIC'S  LIEN  FOR  LABOR. 

Claimant 


Notice  is  hereby  given  that 

residing  at ,  State  of  California, 

hereby  claimes  a  lien  against  the  interest  of 

in  the  real  property  hereinafter  described. 

That  the  name  of  the  owner  of  said  real  property, 
against  whose  interest  therein  a  lien  is  hereby  claimed,  is 

(Here  insert  name  of  owner.) 
and  that  the  interest  of  said 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  471 

in  said  real  property,  as  far  as  known  to  said  lienor,  is  as 
follows,  to-wit: 

(Here  state  nature  of  interest  of  owner  in  the  property.) 

That  the  name  of  the  claimant  herein  is 

and  his  residence  is  at ,  State  of  California; 

That  claimant  was  employed  by 

(Here  state  name  of  employer.) 

on  the day  of ,  19 ,  to  perform 

labor  in  and  about  the  construction  of  a  building  on  the 
premises  hereinafter  described,  and  commenced  work  on 

said  building  as  a on  the day  of 

,  19 ,  and  performed days  of 

labor  as  such ,  ending  on  the day  of 

,  19.... ,  at  the  agreed  price  of  $ 

per  day ; 

That  the  amount  unpaid  to  the  said  claimant  for  such 
labor  is  the  sum  of  $ ; 

That  the  property  subject  to  this  lien,  and  against 

which  the  said hereby  claims  a 

lien,  is  described  as  follows,  to-wit: 

All  that  certain  lot  or  tract  of  land  situate  in  the  City 

of ,  County  of ,  State  of 

California,  particularly  described  as  follows :  (If  in  a  city 
or  village,  describe  the  location  by  street  and  number  if 
known.)  

(Here  describe  the  property.) 

Claimant. 
STATE  OF  CALIFORNIA,]  gg 

COUNTY  OF ..  j 

,  being  duly  sworn, 

deposes  and  says,  that  he  is  the  person  named  as  claimant 
in  the  foregoing  claim  of  lien ;  that  he  has  read  the  fore- 
going claim  of  lien,  and  knows  the  contents  thereof,  and 
that  the  statements  therein  contained  are  true  of  his  own 
knowledge. 


472  BUSINESS  LAW  FOE  BUSINESS  MEN. 

Subscribed  and  sworn  to  before  me  this day  of 

,19 


Notary  Public  in  and  for  the  County  of 
,  State  of  California. 

Section  485. — FORM  or  MECHANIC'S  LIEN  BY  CONTRAC- 
TOR OR  SUB-CONTRACTOR, — The  following  is  a  form  of 
notice  of  mechanic's  lien  by  contractor  or  sub-contractor. 
The  notice  of  lien  must  be  filed  for  record  with  the  county 
recorder  of  the  county  or  city  and  county  where  the  prop- 
erty or  some  part  thereof  is  situated : 

NOTICE  OF  MECHANIC'S  LIEN  BY  CONTRACTOR 
OR  SUB-CONTRACTOR. 


Claimant. 

vs. 

Notice  is  hereby  given  that 

residing  at ,  State  of  California, 

hereby  claims  a  lien  against  the  interest  of 

in  the  real  property  hereinafter  described : 

That  the  name  of  the  owner  of  said  real  property, 
against  whose  interest  therein  a  lien  is  hereby  claimed  is 

and  that  the  interest  of 

said  

in  said  real  property,  as  far  as  known  to  said  lienor,  is.  as 
follows,  to-wit:  : 

(Here  describe  nature  of  interest  of  owner  in  the  prop- 
erty.) 


That  the  name  of  the  claimant  herein  is 

,  and  his  residence  is  at 

,  State  of  California. 

That  on  the day  of ,  19 , 

claimant  entered  into  a  contract  with 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  473 

to  

(Here  describe  work  contracted  for.) 


for  the  agreed  price  of  $ ,  payable  as  follows, 

to-wit:  

(Here  state  terms  of  payment.) 

That  claimant  completed  his  said  contract  on  the 
day  of ,  19 ; 

That  the  amount  unpaid  to  the  said  claimant  on  said 
contract  is  the  sum  of  $ ; 

That  the  property  subject  to  this  lien  and  against 

which  the  said 

hereby  claims  a  lien,  is  described  as  follows,  to-wit : 

All  that  certain  lot  or  tract  of  land  situate  in  the  City 

of ,  County  of , 

State  of  California,  particularly  described  as  follows : 


(Here  describe  the  property.    If  in  a  city  or  village, 
describe  the  location  by  street  and  number,  if  known.) 


That  the  said  claimant, 

hereby  claims  a  lien  on  the  property  above  described  for 
the  sum  of  $ 

Claimant. 

STATE  OF  CALIFORNIA, }  gg 

COUNTY  OF ] 

,  being  duly  sworn, 

deposes  and  says,  that  he  is  the  person  named  as  claimant 
in  the  foregoing  claim  of  lien ;  that  he  has  read  the  fore- 
going claim  of  lien,  and  knows  the  contents  thereof,  and 
that  the  statements  therein  contained  are  true  of  his  own 
knowledge. 


474  BUSINESS  LAW  FOE  BUSINESS  MEN. 

Subscribed  and  sworn  to  before  me  this day  of 

,19 


Notary  Public  in  and  for  the  County  of 
,  State  of  California. 

Section  486. — FORM  OF  NOTICE  OF  CLAIM  AGAINST  PUB- 
LIC IMPROVEMENT  FUND. — The  law  does  not  allow  a  lien 
on  public  property,  property  owned  by  the  state  or  a 
municipality.  But  the  law  does  allow  a  claim  on  public 
funds  appropriated  to  certain  public  improvements,  and 
makes  it  the  duty  of  the  state  or  municipal  officer  in 
charge  of  said  public  improvement  to  withhold  from  the 
contractor  sufficient  money  due  or  that  may  become  due 
to  such  contractor  to  answer  the  claim,  including  the 
reasonable  cost  of  any  litigation  thereunder.  This  notice 
may  be  given  by  delivering  the  same  personally  to  the 
officer  of  the  municipality  whose  duty  it  is  to  pay  the  con- 
tractor from  the  public  funds : 

NOTICE  OF  CLAIM  AGAINST  PUBLIC  IMPROVE- 
MENT FUND. 

Notice  is  hereby  given  that , 

residing  at ,  State  of  California, 

hereby  claims  a  lien  against  the  interest  of 

,  contractor,  in  that  certain  fund 

appropriated  and  set  apart  by  the  City  and  County  of 
San  Francisco,  in  the  State  of  California,  to  pay  said  con- 
tractor for  public  work,  as  follows : 

That  the  name  of  claimant  is , 

and  his  residence  is  at ,  State  of  California. 

That  on  the day  of ,  19 , 

(Here  insert  name  of  contractor.) 

entered  into  a  contract  with  the  said  City  and  County  of 
San  Francisco  to 

(Here  state  nature  of  work  contracted  for.) 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  475 

That  between  the day  of ,  19 , 

claimant  furnished  materials  to  said  contractor  to  be  used 
in  the  construction  of  said  public  work,  and  that  the  first 
materials  were  delivered  to  said  contractor  by  him  on  the 

day  of ,  19 ,  and  the  last  materials 

were  delivered  on  the day  of ,  19 

That  the  materials  so  furnished  consisted  of 

(Here  insert  description  of  materials.) 

and  which  said  materials  were  used  in  the  construction  of 

(Here  describe  the  public  improvement.) 

at ,in  the  said  City  and  County  of 

San  Francisco. 

That  said  materials  were  of  the  reasonable  value  (or 
agreed  price )  of. dollars. 

That  the  amount  unpaid  to  said  claimant  from  said 

contractor  for  said  materials  is  the  sum  of dollars, 

which  said  sum  of dollars  became  due  to  said 

claimant  on  the day  of ,  19 

That  said  

hereby  claims  a  lien  on  all  moneys  due  or  to  become  due 

the  said 

on  said  contract  with  City  and  County  of  San  Francisco 
for  the  sum  of dollars. 

Claimant. 

STATE  OF  CALIFORNIA,]  gg 

COUNTY  OF j 

,  being  duly  sworn, 

deposes  and  says,  that  he  is  the  person  named  as  claimant 
in  the  foregoing  claim  of  lien;  that  he  has  read  the  fore- 
going claim  of  lien,  and  knows  the  contents  thereof,  and 
that  the  statements  therein  contained  are  true  of  his  own 
knowledge. 


476  BUSINESS  LAW  FOE  BUSINESS  MEN. 

Subscribed  and  sworn  to  before  me  this day  of 

.,  19 


Notary  Public  in  and  for  the  County  of 
,  State  of  California. 

Section  487. — FOKM  OF  OWNER'S  NOTICE  OF  COMPLE- 
TION.— The  following  is  a  form  of  owner's  notice  of 
completion : 

NOTICE  OF  COMPLETION  OF  WOEK. 

Notice  is  hereby  given  that  I, 

(Here  insert  name  of  owner.) 


as  owner  of  the  property  herein  described,  caused  a  build- 
ing to  be  erected  upon  the  property  hereinafter  described, 
the  contract  for  doing  which  work  was  heretofore  made 

with  

(Here  insert  name  of  contractor.) 

and  which  contract  was  filed  for  record  in  the  office  of  the 
Kecorder  of  the  City  and  County  of  San  Francisco,  State 
of  California,  on  the day  of. ,  19 

That  the  work  on  said  building  was  completed  on  the 
day  of ,19 

That  the  nature  of  the  title  to  said  property  of  said 
owner  is  as  follows,  that  is  to  say,  he  owns  it  in  fee. 

That  the  property  hereinbefore  referred  to,  and  on 
which  said  building  is  situated,  is  described  as  follows, 
to-wit : 


(Here  insert  description  of  property.) 


STATE  OF  CALIFOENIA,       ) 

f    SS 

CITY  AND  COUNTY  OF  SAN  FEANCISCO.  ) 

,  being  duly  sworn, 

deposes  and  says,  that  he  is  the  owner  of  the  property  de- 
scribed in  the  foregoing  notice ;  that  he  has  read  the  same 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  477 

and  knows  the  contents  thereof,  and  that  the  same  is  true 
of  his  own  knowledge. 

Subscribed  and  sworn  to  before  me  this 

day  of ,  19 

Notary  Public  in  and  for  the  City  and  County 
of  San  Francisco,  State  of  California. 

Section  488. — NOTICE  BY  OWNER  THAT  HE  WILL  NOT 
BE  RESPONSIBLE  FOR  IMPROVEMENTS  ON  His  PREMISES. — 
The  owner  of  property,  or  persons  having  or  claiming 
any  estate  in  the  land  upon  which  improvements  are 
being  made  or  buildings  constructed,  may  within  ten 
days  after  he  shall  have  obtained  knowledge  of  said  con- 
struction, labor  or  repair  or  work  or  labor,  give  notice 
that  he  will  not  be  responsible  for  the  same.  The  follow- 
ing is  a  form  of  notice  by  owner  that  he  will  not  be 
responsible : 
To  Whomsoever  It  May  Concern : 

Notice  is  given  that  I  am  the  owner  of  all  that  prop- 
erty described  as  follows :  

(Here  insert  description  of  property.) 


and  I  hereby  give  notice  that  I  will  not  be  responsible  for 
the  construction,  or  for  the  material  or  labor,  used  or  to 
be  used,  or  for  any  alteration  or  repair,  or  for  any  work, 
labor,  material  furnished  or  to  be  furnished  upon  that 
structure,  or  addition  thereof,  now  upon  said  land,  or 
which  has  been  performed,  furnished  or  used  in  any  man- 
ner or  way  upon  said  land  or  upon  the  buildings  thereon, 
or  additions  thereto,  or  which  may  heretofore  be  per- 
formed, furnished  or  used,  upon  said  land  or  buildings  or 
additions  thereto,  or  for  the  services  of  any  architect. 
Dated  the day  of ,  19 


478  BUSINESS  LAW  FOR  BUSINESS  MEN. 

STATE  OF  CALIFORNIA,       1  gg 
CITY  AND  COUNTY  OF  SAN  FRANCISCO.  $ 

,  being  duly  sworn, 

(Here  insert  name  of  owner.) 

deposes  and  says,  that  he  is  the  owner  of  the  property  de- 
scribed in  the  foregoing  notice ;  that  he  has  read  the  same 
and  knows  the  contents  thereof,  and  that  the  same  is  true 
of  his  own  knowledge. 

Subscribed  and  sworn  to  before  me  this 

day  of ,19 

Notary  Public  in  and  for  the  City  and  County 
of  San  Francisco,  State  of  California. 

Section  489. — FORM  OF  ASSIGNMENT  OF  LIEN. — It  has 
already  been  stated  that  a  mechanic's  lien  can  be  as- 
signed, after  it  is  filed  for  record,  but  not  before.  The 
following  is  a  form  of  assignment  of  lien. 

ASSIGNMENT  OF  LIEN. 

THIS  INDENTURE,  made  the day  of 

,  19 ,  witnesseth : 

That .'...,  residing 

at ,  State  of  California,  hereby  assigns 

for  valuable  consideration  to , 

residing  at ,  State  of  California, 

that  certain  lien  and  all  moneys  due  or  to  become  due 
thereon,  amounting  to  the  date  of  filing  notice  of  lien  to 

the  sum  of dollars,  which  said  notice  of  lien 

was  filed  in  the  office  of  the  clerk  of County, 

State  of  California,  on  the day  of ,  19 ; 

in  which  said  notice  of  lien  the  said 

was  named  as  lienor  and 

as  owner,  and  the  real  property  therein  mentioned  as  the 
subject  of  said  lien  particularly  described  as  follows,  to- 
wit: 

(Here  describe  the  property.) 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  479 

In  witness  whereof,  I  have  hereunto  set  my  hand  and 
seal  the  day  and  year  first  above  written. 

(Seal.) 

STATE  OF  CALIFOENIA, 

COUNTY  OF 

On  this day  of ,  19 ,  before  me 

personally  appeared , 

to  me  known  to  be  the  person  described  in  the  foregoing 
instrument,  and  acknowledged  that  he  executed  the  same. 

Notary  Public  in  and  for  the  County  of 
,  State  of  California. 

Section  490. — EETURN  OF  PLANS  BY  RECORDER. — After 
the  expiration  of  two  years  from  the  date  of  filing  in  the 
recorder's  office  of  notice  of  completion  of  any  building 
or  improvement,  the  contract,  plans  and  specifications 
under  which  the  work  or  improvement  was  performed 
may  be  returned  by  the  recorder  to  the  person  filing  the 
same,  unless  the  recorder  has  been  notified  in  writing  to 
retain  the  same  by  some  one  claiming  some  interest  under 
such  contract  or  in  the  property  affected  thereby;  pro- 
vided, that  after  the  expiration  of  five  years  from  the  date 
of  filing  in  the  recorder's  office  of  any  contract,  plans  and 
specifications  of  any  building  or  improvement,  the  re- 
corder may  destroy  such  contract,  plans  and  specifica- 
tions if  the  same  have  not  been  delivered  as  hereinabove 
provided,  unless  the  recorder  has  been  notified  in  writing 
to  retain  the  same  by  some  one  claiming  some  interest 
under  such  contract  or  in  the  property  affected  thereby. 
Act  of  the  Legislature  of  California,  1915;  in 
effect  August  8,  1915. 

Section  491. — STREET  WORK  LIENS. — Every  con- 
tractor, person,  company  or  corporation,  including  con- 
tracting owners,  to  whom  is  awarded  any  contract  for 
street  work  under  this  act,  shall,  before  executing  the 
said  contract,  file  with  the  superintendent  of  streets  a 
good  and  sufficient  bond,  approved  by  the  mayor,  in  a 


480  BUSINESS  LAW  FOR  BUSINESS  MEN. 

sum  not  less  than  one-half  of  the  total  amount  payable  by 
the  terms  of  said  contract;  such  bond  shall  be  executed 
by  the  principal  and  at  least  two  sureties,  who  shall  qual- 
ify for  double  the  sum  specified  in  said  bond,  and  shall  be 
made  to  inure  to  the  benefit  of  any  and  all  persons,  com- 
panies, or  corporations  who  perform  labor  on,  or  furnish 
materials  to  be  used  in  the  said  work  of  improvement, 
and  shall  provide  that  if  the  contractor,  person,  company, 
or  corporation  to  whom  said  contract  was  awarded  fails 
to  pay  for  any  materials  so  furnished  for  the  said  work  of 
improvement,  or  for  any  work  or  labor  done  thereon  of 
any  kind,  that  the  sureties  will  pay  the  same,  to  an 
amount  not  exceeding  the  sum  specified  in  said  bond. 
Any  laborer,  materialman,  person,  company  or  corpora- 
tion, furnishing  materials  to  be  used  in  the  performance 
of  said  work  specified  in  said  contract,  or  who  performed 
work  or  labor  upon  the  said  improvement,  whose  claim 
has  not  been  paid  by  the  said  contractor,  company  or 
corporation,  who  executed  the  said  contract,  shall  sever- 
ally have  a  first  lien  upon  and  against  the  assessment, 
any  partial  assessment,  any  reassessment,  and  any  bonds 
which  may  be  issued  to  represent  any  assessment  or 
reassessment.  Such  laborers,  or  materialmen  may,  at  any 
time  prior  to  thirty  days  after  the  recording  of  the  assess- 
ment for  said  work,  file  with  the  superintendent  of  streets, 
a  verified  statement  of  his  or  its  claim,  together  with  a 
statement  that  the  same,  or  some  part  thereof,  has  not 
been  paid.  At  any  time  within  ninety  days  after  the  filing 
of  such  claim,  the  persons,  company,  or  corporation,  filing 
the  same  or  their  assigns,  may  commence  an  action  either 
to  enforce  the  aforesaid  lien,  or  on  said  bond,  for  the 
recovery  of  the  amount  due  on  said  claim,  together  with 
the  costs  incurred  in  said  action,  and  a  reasonable  attor- 
ney's fee  to  be  fixed  by  the  court,  for  the  prosecution 
thereof. 

Act  of  the  Legislature,  approved  May  10,  1919 ; 
in  effect  July  22,  1919. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  481 

Section  492. — LIENS  ON  LOTS  FOB  IMPROVEMENTS. — Any 
person  who,  at  the  request  of  the  owner  of  any  lot  or  tract 
of  land,  grades,  fills  in,  or  otherwise  improves  the  same, 
or  the  street,  highway,  or  sidewalk  in  front  of  or  adjoin- 
ing the  same,  or  constructs  any  areas,  or  vaults,  or 
cellars,  or  rooms,  under  said  sidewalks,  or  makes  any 
improvements  in  connection  therewith,  has  a  lien  upon 
said  lot  or  tract  of  land  for  his  work  done  and  materials 
furnished;  provided,  that  in  cases  where  the  improve- 
ment made  or  work  done  is  subject  to  acceptance  by  any 
municipal  board  or  officer,  the  time  for  filing  claims  of 
lien  shall  not  commence  to  run  until  after  such  acceptance 
shall  have  been  made. 

Statutes  of  1913,  Chapter  189. 

AECHITECTS 

Section  493. — COMPENSATION  OF  ARCHITECT. — The 
compensation  of  an  architect  who  draws  plans  and  speci- 
fications is  left  to  an  agreement  between  himself  and  his 
employer.  But  if  there  is  no  agreement  as  to  what  is  to 
be  paid  for  the  architect's  work,  the  law  will  allow  him  a 
reasonable  compensation  for  his  services.  What  is  a  rea- 
sonable compensation  will  depend  upon  the  character  ol 
the  work  he  has  done,  and  will  be  determined  by  the 
knowledge  and  experience  of  persons  skilled  in  that  kind 
of  work.  Custom  may  also  enter  into  the  question  of  the 
architect's  compensation,  as  where  he  has  superintended 
the  construction  of  the  building,  and  it  is  the  local  custom 
to  pay  architects  so  much  for  such  service;  in  which  ense 
it  will  be  presumed  that  his  services  of  like  character 
were  worth  the  customary  compensation,  unless  some  fact 
is  shown  which  makes  these  services  worth  more  or  less 
than  the  customary  rate. 

Section  494. — ARCHITECT'S  LIEN. — An  architect  has  » 
lien  on  the  building  for  his  pay,  provided  he  superintends 
the  erection  of  the  building.  He  must,  to  enforce  his  lien, 


482  BUSINESS  LAW  FOR  BUSINESS  MEN. 

file  the  same  claim  of  lien  in  the  office  of  the  County  Ke- 
corder  as  is  required  of  laborers,  mechanics,  and  ma- 
terialmen,  referred  to  in  preceding  sections. 

Code  of  Civil  Procedure,  Section  1183. 

Section  495. — ARCHITECT  CANNOT  FILE  LIEN  AGAINST 
PUBLIC  BUILDING. — If  an  architect  prepares  plans  and 
specifications  for  a  public  building,   such  as  a  Court 
House,  Jail,  City  Hall,  Hall  of  Eecords,  or  School  House, 
he  cannot  file  a  lien  against  any  such  property,  and  he 
must  look  only  to  the  public  funds  provided  by  law  for 
such  public  improvements.    Justice  Temple,  in  the  Su- 
preme Court  of  California,  in  the  case  of  Mayrhofer 
against  the  Board  of  Education  of  San  Diego,  in  which 
case  it  was  decided  that  in  California  no  lien  will  be  al- 
lowed against  a  public  building,  stated  the  reason  thus : 
"The  claim  is  made  that  public  buildings  are  included 
both  in  the  word  'property,'  used  in  the  Constitution,  and 
in  the  phrase  'any  building,'  used  in  the  Code,  and  there- 
fore it  must  necessarily  follow  that  mechanics  and  ma- 
terial-men are,  by  these  provisions,  given  a  right  to  a  lien 
upon  such  buildings.    But  this  ignores  the  rule  of  statu- 
tory construction,  that  the  State  is  not  bound  by  general 
words  in  a  statute,  which  would  operate  to  trench  upon 
its  sovereign  rights,  injuriously  affect  its  capacity  to  per- 
form its  functions,  or  establish  a  right  of  action  against 
it.    The  Government  was  created  and  shaped  by  the  Con- 
stitution.   It  is  not  an  end  in  itself,  but  a  mere  instru- 
mentality for  public  services.    Its  powers  and  functions 
exist  only  for  the  people.    One  of  its  functions  is  to  enact 
laws  for  the  government  of  the  inhabitants  within  its 
limits,  thereby  affording  them  protection  and  advancing 
their  general  welfare.    The  property  it  holds  is  simply  to 
enable  it  to  perform  the  services  required  of  it.    It  is  as 
much  devoted  to  public  use  as  are  the  streets  and  high- 
ways, though  in  a  different  way.    Instead  of  being  the 
natural  and  obvious  conclusion,  that  a  general  law  pro- 
viding remedies  for  private  individuals  was  intended  to 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  483 

enable  a  creditor  of  the  State  to  seize  this  property  for 
the  satisfaction  of  his  debt,  it  would  be  a  most  unnatural 
inference.  The  Constitution  has  itself  provided,  as  the 
only  means  which  the  State  has  for  the  payment  of  its 
debts,  the  exercise  of  the  sovereign  power  of  taxation. 
And  for  each  political  subdivision  the  rule  is  the  same. 
These  revenues  are  divided  into  specific  funds,  and  one 
furnishing  labor  or  material  to  the  State  knows  to  what 
he  must  look  for  payment.  He  becomes  a  creditor  of  a 
specific  fund,  and  has  no  right  except  with  reference  to 
such  fund."  (Decided  by  the  Supreme  Court  of  Cali- 
fornia in  the  case  of  Mayrhofer  vs.  Board  of  Education 
of  San  Diego,  which  decision  is  printed  in  Volume  89  of 
the  California  Eeports,  page  110.) 

Section  496. — ARCHITECT  HAS  No  LIEN  AGAINST  MON- 
UMENT IN  PUBLIC  PARK. — Where  an  architect  is  employed 
by  a  contractor  for  the  erection  of  a  monument  in  a  public 
park,  he  has  no  lien  for  his  pay  upon  the  monument  or  the 
land  on  which  it  is  erected.  This  question  was  decided 
by  our  Supreme  Court  in  the  matter  of  the  Garfield  Monu- 
ment, in  Golden  Gate  Park,  San  Francisco.  The  Supreme 
Court  said:  "The  monument,  though  built  by  private 
contribution,  was  erected  upon  and  as  an  adornment  of 
one  of  the  public  parks  of  the  municipality.  It  was 
affixed  to  the  freehold,  and  thus  became  a  part  of  the  land, 
the  property  of  the  municipality.  The  monument  could 
not  be  made  subject  to  a  lien."  (Decided  by  the  Supreme 
Court  of  California  in  the  case  of  Griffiths  vs.  Happers- 
berger,  which  decision  is  printed  in  Volume  86  of  the 
California  Reports,  page  605.) 

Section  497. — PAYMENTS  MADE  ON  ARCHITECT'S  CER- 
TIFICATE.— Where  a  contract  provides  that  payments  shall 
be  made  on  the  certificate  of  the  architect — who  is  re- 
quired by  the  contract,  among  other  things,  to  certify  that 
all  the  work  of  the  mechanics,  laborers,  and  others  em- 
ployed by  the  original  contractor,  has  been  paid — his  cer- 


484  BUSINESS  LAW  FOR  BUSINESS  MEN. 

tificate  is  conclusive  of  the  rights  of  all  parties  concerned, 
unless  it  can  be  shown  that  it  was  obtained  by  the  owner 
by  collusion  or  fraud. 

Section  498. — ARCHITECT'S  CERTIFICATE  AS  TO  LIENS. — 
Where  a  building  contract  provides  that  for  each  of  the 
payments  a  certificate  shall  be  obtained  from  the  archi- 
tect, and  that  at  the  time  of  the  presentation  of  any  certif- 
icate there  shall  not  be  any  liens  against  the  building,  and 
a  lien  is  filed  before  the  last  installment,  it  does  not  be- 
come due  while  such  condition  exists ;  and  the  amount  of 
the  lien  must  be  deducted  from  the  amount  due  the  con- 
tractor. 

Section  499. — CONDITION  AS  TO  CERTIFICATE  MAY  BE 
WAIVED  BY  OWNER. — The  condition  in  a  contract  for  the 
erection  of  a  building,  that  all  installments  of  payments 
shall  be  made  upon  certificates  of  the  architect  that  the 
materials  and  labor  have  been  furnished  in  accordance 
with  the  plans  and  specifications,  may  be  waived  by  the 
owner.  The  clause  as  to  the  production  of  the  certificates 
is  for  the  benefit  of  the  owner,  and  he  may  waive  it  at  his 
option,  and  accept  other  proofs. 

Section  500. — ACRHITECT'S  PLANS  PART  OF  CONTRACT. 
When  the  contract  mentions  the  architect 's  drawings  and 
specifications,  and  refers  to  them  for  conditions  of  the 
agreement,  they  form  an  essential  part  of  the  building 
contract,  and  should  be  annexed  to  the  contract  before 
filing.  The  plans  and  specifications  cannot  be  left  in  the 
architect's  office,  and  at  the  same  time  be  considered  as 
annexed  to  the  contract.  If  intended  to  co-operate  with 
and  be  incorporated  into  the  formal  contract,  the  draw- 
ing and  specifications  must  be  in  fact  attached  to  the 
contract. 

Section  501. — SERVICES  OF  ARCHITECT. — The  services 
of  an  architect,  in  the  preparation  of  drawings,  plans,  and 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  485 

specifications  for  a  building  and  in  superintending  its 
erection  are  "work  and  labor  upon  a  building,"  within 
the  meaning  of  the  mechanic's  lien  law.  The  architect 
who  superintends  the  construction  of  a  building  performs 
labor  as  truly  as  the  carpenter  who  frames  it,  or  the 
mason  who  lays  the  wall,  and  labor  of  a  most  important 
character.  The  language  quoted  makes  no  distinction 
between  skilled  and  unskilled  labor,  or  between  mere 
manual  labor  and  the  labor  of  one  who  supervises,  di- 
rects, and  applies  the  labor  of  others.  The  general  prin- 
ciple upon  which  the  lien  laws  proceed  is,  that  any  person 
who  has  contributed  by  his  labor  or  by  furnishing  ma- 
terials, to  a  structure  erected  by  an  owner  upon  his  prem- 
ises, shall  have  a  claim  upon  the  property  for  his  com- 
pensation. An  architect  who  prepares  the  drawings, 
plans,  and  specifications  for  a  building,  and  superintends 
its  erection,  may  as  truly  be  said  to  perform  labor  on  it 
as  any  one  who  takes  part  in  the  work  of  construction. 

Section  502. — LIABILITY  OF  ARCHITECT  FOK  NEGLIGENCE. 
An  architect  must  perform  his  services  with  diligence  and 
ordinary  care.  If  by  his  negligence  long  delay  occurs  in 
finishing  drawings,  plans,  and  specifications  which  he  has 
agreed  to  furnish,  and  the  other  party  is  damaged  by  the 
delay,  he  is  liable  for  the  loss.  Or  if,  as  superintendent 
he  neglects  his  duty,  to  the  detriment  of  his  employer,  he 
is  also  liable  to  him  in  damages.  The  architect  is  bound 
to  devote  to  his  employer  the  skill  and  energy  he  pos- 
sesses, and  will  be  liable  in  damages  for  any  failure  in  this 
respect. 

Section  503. — CONTRACT  FOR  PERCENTAGE  ON  COST  OF 
BUILDING. — Under  a  contract  with  an  architect  to  furnish 
the  necessary  drawings,  specifications,  and  details  for  the 
construction  of  a  building,  for  a  certain  percentage  of  the 
total  cost  of  the  construction  of  the  building,  the  archi- 
tect, after  furnishing  the  drawings,  etc.,  in  case  his  em- 


486  BUSINESS  LAW  FOR  BUSINESS  MEN. 

ployment  is  terminated  before  the  completion  of  the  build- 
ing, is  entitled  to  the  agreed  commission  on  the  total 
cost  of  the  building.  This  was  determined  by  our 
Supreme  Court  in  a  case  where  Charles  I.  Havens 
sued  Annie  Donahue,  at  San  Francisco,  for  a 
commission  of  two  and  a  half  per  cent  upon  the 
total  cost  of  the  building,  according  to  his  contract 
with  Mrs.  Donahue.  He  was  paid  a  portion  of  the 
commission,  but  his  employment  was  terminated  before 
the  building  was  completed,  and  he  sued  to  recover  the 
balance.  Mrs.  Donahue  contended  that  Havens  was  only 
entitled  to  recover  his  commission  upon  the  cost  of  con- 
struction so  far  as  the  building  had  proceeded  at  the 
time  his  employment  was  terminated.  The  Supreme 
Court  decided  that  the  architect  in  question  had  nothing 
to  do  with  the  construction  of  the  building.  His  contract 
was  simply  to  furnish  the  plans,  drawings,  and  specifica- 
tions, and  this  he  did.  (Decided  by  the  Supreme  Court 
of  California  in  the  case  of  Havens  vs.  Donahue,  which 
decision  is  printed  in  Volume  111  of  the  California  Re- 
ports, page  297.) 

Section  504. — LIABILITY  FOE  DISCLOSING  INTENTION  OF 
OWNEE. — An  architect  employed  to  furnish  plans  for  the 
erection  of  a  building  on  a  site  on  which  there  is  another 
building,  occupied  by  tenants,  is  not  liable  to  the  owner, 
by  telling  people  of  the  intended  erection  of  the  new  build- 
ing— the  architect  having  neither  contracted  nor  been  re- 
quested to  keep  such  a  fact  secret — for  the  loss  of  rent 
caused  by  the  vacation  of  the  building  by  the  tenants. 

Section  505. — TIME  SPENT  ON  PLANS  AND  SPECIFICA- 
TIONS.— Where  an  architect  is  compelled  to  sue  for  his 
compensation,  and  there  is  no  agreement  fixing  the 
amount  of  his  pay,  he  may  prove  the  reasonable  value  of 
his  services.  And  evidence  as  to  the  length  of  time  spent 
by  an  architect  on  certain  plans  and  specifications  is  ad- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  487 

missible  on  the  question  of  the  value  of  his  services  in 
preparing  them,  the  jury  not  being  limited  to  a  consid- 
eration of  the  expert  testimony  on  that  question. 

Section  506. — CERTIFICATE  AND  LICENSE  OF  ARCHITECT. 
It  is  unlawful  and  a  misdemeanor,  punishable  by  fine  of 
not  less  than  fifty  dollars  nor  more  than  five  hundred 
dollars,  for  any  person  to  practice  architecture  without  a 
certificate  in  this  state,  or  to  advertise,  or  put  out  any 
sign  or  card,  or  other  device  which  might  indicate  to  the 
public  that  he  was  an  architect ;  provided,  that  nothing  in 
this  act  shall  prevent  any  person  from  making  plans  for 
his  own  buildings,  nor  furnishing  plans  or  other  data  for 
buildings  for  other  persons,  provided  the  person  so  fur- 
nishing such  plans  or  data  shall  fully  inform  the  person 
for  whom  such  plans  or  data  are  furnished,  that  he,  the 
person  furnishing  such  plans,-  is  not  a  certified  architect ; 
provided,  that  nothing  in  this  act  shall  prevent  the  em- 
ployment of  an  architect  residing  out  of  the  state  of  Cali- 
fornia to  prepare  plans  and  specifications  for  buildings 
or  other  structures  within  the  state,  conditioned  he  shall 
present  satisfactory  evidence  to  the  board  of  the  district 
in  which  the  structure  is  to  be  erected  that  he  is  a  com- 
petent architect,  when  such  board  shall  issue  to  such 
architect  a  temporary  certificate  for  such  employment, 
upon  the  payment  of  a  fee  of  five  dollars.  Architects' 
certificates  issued  in  accordance  with  the  provisions  of 
this  act  shall  remain  in  full  force  until  revoked  for  cause, 
as  hereinafter  provided  for  in  this  act.  A  certificate  may 
be  revoked  for  dishonest  practices,  or  for  gross  incom- 
petcncy  in  the  practice  of  the  profession,  which  questions 
shall  be  determined  by  the  district  board  of  architecture 
of  the  district  in  which  the  person  whose  certificate  is 
called  in  question  shall  reside,  or  shall  T>e  doing  business ; 
and  upon  a  full  investigation  of  the  charges  by  the  dis- 
trict board,  an  opportunity  having  been  given  the  accused 
to  be  heard  in  his  own  defense  or  by  counsel ;  and  upon  the 
verdict  of  at  least  four  members  of  the  district  board,  the 


488  BUSINESS  LAW  FOE  BUSINESS  MEN. 

board  may  issue  its  certificate  to  the  secretary  of  state 
revoking  the  certificate  of  the  person  accused;  and  the 
secretary  of  state  shall  thereupon  cancel  such  certificate. 
And  on  the  cancellation  of  such  certificate,  it  shall  he  the 
duty  of  the  secretary  of  the  district  board  to  give  notice 
of  such  cancellation  to  the  county  recorder  of  each  county 
in  this  state,  whereupon  the  recorder  shall  mark  the  cer- 
tificate recorded  in  his  office  " Cancelled." 

After  the  expiration  of  six  months  the  person  whose 
certificate  was  revoked  may  have  a  new  certificate  issued 
to  him  by  the  secretary  of  state  upon  the  certificate  of  the 
district  board  by  which  the  certificate  was  revoked. 

Every  certificated  architect  shall  have  a  seal,  the  im- 
pression of  which  must  contain  the  name  of  the  architect, 
his  place  of  business,  and  the  words  "Certificated  archi- 
tect," with  which  he  may  stamp  all  plans  prepared  by 
him. 

Each  regularly  certificated  architect  shall  pay  an  an- 
nual license  fee  of  five  dollars,  said  fee  to  be  paid  to  the 
secretary  of  the  board  of  the  district  of  which  he  shall  be 
a  resident,  and  shall  be  payable  in  advance  on  January  1, 
and  shall  become  delinquent  the  first  day  of  April,  of 
each  year,  after  which  date  it  shall  be  delinquent;  and 
the  certificate  of  such  architects  who  shall  fail  to  pay  their 
license  fees  by  April  1  of  each  year,  shall  be  subject  to 
cancellation  by  said  district  board,  and  notice  of  such  can- 
cellation shall  be  sent  to  each  county  recorder  of  the  state 
of  California  and  to  the  secretary  of  state,  for  cancella- 
tion of  certificates.  And  the  secretary  of  the  said  dis- 
trict shall  issue  a  receipt  signed  by  the  president  and  sec- 
retary of  the  district,  and  under  the  seal  of  the  district 
board,  to  each  architect  paying  said  license  fee,  showing 
that  said  certificated  architect  has  paid  his  annual  license 
fee,  which  license  receipt  shall  be  displayed  in  a  prom- 
inent place  in  the  office  of  said  architect.  The  fees  so  col- 
lected shall  be  used  to  meet  the  expenses  of  the  state 
board  of  architecture. 

General  Laws  of  California,  page  30. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  489 

PARTNERSHIP. 

Section  507. — WHAT  CONSTITUTES  A  PARTNERSHIP. — 
The  Civil  Code  of  California  defines  a  partnership  as  be- 
ing ''the  association  of  two  or  more  persons  for  the  pur- 
pose of  carrying  on  business  together,  and  dividing  its 
profits  between  them."  This  definition  of  partnership  is 
not  as  comprehensive  as  many  that  have  been  adopted  by 
eminent  writers  on  legal  subjects.  Judge  Story  defines  a 
partnership  thus:  "Partnership,  often  called  co-partner- 
ship, is  usually  defined  to  be  a  voluntary  contract  between 
two  or  more  competent  persons  to  place  their  money, 
effects,  labor  and  skill,  or  some  or  all  of  them,  in  lawful 
commerce  or  business,  with  the  understanding  that  there 
shall  be  a  communion  of  the  profits  between  them."  But 
whether  we  consider  the  definition  of  Judge  Story,  or  the 
definition  to  be  found  in  the  Civil  Code  of  California,  first 
quoted,  it  is  very  evident  that  in  all  one  essential  thing  is 
omitted.  They  state  that  there  is  to  be  a  division  of  the 
profits,  but  say  nothing  about  sharing  the  losses.  A  bet- 
ter definition  of  partnership,  and  one  more  in  accord  with 
the  established  conditions  of  modern  business  might  be 
suggested  thus :  Partnership  is  the  voluntary  association 
of  two  or  more  persons  for  the  purpose  of  carrying  on 
business  together,  and  dividing  its  profits  and  sharing  its 
losses  between  them.  For  there  may  be,  and  often  is,  a 
sharing  of  the  profits  of  a  business  venture,  when  there 
is  no  partnership.  Agents,  or  brokers,  or  commission 
merchants  may  be  offered  and  accept  a  share  of  the  prof- 
its, as  an  inducement  to  greater  effort  on  their  part,  but 
this  will  not  constitute  them  partners  with  their  princi- 
pals. There  must  be  a  community  of  interest  in  both  the 
profits  and  the  losses,  to  constitute  a  valid  partnership. 

Section  508. — FORMATION  OF  PARTNERSHIP. — A  part- 
nership can  be  formed  only  by  the  consent  of  all  the 
parties.  As  the  voluntary  consent  of  all  the  members  is 


490  BUSINESS  LAW  FOR  BUSINESS  MEN. 

necessary  in  the  formation  of  a  partnership,  it  is  the  law 
that  no  new  partner  can  be  admitted  into  a  partnership 
without  the  consent  of  every  member.  If  one  partner 
sells  his  interest  in  the  partnership  property,  this  will 
not  make  the  purchaser  a  partner,  without  the  consent  of 
the  partner  who  stays  in  the  business.  Neither  member 
of  a  partnership  can  force  a  new  member  into  the  firm. 

Section  509. — PARTNERSHIP  PROPERTY. — The  property 
of  a  partnership  consists  of  all  that  is  contributed  to  the 
common  stock  at  the  formation  of  the  partnership,  and 
all  that  is  subsequently  acquired  by  the  partnership.  But 
while  every  partnership  presupposes  that  there  must  be 
something  brought  into  the  common  stock  or  fund  by  each 
member,  it  is  not  necessary  that  each  should  contribute  or 
contract  to  contribute  money,  goods,  effects,  or  other 
property,  towards  the  common  stock;  for  one  may  con- 
tribute labor,  or  skill,  and  another  may  contribute  prop- 
erty, and  another  may  contribute  money,  according  as 
they  shall  agree.  Sometimes  it  happens  that  each  part- 
ner contributes  only  skill,  or  labor,  or  services,  for  the 
common  benefit.  But  all  must  contribute  something,  and 
thus  join  together  either  money,  or  goods,  or  other  prop- 
erty, or  labor,  or  skill.  Whether  the  partners  in  the  first 
place  contribute  money,  or  real  or  personal  property,  or 
only  their  personal  labor  and  services,  if  they  afterwards 
acquire  any  property  in  the  partnership  business  and 
with  partnership  funds,  it  belongs  to  the  firm,  and  not  to 
the  members  individually. 

Civil  Code,  Section  2401. 

Section  510. — PARTNER'S  INTEREST  IN  PARTNERSHIP 
PROPERTY. — The  interest  of  each  member  of  a  partner- 
ship extends  to  every  portion  of  its  property.  One  part- 
ner has  no  interest  distinct  from  the  other  in  the  assets 
of  the  firm.  One  partner  has  no  control  of  the  partner- 
ship assets  which  the  other  cannot  have.  The  property 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  491 

of  the  partnership  is  common,  held  by  a  community  of 
interest ;  and  it  is  always  first  liable  for  the  partnership 
debts,  before  any  of  it  can  be  applied  to  the  individual  use 
or  individual  debts  of  either  partner. 

Section  511. — POSSESSION  OF  PARTNERSHIP  PROPERTY.— 
Partners  are  equally  entitled  to  possession  of  the  partner- 
ship property.  Partners  are  joint  owners  and  possessors 
of  all  the  capital  stock,  funds,  and  effects  belonging  to  the 
partnership,  as  well  as  of  those  which  belonged  to  it  at 
the  time  of  its  first  formation  and  establishment ;  so  that, 
whether  its  stock,  Funds,  or  effects  be  the  product  of  their 
labors  or  manufactures,  or  be  received  or  acquired  by 
sale,  barter,  or  otherwise,  in  the  course  of  their  trade  or 
business,  there  is  an  entire  community  of  right  and  in- 
terest between  them. 

Neither  partner  has  any  right  or  possession  of  the 
partnership  property  to  the  exclusion  of  the  other.  One 
partner  is  as  much  entitled  to  the  possession  as  the  other. 
Nor  would  it  make  any  difference  if  the  partnership  was 
dissolved;  for  in  that  case  both  partners  would  be  en- 
titled equally  to  the  possession  of  the  partnership  assets, 
until  the  partnership  affairs  could  be  finally  settled  up. 

Section  512. — PARTNER'S  SHARE  IN  PROFITS  AND  LOSSES. 
In  the  absence  of  any  agreement  on  the  subject,  the 
shares  of  partners  in  the  profits  or  losses  of  the  business 
are  equal,  and  the  share  of  each  in  the  partnership  prop- 
erty is  the  value  of  his  original  contribution,  increased  or 
diminished  by  his  share  of  profit  or  loss.  Where  there  is 
no  agreement  between  the  partners,  they  are  to  contrib- 
ute equally  to  every  loss,  whether  the  loss  be  unpaid  ad- 
vances, or  the  loss  of  the  original  capital  brought  in ;  and 
this  is  the  rule,  whether  the  partners  contribute  to  the 
capital  in  equal  shares  or  not.  It  is  essential  to  the  in- 
terest of  a  valid  partnership  that  there  should  be  a  shar- 
ing of  profits  and  a  sharing  of  losses.  Profits  and  losses 
will  be  shared  equally,  if  there  is  no  agreement  to  the 


492  BUSINESS  LAW  FOB  BUSINESS  MEN. 

contrary,  no  matter  what  proportion  of  the  firm  assets 
was  originally  contributed  by  each.  But  the  partners  may 
agree  between  themselves  that  one  shall  have  a  larger 
share  of  the  profits  than  the  other,  or  that  one,  if  losses 
occur,  shall  bear  a  larger  share  of  the  loss  than  the  other, 
and  this  agreement  will  be  valid  and  binding.  An  agree- 
ment to  divide  the  profits  of  the  business  implies  an  agree- 
ment for  a  corresponding  division  of  its  losses,  unless  it 
is  otherwise  expressly  stipulated.  But  the  law  recognizes 
the  fact  that  the  inequality  of  skill,  of  labor,  or  of  experi- 
ence, which  the  partners  may  bring  into  the  particular 
business,  may  not  only  justify  but  positively  require  an 
inequality  of  compensation,  and  of  exemption  from  loss, 
as  a  matter  of  justice  and  equity  between  the  parties. 
And  the  law  has,  therefore,  wisely  not  prohibited  it ;  but 
has  left  it  to  the  parties  to  exercise  their  own  discretion 
in  these  matters,  taking  care  that  no  fraud,  imposition, 
or  undue  advantage  is  taken  by  one  of  the  other.  And 
wherever  stipulations  are  fairly  made  between  partners, 
for  unequal  sharing  of  profits  and  losses,  the  law  will 
uphold  and  enforce  them  as  valid  agreements. 
Civil  Code,  Sections  2403,  2404. 

Section  513. — APPLICATION  OF  PARTNERSHIP  PROPERTY 
TO  PAYMENT  OF  DEBTS. — Each  member  of  a  partnership 
may  require  its  property  to  be  applied  to  the  discharge 
of  its  debts,  and  has  a  lien  upon  the  shares  of  the  other 
partners  for  this  purpose,  and  for  the  payment  of  the 
general  balance,  if  any,  due  to  him.  The  debts  of  a  part- 
nership must  be  paid  out  of  the  partnership  property, 
before  any  portion  of  it  can  be  applied  to  the  individual 
debts  of  the  partners.  The  interest  of  a  partner  may  be 
levied  upon  for  the  payment  of  his  debts,  but  when  this  is 
done,  the  creditors  of  the  firm  must  be  first  satisfied,  be- 
fore the  property  can  be  taken  to  pay  anybody  else. 

Section  514. — WHAT  Is  PARTNERSHIP  PROPERTY. — All 
property,  whether  real  or  personal,  acquired  with  part- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  493 

nership  funds,  is  presumed  to  be  partnership  property. 
There  is  little  difficulty  in  determining  the  partnership 
character  of  personal  or  movable  property,  as  a  stock  of 
goods,  for  instance;  but  there  is  sometimes  difficulty  in 
determining  the  true  character  of  real  estate.  The  deed 
to  real  estate  must  necessarily  be  made  to  and  be  recorded 
in  the  individual  names  of  one  or  more  members  of  the 
firm.  Cases  often  occur  where  the  partner  in  whose  name 
real  property  stands  of  record  denies  that  it  is  partner- 
ship property  and  claims  it  as  his  own.  Whenever  this 
occurs,  it  is  important  to  know  the  law  governing  the 
matter.  It  is  the  general  rule  in  law  that  real  or 
immovable  property  is  deemed  to  belong  to  the  persons 
in  whose  name  the  deed  stands.  But,  as  to  partners,  how- 
ever the  recorded  title  may  stand,  or  in  whose  name  it  may 
be,  real  estate  bought  with  partnership  funds  for  partner- 
ship purposes  will  always  be  considered  partnership 
property. 

Section  515. — MUTUAL  OBLIGATIONS  OF  PARTNERS.— 
The  relations  of  partners  are  necessarily  confidential,  and 
they  are  always  bound  to  deal  in  good  faith  one  with  an- 
other. In  all  proceedings  connected  with  the  formation, 
conduct,  dissolution,  and  liquidation  of  a  partnership, 
every  partner  is  bound  to  act  in  the  highest  good  faith 
toward  his  co-partners.  He  must  not  obtain  any  ad- 
vantage over  them  in  the  partnership  affairs,  by  the 
slightest  misrepresentation,  concealment,  threat,  or  pres- 
sure of  any  kind.  The  contract  of  partnership  has  its 
foundation  in  the  mutual  respect,  confidence,  and  belief 
in  the  entire  integrity  of  each  partner,  and  his  sincere 
devotion  to  the  business  and  true  interests  of  the  part- 
nership; and  good  faith,  reasonable  skill  and  diligence, 
and  the  exercise  of  sound  judgment  and  discretion,  are 
necessarily  and  naturally  expected  of  each  party  to  the 
partnership.  Judge  Story  in  his  book  on  partnership 
says,  on  this  subject :  "Good  faith  not  only  requires  that 


494  BUSINESS  LAW  FOR  BUSINESS  MEN. 

every  partner  should  not  make  any  false  representations 
to  Ms  partners,  but  also  that  he  should  abstain  from  all 
concealments,  which  may  be  injurious  to  the  partnership 
business.  If,  therefore,  any  partner  is  guilty  of  any  such 
concealment,  and  derives  a  private  benefit  therefrom,  he 
will  be  compelled  to  account  therefor  to  the  partnership. 
Upon  the  like  ground,  where  one  partner,  who  exclusively 
superintended  the  accounts  of  the  concern,  had  agreed  to 
purchase  the  share  of  his  co-partners  in  the  business  for 
a  sum,  which  he  knew,  from  the  accounts  in  his  posses- 
sion, but  which  he  concealed  from  them,  to  be  for  an  in- 
adequate consideration,  the  bargain  was  set  aside  in 
equity,  as  a  constructive  fraud ;  for  he  could  not  in  fair- 
ness deal  with  the  other  partners  for  their  share  of  the 
profits  of  the  concern  without  putting  them  in  possession 
of  all  the  information,  which  he  himself  had,  with  respect 
to  the  state  of  the  accounts  and  the  value  of  the  concern." 
As  illustrations  of  the  good  faith  which  must  be  observed 
by  one  partner  to  another,  so  clearly  explained  by  Judge 
Story,  it  is  a  violation  of  good  faith  for  any  partner,  in 
conducting  the  partnership  business,  to  contract  secretly 
with  third  persons  for  any  private  and  selfish  advantage 
and  benefit  to  himself,  exclusive  of  the  partnership;  for 
all  the  partnership  property  and  partnership  contracts 
should  be  managed  for  the  equal  benefit  of  all  the  part- 
ners. If,  therefore,  any  one  partner  should  contract  se- 
cretly in  a  matter  of  partnership  concern  for  any  private 
advantage  or  benefit  to  himself,  to  the  disadvantage  or  in 
fraud  of  his  partners,  he  will  be  compelled  to  divide  his 
gains  with  them.  So,  if  a  purchase  is  made  on  the  part- 
nership account  by  one  partner,  who  secretly  stipulates 
for  and  receives  any  reward  or  allowance  from  the  seller, 
for  his  own  private  profit,  he  will  be  compelled  to  share 
with  his  partners.  So,  where  one  partner  secretly  obtaina 
the  renewal  of  a  partnership  lease  in  his  own  name,  he 
will  be  held  a  trustee  for  the  firm  in  the  renewed  lease. 
The  obligations  of  partners,  however,  whatever  they  may 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  495 

be,  do  not  prevent  either  member  of  the  firm  from  engag- 
ing in  other  business  on  his  own  account,  but  it  must  not 
be  such  business  as  interferes  with  or  is  in  any  way  injuri- 
ous to  the  partnership. 

Civil  Code,  Section  2411. 

Section  516. — LIABILITY  OF  PARTNERS  TO  ACCOUNT.— 
Each  member  of  a  partnership  must  account  to  it,  for 
everything  that  he  receives  on  accojmt  of  the  firm.  While 
he  must  render  an  account  of  everything  he  receives,  be 
is  at  the  same  time  entitled  to  reimbursement  from  the 
firm  for  everything  that  he  has  properly  expended  for  its 
benefit,  and  he  is  entitled  to  be  reimbursed  for  all  losses 
and  risks  which  he  has  necessarily  incurred  on  behalf  of 
the  firm. 

Civil  Code,  Section  2412. 

Section  517. — COMPENSATION  FOR  SERVICES  TO  FIRM.— 
A  partner  is  not  entitled  to  any  compensation  for  services 
rendered  by  him  to  the  partnership.  A  special  agreement 
may  be  made  among  the  partners  that  one  shall  be  paid 
an  extra  compensation  above  his  share  of  the  profits,  for 
his  services,  but  the  obligation  rests  entirely  upon  the 
agreement  of  the  parties.  Where  there  is  no  agreement 
of  the  kind,  the  law  will  not  allow  one  partner  to  take 
from  the  partnership  assets  any  compensation  for  his 
services.  The  reason  is,  that  each  partner  is  under  obli- 
gations to  devote  his  skill  and  efforts  to  the  promotion 
of  the  common  benefits  of  the  firm. 
Civil  Code,  Section  2413. 

Section  518. — RENUNCIATION  OF  PARTNERSHIP. — The 
law  of  California  provides,  that  a  partner  may  exonerate 
himself  from  all  future  liability  to  a  third  person,  on  ac- 
count of  the  partnership,  by  renouncing,  in  good  faith, 
all  participation  in  its  future  profits.  To  do  so,  he  must 
give  notice  to  third  persons,  and  to  his  partner,  that  ho 
renounces  all  participation  in  the  future  profits  of  the 


496  BUSINESS  LAW  FOR  BUSINESS  MEN. 

firm,  and  that,  so  far  as  may  be  in  his  power,  he  dissolves 
the  partnership,  and  does  not  intend  to  be  liable  on  its 
account  for  the  future.  After  a  partner  has  given  notice 
of  his  renunciation  of  the  partnership,  he  cannot  claim 
any  of  its  subsequent  profits,  and  his  partners  may  pro 
ceed  to  dissolve  the  partnership.  As  to  the  partners,  this 
renunciation  ends  the  partnership.  But  as  to  all  other 
persons  the  liabilities  of  the  retiring  partner  continue 
until  proper  notice  is  given.  General  notice  is  sufficient 
as  to  the  public  in  general ;  but  as  to  such  persons  as  have 
had  dealings  with  the  firm,  actual  notice  must  be  given. 
A  partner  retiring  from  the  partnership,  in  order  to  re- 
lieve himself  from  further  liabilities  of  the  firm,  must 
give  actual  notice  of  such  retirement,  and  of  the  dissolu- 
tion of  the  partnership,  to  such  persons  as  have  been 
accustomed  to  deal  with  it.  It  is  not  essential  that  such 
notice  shall  be  given  in  any  particular  form;  it  may  be 
verbal,  or  in  writing;  it  may  be  expressed,  or  it  may  be 
implied  from  circumstances.  It  must  appear,  however, 
with  reasonable  certainty,  that  such  persons  in  some  way 
received  actual  notice.  This  is  so,  because  established 
business  relations  might  lead  such  parties  more  readily 
to  give  the  firm  credit.  Moreover,  they  are  known  to  the 
firm,  and  may  be  readily,  in  some  proper  way,  notified. 
Such  notice  given  in  a  regular  newspaper  of  general  cir- 
culation, published  in  the  city,  town,  or  county  where  the 
partnership  business  is  carried  on,  is  the  usual  method  of 
giving  information ;  and  this  will  be  sufficient,  when  con- 
tinued for  a  reasonable  length  of  time — this  depending 
somewhat  upon  the  nature,  extent,  and  place  of  the  busi- 
ness. 

Civil  Code,  Sections  2417,  2418. 

Section  519. — POWER  OF  MAJORITY  OF  PARTNERS.— 
Where  the  partnership  consists  of  more  than  two  mem- 
bers, the  decision  of  the  majority  binds  the  firm  in  the 
conduct  of  its  business.  The  minoritv  must  be  consulted 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  497 

in  good  faith,  and  when  this  is  done  the  majority  of  the 
members  have  a  right  to  control  the  manner  of  conducting 
the  business.  The  majority  can  govern  only  in  the  due 
course  of  business,  and  cannot  change  the  general  char- 
acter of  the  business  against  the  will  of  the  one  dissent- 
ing partner. 

Civil  Code,  Section  2428. 

Section  520. — AUTHORITY  OF  INDIVIDUAL  PARTNER.— 
Every  general  partner  is  agent  for  the  partner- 
ship in  the  transaction  of  its  business,  and  has 
authority  to  do  whatever  is  necessary  to  carry  on  such 
business  in  the  ordinary  manner,  and  for  this  purpose 
may  bind  his  co-partners  by  an  agreement  in  writing. 
Each  partner  is  the  general  agent  of  his  co-partners  as  to 
firm  business,  and  the  members  of  the  firm  are  considered 
as  sanctioning  his  contracts.  Whenever  there  are  writ- 
ten articles,  or  particular  stipulations  between  the  part- 
ners, these  will  regulate  their  respective  power  and  au- 
thority as  between  themselves,  although  not,  if  unknown, 
in  their  dealings  with  third  persons.  But  independently 
of  any  such  articles  or  stipulations,  each  partner  pos- 
sesses an  equal  and  general  power  and  authority  in  behalf 
of  the  firm,  to  transfer,  pledge,  exchange,  or  otherwise 
dispose  of  the  partnership  property  and  effects,  for  any 
and  all  purposes  within  the  scope  and  objects  of  the  part- 
nership, and  in  the  course  of  its  trade  and  business.  One 
partner  by  virtue  of  that  relation  is  constituted  a  general 
agent  for  another  as  to  all  matters  within  the  scope  of 
the  partnership  dealings,  and  has  communicated  to  him, 
by  virtue  of  that  relation,  all  authority  necessary  for 
carrying  on  the  partnership,  and  all  such  authority  as  is 
usually  exercised  by  partners  in  the  business  in  which 
they  are  engaged.  Any  restrictions  which,  by  agreement 
amongst  the  partners,  are  attempted  to  be  imposed  upon 
the  authority  which  one  possesses  as  a  general  agent  for 
the  other,  are  operative  only  between  the  partners  them- 
selves, and  do  not  limit  the  authority  as  to  third  persons, 


498  BUSINESS  LAW  FOR  BUSINESS  MEN. 

who  acquire  rights  by  their  exercise,  unless  they  know 
that  such  restrictions  have  been  made.  Each  partner 
may  enter  into  any  contracts  or  engagements  on  behalf 
of  the  firm  in  the  ordinary  trade  and  business ;  as,  for  ex- 
ample, by  buying,  or  selling,  or  pledging  goods,  or  by 
paying,  or  receiving,  or  borrowing  moneys,  or  by  draw- 
ing, or  negotiating,  or  indorsing,  or  accepting  bills  of 
exchange,  and  promissory  notes,  and  checks,  and  other 
negotiable  securities,  or  by  procuring  insurance  for  the 
firm,  or  by  doing  any  acts  which  are  appropriate  to  such 
trade  or  business,  according  to  the  common  course  and 
usages  of  the  business.  So,  each  partner  may  consign 
goods  to  an  agent  or  factor  for  sale  on  account  of  the 
firm,  and  give  instructions  and  orders  relating  to  the 
sale.  All  such  contracts  and  engagements,  acts  and 
things,  he  has  authority  to  make  and  do  in  the  name  of 
the  firm ;  and  in  order  to  bind  the  firm,  they  must  ordinar- 
ily be  made  and  done  in  the  name  of  the  firm,  otherwise 
they  will  bind  the  individual  partner  only. 
Civil  Code,  Section  2429. 

Section  521. — WHAT  PARTNER  CANNOT  Do. — There  are 
some  things  which  the  law  of  California  specially  declares 
one  partner  alone  has  no  authority  to  do.  (1)  He  cannot 
make  an  assignment  of  any  portion  of  the  partnership 
property  to  a  creditor,  or  to  a  third  person  in  trust  for 
creditors.  (2)  He  cannot  dispose  of  the  good- will  of  the 
business.  (3)  He  cannot  dispose  of  the  whole  of  the  part- 
nership property  at  once,  unless  it  consists  entirely  of 
merchandise.  (4)  He  has  no  authority  to  do  any  act 
which  would  make  it  impossible  to  carry  on  the  ordinary 
business  of  the  partnership.  (5)  One  partner  has  no 
authority  to  confess  a  judgment  against  the  partnership. 
(6)  One  partner  cannot  submit  a  partnership  claim  to 
arbitration. 

Civil  Code,  Section  2430. 


BUSINESS  CONTKACTS  AND  LEGAL  OBLIGATIONS.  499 

Section  522. — PARTNER  ENGAGING  IN  OTHER  BUSINESS. 
A  general  partner,  who  agrees  to  give  his  personal  atten- 
tion to  the  business  of  the  partnership,  may  not  engage  in 
any  business  which  gives  him  an  interest  adverse  to  that 
of  the  partnership,  or  which  prevents  him  from  giving 
to  such  business  all  the  attention  which  would  be  ad- 
vantageous to  it.  A  partner  may  engage  in  any  separate 
business  which  does  not  create  an  interest  adverse  to  the 
partnership,  and  which  does  not  take  too  much  of  his  time 
from  the  firm's  business. 

Civil  Code,  Sections  2436,  2437. 

Section  523. — GENERAL  LIABILITY  OF  PARTNER. — Every 
general  partner  is  liable  to  third  person  for  all  the  obli- 
gations of  the  partnership,  jointly  with  his  co-partners. 
Civil  Code,  Section  2442. 

Section  524. — LIABILITY  OF  ONE  WHO  PERMITS  HIM- 
SELF TO  BE  HELD  OUT  AS  A  PARTNER. — Any  one  permitting 
himself  to  be  represented  as  a  partner  is  liable  to  such 
third  persons  to  whom  such  representation  is  communi- 
cated, and  who,  on  the  faith  of  it,  give  credit  to  the  part- 
nership. Thus,  one  who  is  not  actually  a  partner  may 
make  himself  liable  for  the  partnership  debts,  if  he  knows 
that  he  is  being  represented  by  the  firm  as  a  partner  in 
it,  and  allows  such  representation  to  be  made,  and  it  is 
acted  upon  in  good  faith. 

Civil  Code,  Section  2444. 

Section  525. — BUSINESS  UNDER  FICTITIOUS  NAME. — The 
law  provides  that  every  partnership  transacting  business 
in  this  State  under  a  fictitious  name,  or -designation  not 
showing  the  names  of  the  persons  interested  as  partners 
in  such  business,  must  file  with  the  clerk  of  the  county  in 
which  its  principal  place  of  business  is  situated,  a  certif- 
icate stating  the  names  in  full  of  all  the  members  of  such 
partnership  and  their  places  of  residence,  and  must  pub- 


500  B USINESS  LAW  FOB  BUSINESS  MEN. 

lish  the  same  once  a  week  for  four  successive  weeks  in  a 
newspaper  published  in  the  county,  if  there  be  one,  and  if 
there  be  none  in  such  county,  then  in  a  newspaper  pub- 
lished in  an  adjoining  county.  There  is  one  exception, 
in  the  case  where  a  commercial  or  banking  partnership, 
established  and  doing  business  in  a  foreign  country,  seeks 
to  do  business  in  this  State ;  a  foreign  firm  may  use  the 
same  partnership  name  it  uses  at  home,  although  fic- 
titious, and  although  it  does  not  show  the  names  of  the 
persons  interested  as  partners.  The  certificate  must  be 
signed  by  the  partners,  and  acknowledged  by  them,  and 
must  be  published  within  one  month  after  the  formation 
or  commencement  of  the.  partner  ship.  A  new  certificate 
must  be  made  and  published  whenever  there  is  a  change 
in  the  membership  of  the  partnership. 

Civil  Code,  Sections  2466,  2467,  2468,  2469. 

No  person,  doing  business  under  a  fictitious  name,  or 
his  assignee  or  assignees,  nor  any  persons  doing  business 
as  partners  contrary  to  the  provisions  of  this  law,  or 
their  assignee  or  assignees,  shall  maintain  any  action 
upon  or  on  account  of  any  contract  or  contracts  made,  or 
transactions  had,  under  such  fictitious  name,  or  in  their 
partnership  name,  in  any  court  of  this  state  until  the 
certificate  has  been  filed  and  the  publication  has  been 
made  as  herein  required. 

Act  of  the  Legislature,  approved  March  23, 1911. 

Section  526. — FORM  OF  CERTIFICATE  OF  PARTNERSHIP 
TRANSACTING  BUSINESS  UNDER  FICTITIOUS  NAME. — The  fol- 
lowing is  a  form  of  certificate  of  partnership  transacting 
business  under  fictitious  name,  to  be  filed  with  the  county 
clerk : 

STATE  OF  CALIFORNIA,       ) 

OC 

CITY  AND  COUNTY  OF  SAN  FRANCISCO.  $ 

John  A.  Smith  and  Henry  T.  Jones,  being  duly  sworn, 
say  that  they  are  partners,  doing  business  in  the  City  and 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  501 

County  of  San  Francisco,  State  of  California,  under  the 
firm  name  of  John  A.  Smith  &  Co. ;  that  the  names  in  full 
of  all  of  the  members  of  such  partnership,  and  their 
places  of  residence,  are  as  follows,  to-wit :  John  Augus- 
tus Smith,  residing  at  914  Harrison  Street,  City  and 
County  of  San  Francisco,  State  of  California,  and  Henry 
Thomas  Jones,  residing  at  212  Mission  Street,  City  and 
County  of  San  Francisco,  State  of  California;  that  the 
place  where  the  business  of  said  partnership  is  transacted 
is  at  400  Market  Street,  City  and  County  of  San  Fran- 
cisco, State  of  California. 

In  witness  whereof  we  have  hereunto  set  out  hands 

and  seals  this day  of ,  19 

: (Seal) 

(Seal) 

STATE  OF  CALIFOENIA,        J  gg 
CITY  AND  COUNTY  OF  SAN  FRAN  Cisco,  j 

On  this day  of ,  19 ,  before  me, 

a  notary  public  in  and  for  the  City  and  County  of  San 
Francisco,  State  of  California,  personally  appeared  John 
Augustus  Smith,  and  Henry  Thomas  Jones,  known  to  me 
to  be  the  persons  whose  names  are  subscribed  to  the  with- 
in instrument,  and  acknowledged  that  they  executed  the 
same. 

Notary  Public  in  and  for  the  City  and  County 
of  San  Francisco,  State  of  California. 

Section  527. — SPECIAL  PARTNERSHIPS. — A  special  part- 
nership may  be  formed  in  this  State  by  two  or  more  per- 
sons, for  the  transaction  of  any  business  except  banking 
or  insurance.  A  special  partnership  may  consist  of  one  or 
more  general  partners  and  one  or  more  special  partners. 

Section  528. — CERTIFIED  STATEMENT  OF  SPECIAL  PART- 
NERSHIP.— When  a  special  partnership  is  formed  the  part- 
ners must  sign  a  certificate  stating  the  name  under  which 
the  partnership  is  to  be  conducted;  the  general  nature 


502  BUSINESS  LAW  FOB  BUSINESS  MEN. 

of  the  business  intended  to  be  transacted ;  the  names  of  all 
the  partners,  and  their  residences,  specifying  which  are 
general  and  which  are  special  partners;  the  amount  of 
capital  which  each  special  partner  has  contributed  to  the 
common  stock ;  and  the  time  at  which  the  partnership  will 
begin  and  end.  This  certificate  must  be  acknowledged 
and  recorded  in  all  the  counties  in  which  the  firm  has 
places  of  business.  An  affidavit  of  each  of  the  partners 
must  be  filed  for  record  with  the  certificate,  stating  that 
each  of  the  special  partners  has  paid  in  the  sum  named 
in  the  certificate.  The  certificate,  or  a  statement  of  its 
substance,  must  also  be  published  in  a  newspaper  in  the 
county  where  the  original  certificate  is  filed ;  and  if  there 
is  no  newspaper  in  that  county,  then  the  publication  must 
be  made  in  the  nearest  newspaper ;  and  this  publication 
must  be  made  once  a  week  for  four  successive  weeks, 
beginning  within  one  week  from  the  time  of  filing  the 
certificate  for  record. 

Civil  Code,  Sections  2479,  2480,  2481,  2483,  2484. 

Section  529. — SPECIAL  PARTNERSHIP — LIABILITY  OF  THE 
PARTNERS. — The  general  partners  in  a  special  partner- 
ship are  liable  to  the  same  extent  as  partners  in  a  strictly 
general  partnership.  They  are  each  liable  for  all  the 
debts  of  the  firm.  But  a  special  partner  is  only  liable 
for  the  debts  of  the  firm  to  the  extent  of  the  capital  he 
has  put  into  the  business.  A  special  partner  may  do 
things  which  will  make  him  liable  as  a  general  partner ; 
for  if  it  appears  that  he  has  wilfully  made  a  false  state- 
ment in  the  certificate  of  partnership,  or  if  he  wilfully 
interferes  with  the  business  of  the  firm,  or  if  he  repre- 
sents himself  as  a  general  partner  in  the  firm,  he  will  be 
liable  as  a  general  partner;  that  is,  he  will  be  liable  for 
all  debts  of  the  firm. 

Civil  Code,  Sections  2500,  2501. 

Section  530. — EIGHTS  OF  SPECIAL  PARTNERS. — Only  the 
general  partners  have  authority  to  transact  the  business 
of  a  special  partnership.  The  special  partner,  while  he 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  503 

has  no  right  to  engage  in  or  interfere  with  the  authority 
of  the  general  partners  to  conduct  the  business  of  tho 
firm,  yet  may  at  all  times  investigate  the  partnership 
affairs,  and  advise  his  partners,  or  their  agents,  as  to 
their  management  of  the  business.  A  special  partner 
may  lend  money  to  the  partnership,  or  advance  money 
for  it,  and  take  from  it  security,  and  as  to  such  loans  or 
advances  he  will  have  the  same  rights  as  any  other  cred- 
itor ;  but  in  case  of  the  insolvency  of  the  firm,  all  other 
claims  which  he  may  have  against  it  will  be  postponed  un- 
til all  other  creditors  are  satisfied.  In  all  matters  relat- 
ing to  a  special  partnership,  the  general  partners  may  sue 
and  be  sued  alone,  as  if  there  were  no  special  partners. 
No  special  partner,  under  any  pretense,  has  any  right  to 
withdraw  any  of  the  capital  invested  by  him  in  the  part- 
nership, during  its  continuance. 

Civil  Code,  Sections  2489,  2490,  2491,  2492,  2493. 

Section  531. — FORM  OF  CERTIFICATE  OF  SPECIAL,  PART- 
NERSHIP.— The  following  is  a  form  of  the  certified  state- 
ment of  special  partnership,  to  be  made  and  recorded : 

STATE  OF  CALIFORNIA,  }  c 

COUNTY  OF  LOS  ANGELES  j 

Henry  S.  Green,  John  A.  Jones,  and  Alfred  T.  Smith, 
being  duly  sworn,  say :  That  they  have  formed  a  special 
partnership  to  do  business  in  the  City  of  Los  Angeles, 
State  of  California,  under  the  firm  name  of  Henry  S. 
Green  &  Co. ;  that  the  name  under  which  said  partnership 
is  to  be  conducted  is  Henry  S.  Green  &  Co.;  that  the 
business  intended  to  be  transacted  by  said  partnership  is 
the  dealing  in  general  merchandise,  and  the  buying  and 
selling  at  retail  of  groceries  and  dry  goods;  that  the 
names  of  all  the  partners,  general  and  special,  and  the 
residence  of  each  of  said  partners,  are  as  follows,  to-wit : 
Henry  Samuel  Green,  a  general  partner,  residing  at  No. 
200  Hill  Street,  Los  Angeles,  State  of  California; 
John  Arthur  Jones,  a  general  partner,  residing  at  No. 
300  Green  Street,  Los  Angeles,  State  of  California;  and 


504  BUSINESS  LAW  FOE  BUSINESS  MEN. 

Alfred  Thomas  Smith,  a  special  partner,  residing  at  No. 
500  Mason  Street,  City  and  County  of  San  Francisco, 
State  of  California ;  that  the  amount  of  capital  which  the 
said  Alfred  Thomas  Smith  contributed  to  the  common 
stock  of  said  partnership  is  the  sum  of  $5000;  and  that 

said  partnership  will  begin  on  the day  of 

,  19 ,  and  end  on  the day  of 

,  19 

In  witness  whereof,  we  have  hereunto  set  our  hands 
and  seals  this day  of ,  19 

(Seal.) 

(Seal.) 

(Seal.) 

STATE  OF  CALIFORNIA,  1  gg 

COUNTY  OF  LOS  ANGELES  \ 

On  this day  of ,  19 ,  before  me, 

a  notary  public  in  and  for  the  County  of  Los  Angeles, 
State  of  California,  personally  appeared  Henry  Samuel 
Green,  John  Arthur  Jones,  and  Alfred  Thomas  Smith, 
known  to  me  to  be  the  persons  whose  names  are  sub- 
scribed to  the  within  instrument,  and  acknowledged  that 
they  executed  the  same. 

Notary  Public  in  and  for  the  County  of 
Los  Angeles,  State  of  California. 

Section  532. — AFFIDAVIT  THAT  SPECIAL  PARTNER  HAS 
PAID  IN  His  SHARE. — An  affidavit  of  each  of  the  partners 
must  be  filed  for  record  with  the  certificate,  stating  that 
each  of  the  special  partners  has  paid  in  the  sum  named 
in  the  certificate.  The  following  is  a  form  of  this 
affidavit : 

AFFIDAVIT  OF  HENEY  S.  GEEEN. 
STATE  OF  CALIFOENIA,  1  gg 

COUNTY  OF  LOS  ANGELES  j 

Henry  Samuel  Green,  being  duly  sworn,  says :  that  he 
is  a  general  partner  named  in  the  certified  statement  of 


BUSINESS  CONTBACTS  AND  LEGAL  OBLIGATIONS.  505 

special  partnership  this  day  filed  for  record,  in  which  he 
and  John  Arthur  Jones  are  named  as  general  partners 
and  Alfred  Thomas  Smith  as  special  partner,  under  the 
firm  name  of  Henry  S.  Green  &  Co. ;  that  the  said  Alfred 
Thomas  Smith,  named  in  the  said  certificate  of  partner- 
ship, as  a  special  partner,  has  paid  in  the  sum  of  $5000, 
the  sum  named  in  said  certificate. 

Subscribed  and  sworn  to  before  me  this day 

of ,19 

Notary  Public  in  and  for  the  County  of 
Los  Angeles,  State  of  California. 

AFFIDAVIT  OF  JOHN  A.  JONES. 
STATE  OF  CALIFORNIA,  1 

r  SS. 
COUNTY  OF  LOS  ANGELES  } 

John  Arthur  Jones,  being  duly  sworn,  says:  that  he 
is  a  general  partner  named  in  the  certified  statement  of 
special  partnership  this  day  filed  for  record,  in  which  he 
and  Henry  Samuel  Green  are  named  as  general  partners 
and  Alfred  Thomas  Smith,  as  special  partner,  under  the 
firm  name  of  Henry  S.  Green  &  Co. ;  that  the  said  Alfred 
Thomas  Smith,  named  in  the  said  certificate  of  partner- 
ship as  a  special  partner,  has  paid  in  the  sum  of  $5000, 
the  sum  named  in  said  certificate. 

Subscribed  and  sworn  to  before  me  this day 

of ,19..... 

Notary  Public  in  and  for  the  County  of 
Los  Angeles,  State  of  California. 

AFFIDAVIT  OF  ALFRED  T.  SMITH. 
STATE  OF  CALIFORNIA,  1  gg 

COUNTY  OF  LOS  ANGELES  j 

Alfred  Thomas  Smith,  being  duly  sworn,  says :  that  he 
is  the  special  partner  named  in  the  certified  statement  of 


506  BUSINESS  LAW  FOR  BUSINESS  MEN. 

special  partnership  this  day  filed  for  record,  in  which  he 
is  named  as  special  partner  and  Henry  Samuel  Green 
and  John  Arthur  Jones,  as  general  partners,  under  the 
firm  name  of  Henry  S.  Green  &  Co.;  that  he,  the  said 
Alfred  Thomas  Smith,  named  in  the  said  certificate  of 
partnership,  as  a  special  partner,  has  paid  in  the  sum  of 
$5000,  the  sum  named  in  said  certificate. 

Subscribed  and  sworn  to  before  me  this day 

of ,19 

Notary  Public  in  and  for  the  County  of 
Los  Angeles,  State  of  California. 

Section  533. — INTEREST  AND  PROFITS  OF  SPECIAL  PART- 
NER.— A  special  partner  may  receive  such  interest  on  his 
money  invested,  and  such  proportion  of  the  profits,  as 
may  be  agreed  upon  between  him  and  the  general  part- 
ners. 

Section  534. — MINING  PARTNERSHIPS. — A  mining  part- 
nership is  different  in  its  nature  and  creation  from  the 
ordinary  partnerships  known  to  commercial  life.  An 
express  agreement  to  become  partners,  or  to  share  the 
profits  and  losses,  is  not  necessary  in  the  creation  or  ex- 
istence of  a  mining  partnership.  The  law  of  California 
provides,  that  a  mining  partnership  arises  from  the  own- 
ership of  shares  or  interests  in  the  mine,  and  the  working 
of  the  mine  for  the  purpose  of  extracting  the  mineral 
from  it.  The  miners  must  own  or  have  acquired  the 
mine,  and  be  actually  engaged  in  working  it;  and  when 
they  do  so,  the  law  looks  upon  their  relations  as  those  of 
a  partnership,  without  the  necessity  of  a  written  or  oral 
agreement  to  share  profits  and  losses.  It  is  not  neces- 
sary that  the  miners  hold  the  legal  title  to  the  mine  in 
order  to  become  partners.  If  they  acquire  a  mining  claim, 
though  it  is  not  patented,  and  may  never  be,  still  they  are 
mining  partners  if  they  actually  engage  in  working  the 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  507 

mine  for  the  purpose  of  extracting  the  mineral  from  it. 
The  mining  partners  need  not  all  have  equal  interests  in 
the  profits.  If  a  number  of  miners  acquire  a  claim  and 
work  it,  on  shares,  whether  the  shares  be  equal  or  not,  it 
is  a  mining  partnership.  The  essential  difference  between 
the  ordinary  partnerships  and  a  mining  partnership  is, 
that  in  a  mining  partnership  there  is  no  choice  of  part- 
ners. One  member  of  a  mining  partnership  may  sell  his 
interest  or  share  in  the  mine,  and  the  partnership  is  not 
dissolved,  and  as  to  those  who  continue  to  work  the  mine, 
the  partnership  continues  to  exist;  while  in  a  general 
partnership,  the  sale  by  one  partner  dissolves  the  part- 
nership, because  none  of  the  general  partners  can  force 
a  new  member  into  the  firm. 

Civil  Code,  Sections  2511,  2512. 

Section  535. — PROFITS  AND  LOSSES  IN  MINING  PARTNER- 
SHIP.— A  mining  partner  shares  in  the  profits  and  losses 
in  proportion  to  the  interest  or  share  which  he  owns  in  the 
whole  mine,  and  the  proportion  which  his  interest  bears 
to  the  whole  partnership  capital  or  whole  number  of 
shares. 

Section  536. — LIABILITY  OF  MINING  PARTNERS. — Each 
mining  partner  is,  as  to  third  parties,  liable  for  the  en- 
tire debts  of  the  partnership.  If  one  mining  partner 
pays  the  debts,  or  advances  money  for  the  use  of  the  part- 
nership, he  has  a  lien  on  the  property  of  the  partnership 
for  his  money.  And  the  law  declares  that  this  lien  shall 
exist,  even  though  there  is  an  agreement  among  the  pait- 
ners  that  it  must  not. 

Civil  Code,  Section  2514. 

Section  537. — MINING  GROUND  PARTNERSHIP  PROPERTY. 
The  mining  ground  owned  and  worked  by  partners  in 
mining,  whether  purchased  with  partnership  funds  or  not, 
is  partnership  property.  But  a  mere  agreement  to  work 
a  mine  in  the  future,  upon  the  happening  of  a  conting- 


508  BUSINESS  LAW  FOR  BUSINESS  MEN. 

ency,  does  not  make  it  partnership  property.  Justice 
Temple,  of  the  Supreme  Court  of  California,  in  the  min- 
ing case  of  Dorsey  vs.  Newcomer,  speaking  of  the  part- 
nership property  of  miners,  said :  "It  is  not  always  easy 
to  determine  what  constitutes  the  partnership  property 
of  a  mining  partnership.  The  statute  provides  that  the 
mining  ground  owned  and  worked  by  partners  in  min- 
ing, whether  purchased  by  the  partnership  or  not,  is  part- 
nership property.  It  does  not  follow  that  property  other 
than  the  ground  owned  and  worked  may  not  also  be  part- 
nership property.  No  doubt,  other  property  acquired  by 
the  partnership  for  the  purpose  of  aiding  in  working  the 
mining  claim,  such  as  a  mill  or  mill  site,  would  also  be 
property  of  the  partnership.  So,  other  mining  ground  ac- 
quired for  the  purpose  of  working  with  the  mining  ground 
already  being  worked,  and  so  situated  that  it  can  be 
worked  with  the  original  claim  as  parts  of  one  mine, 
would  be  partnership  property.  And,  generally,  prop- 
erty acquired  by  the  partnership  by  the  use  of  partner- 
ship funds,  as  distinguished  from  individuals  constitut- 
ing the  firm,  may  be  so  regarded.  But  the  statute  evi- 
dently distinguishes  between  ground  owned  or  acquired 
for  the  purpose  of  working,  and  ground  actually  worked. 
It  is  only  the  last  that  in  general  can  be  regarded  as  part- 
nership property,  when  not  acquired  by  the  partnership, 
or  by  the  use  of  its  funds."  (Decided  by  the  Supreme 
Court  of  California,  in  the  case  of  Thomas  B.  Dorsey  vs. 
J.  T.  Newcomer,  which  decision  is  printed  in  Volume  121 
of  the  California  Eeports,  page  213.) 
Civil  Code,  Section  2515. 

Section  538. — NEW  MEMBER  OF  MINING  PARTNERSHIP. 
One  of  the  partners  in  a  mining  partnership  may  sell  his 
interest  in  the  mine  and  business  without  dissolving  the 
partnership.  And  the  purchaser,  from  the  date  of  his 
purchase,  becomes  a  member  of  the  partnership.  But 
the  purchaser  of  an  interest  in  the  mining  ground  takes 
it  subject  to  the  liens  existing  in  favor  of  the  partners, 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  509 

for  debts  due  the  creditors,  or  advances  made  for  the 
benefit  of  the  partnership,  of  which  he  has  notice ;  and  the 
purchaser  of  the  interest  of  a  partner  in  a  mine  when  the 
partners  are  engaged  in  working  it,  is  charged  by  the  law 
with  notice  of  all  liens  resulting  from  the  relation  of  the 
partners  to  each  other  and  to  the  creditors  of  the  part- 
nership. 

Civil  Code,  Sections  2516,  2517,  2518. 

No  member  of  a  mining  partnership,  or  any  agent  or 
manager  of  the  firm,  can  bind  the  partnership  by  a  con- 
tract in  writing,  except  by  express  authority  from  all  the 
members  of  the  firm.  He  cannot  bind  the  partnership  by 
making  a  promissory  note,  or  by  any  agreement  in  writ- 
ing affecting  the  partnership  property. 
Civil  Code,  Section  2519. 

Section  539. — OWNERS  or  MAJORITY  OF  SHARES  GOVERN 
CONDUCT  or  MINE. — The  decision  of  the  partners  owning 
a  majority  of  the  shares  or  interests  in  a  mining  partner- 
ship will  always  control  the  conduct  of  its  business.  As 
the  mining  property  can  only  be  used  as  a  whole,  it  is  in- 
dispensable in  conducting  the  business  of  mining  that 
those  owning  the  larger  portion  of  the  property  should 
have  the  power  to  control,  in  case  all  cannot  agree,  for 
otherwise  the  work  might  become  wholly  discontinued  at 
any  time.  The  powers  of  the  individual  members  of  a 
mining  partnership  are  much  more  limited  than  are  the 
powers  of  the  individual  members  of  a  purely  commercial 
or  trading  partnership.  What  may  be  necessary  and 
proper  for  carrying  on  the  business  of  mining,  for  the 
joint  benefit  of  all  concerned,  must  always  be  determined 
by  those  owning  and  holding  in  the  aggregate  the  ma- 
jority interest  in  the  property.  And  if  the  powers  which 
are  thus  exercised  by  the  majority  are  not  necessary  and 
proper  for  the  success  of  the  enterprise,  those  whose 
interests  may  be  imperiled  or  disastrously  affected  by 


510  BUSINESS  LAW  FOB  BUSINESS  MEN. 

the  improper  conduct  of  the  majority  have  the  right  to 
resort  to  the  courts  for  redress  and  protection. 
Civil  Code,  Section  2520. 

Section  540. — DURATION  OP  PARTNERSHIP. — If  no  term 
is  prescribed  by  agreement  for  the  duration  of  a  partner- 
ship, a  general  partnership  will  continue  for  an  indefinite 
time,  until  dissolved  by  mutual  consent,  or  by  a  partner, 
or  by  the  law. 

Section  541. — TOTAL  DISSOLUTION  OF  PARTNERSHIP.— 
A  general  partnership  is  dissolved  as  to  all  of  the  part- 
ners: (1)  By  lapse  of  the  time  prescribed  by  agreement 
for  its  duration;  (2)  By  the  expressed  will  of  any  part- 
ner, if  there  is  no  such  agreement;  (3)  By  the  death  of  a 
partner;  (4)  By  the  transfer  to  a  person,  not  a  partner, 
of  the  interest  of  any  partner  in  the  partnership  prop- 
erty; (5)  By  war,  or  the  prohibition  of  commercial  inter- 
course between  the  country  in  which  one  partner  resides 
and  that  in  which  another  resides ;  or,  (6)  By  a  judgment 
of  dissolution.  But,  as  we  have  already  seen,  there  is  an 
exception  in  the  case  of  a  mining  partnership,  which  is 
not  dissolved  by  the  death  of  one  partner  or  the  sale  of 
the  partner's  interest. 

Civil  Code,  Section  2450. 

Section  542. — PARTIAL  DISSOLUTION  OF  PARTNERSHIP. — 
A  general  partnership  may  be  dissolved,  as  to  himself 
only,  by  the  expressed  will  of  any  partner,  notwithstand- 
ing his  agreement  for  its  continuance ;  subject,  however, 
to  liability  to  his  co-partners  for  any  damage  caused 
them. 

Civil  Code,  Section  2451. 

Section  543. — WHEN  PARTNER  ENTITLED  TO  DISSOLU- 
TION.— A  partner  is  entitled  to  a  dissolution:  (1)  When 
he,  or  another  partner,  becomes  legally  incapable  of  con- 
tracting; (2)  When  another  partner  fails  to  perform  his 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  511 

duties  under  the  agreement  of  partnership,  or  is  guilty  of 
serious  misconduct;  or,  (3)  When  the  business  of  the 
partnership  can  be  carried  on  only  at  a  permanent  loss. 

Partners  may,  at  the  time  of  forming  the  partnership, 
prescribe  the  period  for  which  it  shall  endure,  and  how 
and  when  it  may  be  determined.  Its  continuance  may 
be  for  a  definite  term,  or  it  may  be  at  the  will  of  the 
partners ;  and  it  is  well  settled  that  a  partnership  at  will 
may  be  terminated  at  the  pleasure  of  any  member  of  the 
firm,  so  long  as  he  acts  without  fraudulent  intent.  As 
partnerships  are  formed  by  the  mutual  agreement  of  all 
the  partners,  so  may  they  be  altered,  modified,  or  dis- 
solved, by  like  agreement.  A  partnership  for  a  definite" 
period  may  be  dissolved  by  mutual  consent.  But  an 
express  agreement  to  dissolve  is  not  necessary.  Words 
and  acts  implying  such  intention  are  sufficient.  If  part- 
ners, by  mutual  consent,  cease  to  do  business,  and  divide 
the  partnership  property,  this  amounts  to  a  dissolution, 
as  much  as  if  done  by  an  express  agreement  to  that  effect. 
A  partnership  is  none  the  less  ended  by  reason  of  the 
fact  that  certain  specific  property  of  the  firm,  after  a 
settlement  and  adjustment  of  the  firm  business,  remains 
unsold,  and  that  each  partner,  under  the  settlement,  re- 
tains his  proportionate  part  of  such  property. 

Notwithstanding  that  a  time  for  the  dissolution  of  a 
firm  may  be  fixed  by  partnership  articles,  or  that  the 
partners  may  dissolve  by  agreement,  express  or  implied, 
before  such  time,  the  partnership  may  be  dissolved  by 
the  happening  of  any  of  the  events  which,  in  law,  are 
held  to  effect  that  result.  Thus,  the  withdrawal  of  a 
partner  causes  a  dissolution  of  the  firm;  and  the  intro- 
duction of  a  new  member  into  an  existing  partnership 
works  its  dissolution,  and  the  creation  of  a  new  partner- 
ship. If  both  partners  refuse  to  perform  their  part  of 
the  partnership  agreement,  there  is  no  law  requiring,  or 
recognizing,  a  continuance  of  the  partnership.  A  firm  is 
dissolved  when  it  ceases  to  do  the  business  for  which  it 
was  organized. 


512  BUSINESS  LAW  FOR  BUSINESS  MEN. 

The  mere  fact,  alone,  that  a  partnership  is  insolvent 
does  not  operate  as  a  dissolution  of  the  firm.  There 
must  be  a  stoppage  of  payment,  assignment,  or  act 
amounting  in  law  to  a  declaration  of  insolvency,  to  work 
a  dissolution.  An  assignment,  however,  by  co-partners, 
for  the  benefit  of  their  creditors,  of  the  entire  firm  assets, 
except  property  exempt  from  execution,  operates  as  a 
dissolution  of  the  partnership. 

The  mere  filing  of  an  attachment  against  partnership 
property  does  not  dissolve  the  partnership ;  nor  will  the 
mere  seizure  of  such  property  under  a  writ  of  attachment 
have  that  effect ;  and  it  has  been  held  by  the  courts  that 
'the  seizure  under  execution  of  the  interest  of  a  defendant 
in  partnership  property  does  not  dissolve  the  partner- 
ship ;  but  a  levy  of  execution  against  one  partner  on  his 
interest  in  the  firm,  and  the  sale  of  such  interest,  does 
dissolve  the  firm. 

A  sale  which  practically  includes  all  of  the  property 
used  by  a  firm  in  carrying  on  its  business,  whether  made 
by  the  firm  or  by  a  member,  operates  as  a  dissolution  of 
the  partnership.  The  destruction  of  the  property  which 
is  the  subject  matter  of  the  co-partnership  is  another 
cause  which  will  work  a  dissolution.  A  court  of  equity 
may  decree  the  dissolution  of  a  partnership  during  the 
term  for  which  it  was  entered  into,  and  declare  it  void, 
where  there  is  fraud,  imposition,  misrepresentation,  or 
oppression  in  the  original  agreement. 

Equity  has  jurisdiction,  where  a  person  has  been  in- 
duced by  fraudulent  representation  to  enter  into  a  part- 
nership, to  rescind  the  contract  at  his  instance,  and  put 
an  end  to  it.  Misrepresentation  of  material  facts  is  a 
ground  for  setting  aside  a  partnership  contract.  A  per- 
son who  has  been  induced  to  enter  into  a  partnership,  by 
a  material  misrepresentation  of  the  other  party,  is  en- 
titled to  have  the  contract  set  aside. 

One  partner  cannot,  by  any  act  of  his  own,  and  at  his 
will,  terminate  a  partnership  for  a  fixed  period,  before 
that  period  has  elapsed.  A  partnership  agreement,  like 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  513 

any  other,  is  binding  upon  the  parties,  and  they  must 
adhere  to  its  terms.  Neither  partner  is  at  liberty  to 
recede  from  it  against  the  will  of  the  other,  without  a 
sufficient  cause. 

A  court  of  equity  may  decree  a  dissolution  of  the  part- 
nership, for  causes  arising  subsequently  to  the  formation 
of  the  contract,  founded  upon  misconduct,  or  fraud,  or 
violation  of  duty,  of  one  partner;  or  on  account  of  the 
inability  or  incapacity  of  one  partner  to  perform  his 
obligations  and  duties,  and  to  contribute  his  skill,  labor, 
and  diligence  in  the  promotion  and  accomplishment  of  the 
objects  of  the  partnership;  or  for  the  existence  of  facts 
rendering  it  impracticable  to  carry  on  the  undertaking 
for  which  the  partnership  was  formed. 

A  court  of  equity  will  dissolve  a  partnership  where 
all  confidence  between  the  partners  has  been  destroyed, 
so  that  they  cannot  proceed  together  in  prosecuting  the 
business  for  which  it  was  formed.  And  this  result  fol- 
lows, not  only  where  such  want  of  confidence  is  occasioned 
by  the  misconduct  or  gross  mismanagement  of  the  part- 
ner against  whom  the  dissolution  is  sought,  but  also  when 
such  want  of  confidence  and  distrust  has  arisen  from 
other  circumstances,  provided  it  has  become  such  as 
cannot  probably  be  overcome.  But  a  partner  who,  by  his 
own  wilful  misconduct,  has  caused  such  want  of  con- 
fidence, will  not  be  allowed  to  take  advantage  of  it  to 
procure  a  dissolution.  If  a  partner's  acts  are  inconsistent 
with  the  duty  of  partners,  and  of  a  nature  to  destroy  the 
mutual  confidence  which  ought  to  subsist  between  them, 
and  makes  it  impossible  that  the  business  can  be  con- 
ducted in  partnership  with  benefit  to  either  party,  a  court 
of  equity  will  decree  a  dissolution  before  the  expiration 
of  the  term  for  which  the  partnership  was  entered  into. 
The  same  is  true  where  the  circumstances  have  so 
changed  as  to  render  it  impossible  to  carry  on  the  part- 
nership without  injury  to  all  the  partners.  A  partner- 
ship will  be  dissolved  where  one  of  the  firm  has  delib- 
erately resolved  to  break  up  and  ruin  its  business,  or 


514  BUSINESS  LAW  FOE  BUSINESS  MEN. 

where  ill  feeling  between  the  partners  renders  it  impos- 
sible to  conduct  the  business  successfully. 

The  wrongful  exclusion  of  one  partner  from  the  busi- 
ness, or  refusal  to  allow  him  to  inspect  the  books,  is  a 
cause  for  dissolution  of  the  partnership. 

It  is  a  sufficient  cause  for  dissolution  of  a  partnership 
that  it  clearly  appears  that  the  business  for  which  the 
partnership  was  formed  is  impracticable,  or  cannot  be 
carried  on  except  at  a  loss. 

A  partner's  failure  or  refusal  to  comply  with  the 
terms  of  the  partnership  agreement  as  to  contributing 
capital  or  funds  required  for  the  successful  prosecution 
of  the  business  is  also  a  cause  for  dissolution,  whether 
such  failure  or  refusal  arises  from  disinclination  or  in- 
ability. Thus,  if  a  partnership  is  formed  for  the  purpose 
of  buying  and  selling  land,  each  partner  to  furnish  an 
equal  share  of  money,  the  refusal  of  one  to  make  the 
necessary  advances  would  be  a  good  cause  for  putting  an 
end  to  the  partnership.  And,  if  a  partner  refuses  to 
manufacture  articles  as  agreed,  so  as  to  make  the  works 
profitable,  it  is  a  cause  for  dissolution. 

If  a  partner,  by  reason  of  his  infirmities,  becomes 
totally  incapable  of  performing  the  partnership  duties 
incumbent  upon  him,  a  dissolution  will  be  decreed,  not 
only  to  protect  the  partner  who  has  become  incapacitated, 
but  to  relieve  the  other  from  the  difficult  position  in  which 
he  is  placed.  Confirmed  and  incurable  insanity  is  a 
ground  for  dissolving  a  partnership,  and  when  it  is  shown 
that  a  partner  is  so  far  disordered  in  his  mind  as  to  be 
incapable  of  conducting  the  firm  business  according  to 
the  terms  of  the  contract  of  copartnership,  a  court  of 
equity  will  dissolve  the  firm.  After  an  adjudication  of 
the  insanity  of  one  partner,  the  continuing  partner  may 
apply  for  a  dissolution  of  the  partnership,  if  he  so 
desires ;  or,  if  it  is  a  partnership  at  will,  he  may  dissolve 
it  of  his  own  volition;  but  where  one  partner  has  been 
adjudged  insane,  and  the  remaining  partner  continues 
the  business  as  before,  without  objection  or  notice  to 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  515 

any  one,  it  is  presumed  that  he  did  not  intend  a  dissolu- 
porary,  and  whether  it  would  become  practicable  for  him 
to  resume  business.  So  long  as  he  thus  continues  to  carry 
on  the  business,  without  seeking  to  dissolve  the  partner- 
ship, there  is  no  dissolution,  nor  is  he  excused  from  ac- 
counting for  the  profits  derived  by  him  from  the  business 
of  the  firm. 

Partners  may  provide  in  their  contract  that  certain 
acts  or  conduct  shall  operate  to  dissolve  the  partnership ; 
but,  in  the  absence  of  special  agreement,  courts  may  dis- 
solve a  partnership  for  misconduct,  gross  neglect,  or 
breach  of  partnership  duty.  As  a  general  rule,  gross  mis- 
conduct, want  of  good  faith,  or  gross  want  of  diligence, 
or  such  cause  as  is  productive  of  serious  and  permanent 
injury  to  the  partnership  concerns,  or  renders  it  imprac- 
ticable to  carry  on  the  partnership  business,  is  proper 
tion  of  the  firm,  but  that  he  waited  to  determine  whether-  - 
the  incapacity  of  his  partner  would  prove  merely  tern- 
ground  for  dissolution.  Habitual  intoxication,  extrava- 
gance, and  dishonesty  are  good  grounds  for  dissolution. 

If  quarrels,  dissensions,  or  chronic  hostility  between 
partners  are  of  such  serious  and  permanent  character  as 
to  prevent  the  profitable  continuance  of  the  partnership 
business,  on  the  terms  of  the  agreement  between  the 
partners,  a  dissolution  will  be  decreed.  Violent  disputes, 
ill  will,  or  dissensions  between  the  partners,  which  en- 
tirely prevent  the  beneficial  effects  of  a  connection,  are 
sufficient  to  justify  a  decree  of  dissolution.  A  dissolution 
should  be  decreed  where  it  appears  that  the  partners  are 
in  a  constant  state  of  quarrel;  that  one  makes  a  rule  of 
going  to  the  office  at  an  early  hour,  opening  all  the  letters 
addressed  to  the  firm,  and  failing  to  communicate  the 
contents  to  the  other;  that  the  other  partner  is  always 
arbitrary  in  his  action;  and  that,  generally,  what  one 
wants  to  do  the  other  objects  to. 

A  court  of  equity  will  not  dissolve  a  co-partnership 
unless  cause  is  shown,  and  the  mere  desire  of  a  partner 
for  a  dissolution  is  not  a  sufficient  cause.  It  is  not  for 


516  BUSINESS  LAW  FOB  BUSINESS  MEN. 

every  act  of  misconduct  on  the  part  of  one  partner  that 
a  court  of  equity,  at  the  instance  of  another  partner,  will 
dissolve  the  partnership  and  close  up  the  affairs  of  the 
company.  The  court  will  require  a  strong  case  to  be 
made,  and  it  is  a  general  principle  that  a  court  has  no 
jurisdiction  to  make  a  separation  between  partners  for 
trifling  causes,  or  temporary  grievances,  involving  no  per- 
manent mischief.  Thus,  it  is  not  sufficient  cause  for  the 
dissolution  of  a  firm  that  a  loss  occurs  to  it  through  a 
partner's  mere  error  of  judgment,  or  that  there  is  a  mere 
dissatisfaction  between  partners.  A  court  of  equity  will 
not  decree  a  dissolution  of  a  partnership,  unless  it  is 
shown  that  the  defendant  has  substantially  failed  in  the 
performance  of  his  part  of  the  partnership  agreement. 
Civil  Code,  Section  2452. 

Section  544. — NOTICE  OF  DISSOLUTION  OF  PAETNER- 
SHIP. — The  liability  of  a  general  partner  for  the  acts  of 
his  co-partners  continues,  even  after  a  dissolution  of  the 
co-partnership,  in  favor  of  persons  who  have  had  deal- 
ings with  and  given  credit  to  the  partnership  during  its 
existence,  until  they  have  had  personal  notice  of  the  dis- 
solution. The  liability  of  a  partner  may  extend  beyond 
the  indebtedness  existing  at  the  dissolution,  and  include 
indebtedness  subsequently  contracted  in  favor  of  persons 
relying  on  the  partnership,  and  who  did  not  have  any 
notice  of  its  dissolution.  Those  who  have  dealt  with  the 
firm  before  dissolution  are  entitled  to  hold  all  the  part- 
ners liable  for  debts  contracted  afterwards  in  good  faith, 
in  the  belief  that  the  firm  still  continues,  and  in  reliance 
upon  its  assets  and  the  personal  responsibility  of  its 
members.  As  to  such  customers,  actual  notice  is  required 
to  exempt  from  liability  any  member  of  the  firm,  though 
he  has  retired.  The  fact  that  notice  was  mailed  to  such 
customer,  or  was  published  in  a  newspaper  of  general 
circulation,  and  such  newspaper  mailed  to  a  creditor  with 
a  red  line  drawn  about  the  notice  for  the  purpose  of  at- 
tracting attention  to  it,  or  that  the  dissolution  had 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  517 

attained  general  notoriety,  cannot  defeat  the  customer's 
claim  to  hold  all  the  members  of  the  firm  answerable,  if 
it  appears  that  he  did  not  have  actual  notice  of  the  dis- 
solution. Persons  who  have  not  dealt  with  the  firm 
before  its  dissolution  are  not  entitled  to  actual  notice,  and 
cannot  hold  a  retiring  member  answerable  if  notice  of 
the  dissolution  has  been  given  by  publication  in  a  news- 
paper. A  change  of  the  partnership  name,  which  plainly 
indicates  the  withdrawal  of  a  partner,  is  sufficient  notice 
of  the  fact  of  such  withdrawal  to  all  persons  to  whom  it 
is  communicated;  but  a  change  in  the  name,  which  does 
not  contain  such  an  indication,  is  not  notice  of  the  with- 
drawal of  any  partner. 

Civil  Code,  Sections  2453,  2454. 

Section  545. — WINDING  UP  THE  PARTNERSHIP  AFFAIRS. 
After  the  dissolution  of  a  partnership,  its  affairs  must 
be  wound  up,  and  its  property  disposed  of.  No  new  con- 
tracts are  to  be  made,  no  new  business  transacted;  but 
only  the  final  disposition  of  the  assets  of  the  firm,  the 
collection  of  accounts,  the  payment  of  the  debts,  the  dis- 
tribution of  the  property  left  over.  Any  member  of  a 
general  partnership  may  act  in  the  winding  up  of  its 
affairs.  By  consent  of  all  the  partners,  the  final  settle- 
ment of  the  affairs  of  the  firm  may  be  committed  to  one 
of  the  partners,  and  the  other  partners  will  then  have  no 
right  to  act.  The  partner  authorized  to  act  in  liquida- 
tion may  collect,  compromise,  or  release  any  debts  due  to 
the  partnership,  and  pay  or  compromise  any  claims 
against  it,  and  dispose  of  the  partnership  property;  he 
may  also  indorse,  in  the  name  of  the  firm,  promissory 
notes  or  other  obligations  held  by  the  partnership,  for 
the  purpose  of  collecting  them,  but  he  cannot  create  any 
new  obligation  in  the  name  of  the  firm. 

Civil  Code,  Sections  2459,  2460,  2461,  2462. 

Section  546. — BIGHTS  OF  PARTNERS  AFTER  DISSOLU- 
TION.— Each  partner,  after  the  dissolution  of  the  firm, 
has  an  equal  right  to  the  possession  of  its  assets.  And 


518  BUSINESS  LAW  FOR  BUSINESS  MEN. 

if  the  liquidation  of  the  partnership  affairs  is  not  left  in 
the  hands  of  certain  members  of  the  firm,  by  consent  of 
all  the  partners,  then  each  partner  has  the  right  to  do 
whatever  acts  are  necessary  to  complete  the  business  of 
the  partnership,  and  fulfil  its  contracts;  and,  as  each 
partner  is  interested  in  seeing  the  business  closed,  by 
the  collection  of  the  assets,  and  the  payment  of  the  firm's 
obligations,  and  a  division  of  the  remainder,  each  may 
take  steps  looking  to  that  end,  and  exercise  the  power 
vested  in  him  as  a  partner  to  dispose  of  and  preserve  the 
property  of  the  firm,  and  pay  its  obligations.  After  dis- 
solution of  the  firm  each  of  the  partners  has  the  right  to 
enter  into  the  same  or  any  other  business  on  his  own 
account.  If  property  of  the  firm  is  in  possession  of  one 
of  the  members  of  the  partnership,  he  has  the  power  to 
take  such  measures  as  are  necessary  for  its  preservation 
and  protection.  Each  of  the  partners,  in  the  absence  of 
an  agreement  to  the  contrary,  is  bound  to  give  his  services 
to  the  business  of  the  firm,  and  this  remains  true  after 
its  dissolution  so  far  as  is  necessary  to  the  winding  up  of 
its  affairs.  After  the  dissolution  of  the  partnership,  each 
partner  remains  liable  for  the  indebtedness  of  the  firm, 
to  the  same  extent  as  before. 

Section  547. — FORM  OP  PARTNERSHIP  AGREEMENT. — 
The  following  is  a  form  of  partnership  agreement : 

Articles  of  Co-partnership,  made  and  entered  into 

the day  of ,  19 ,  between 

,of , 

State  of  California,  and 

,  of  the  same  place : 

The  said  parties  above  named  have  agreed,  and  by 
these  presents  do  agree,  to  become  partners  in  business 
together,  under  and  by  the  name,  firm,  and  style  of  (here 
state  name  of  firm),  in  the  business  of  (here  state  the 
kind  of  business  to  be  transacted  by  the  firm),  at  (here 
state  name  of  place  where  the  business  is  to  be  con- 
ducted), State  of  California;  their  co-partnership  to 
commence  on  the day  of ,  19 , 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  519 

and  to  continue years  thence  next  ensuing, 

fully  to  be  completed  and  ended,  and  to  that  end  and 
purpose  the  said  parties  have  delivered  in  as  capital  stock 

the  sum  of Dollars,  gold  coin 

of  the  United  States,  share  and  share  alike,  to  he  used 
and  employed  in  common  between  them,  for  the  support 
and  management  of  the  said  business,  to  their  mutual 
benefit  and  advantage.  And  it  is  agreed,  by  and  between 
the  said  parties,  that  at  all  times  during  the  continuance 
of  their  co-partnership,  they  and  each  of  them  will  give 
their  attendance,  and  do  their  and  each  of  their  best 
endeavors,  and  to  the  utmost  of  their  skill  and  power 
exert  themselves,  for  their  joint  interest,  profit,  benefit, 
and  advantage,  in  the  business  aforesaid ;  that  they  shall 
and  will,  at  all  times  during  their  co-partnership,  bear, 
pay,  and  discharge,  equally  between  them,  all  rents  and 
other  expenses  that  may  be  required  for  the  support  and 
management  of  the  said  business ;  that  all  gains,  profits, 
and  increase  that  shall  come,  grow,  or  arise  from  or  by 
means  of  the  said  business,  shall  be  divided  between  them, 
share  and  share  alike;  and  all  loss  that  shall  happen  to 
their  said  joint  business,  by  bad  debts,  or  otherwise,  shall 
lie  borne  and  paid  equally  between  them ;  that  there  shall 
be  kept,  at  all  times  during  the  continuance  of  their  co- 
partnership, perfect,  just,  and  true  books  of  accounts, 
wherein  each  of  the  said  co-partners  shall  enter  and  set 
down,  as  well  all  money  by  them,  or  either  of  them, 
received,  paid,  laid  out,  and  expended,  in  and  about  the 
said  business,  as  also  all  the  goods,  wares,  merchandise, 
and  commodities,  by  them,  or  either  of  them,  bought  or 
sold,  by  reason  or  on  account  of  the  said  business,  and  all 
other  matters  and  things  whatsoever,  to  the  said  business 
and  management  thereof  in  anywise  belonging;  which 
said  books  shall  be  used  in  common  between  the  said  co- 
partners, so  that  either  of  them  may  have  access  thereto 
without  any  interruption  or  hindrance  of  the  other ;  that 
the  said  co-partners,  once  in  each  year,  during  the  con- 
tinuance of  the  said  co-partnership,  as  aforesaid,  to-wit : 

on  the day  of. :,  in  each  year,  or 

oftener  if  necessary,  shall  make,  yield,  and  render,  each 
to  the  other,  a  true,  just,  and  perfect  inventory  and  ac- 


520  BUSINESS  LAW  FOB  BUSINESS  MEN. 

count,  of  all  the  profits  and  increase  by  them,  or  either 
of  them,  made,  and  of  all  loss  by  them,  or  either  of  them, 
sustained,  and  also  of  all  payments,  receipts,  disburse- 
ments, and  of  all  other  things  by  them  made,  received, 
disbursed,  acted,  or  suffered,  in  their  said  business ;  and 
the  said  account  being  so  made,  they  shall  and  will  clear 
and  adjust,  each  to  the  other,  at  the  time,  their  just  share 
of  the  profits  so  made  as  aforesaid ;  that  during  the  con- 
tinuance of  the  said  co-partnership,  neither  of  them  shall 
or  will  indorse  any  note,  or  otherwise  become  security  for 
any  person  or  persons  whomsoever,  without  the  consent 
of  the  other  said  co-partner;  that  at  the  end  of  said  term, 
or  other  sooner  determination  of  their  co-partnership,  the 
said  co-partners,  each  to  the  other,  shall  and  will  make 
a  true,  just,  and  final  account  of  all  things  relating  to 
their  said  business,  and  in  all  things  truly  adjust  the 
same ;  and  that  all  and  every  stock  and  stocks,  as  well  as 
the  gains  and  increase  thereof,  which  shall  appear  to  be 
remaining,  either  in  money,  goods,  wares,  fixtures,  debts, 
or  otherwise,  shall  be  divided  between  them,  share  and 
share  alike. 

In  witness  whereof  the  parties  hereto  have  hereunto 
set  their  hands  and  seals  the  day  and  year  first  above 
written. 

(Seal.) 

(Seal.) 

SPAULDING'S  TABLE  FOR  MEASUREMENT  OF 

LOGS. 

Section  548. — LEGAL  STANDARD  OF  LOG  MEASUREMENT. 
The  State  adopted  the  table  known  as  Spaulding's  Table 
for  the  Measurement  of  Logs,  as  the  legal  standard  of 
measurement  in  California.  The  following  table,  known 
as  Spaulding's  Table  for  the  Measurement  of  Logs,  is 
the  standard  and  table  for  the  measurement  of  logs 
throughout  the  State.  For  the  measurement  of  logs  of 
any  greater  length  than  indicated  in  the  table,  the  com- 
putation shall  be  made  in  accordance  with  table.  All  logs 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS. 


521 


shall  be  measured  at  the  small  end  and  inside  the  bark, 
and  the  contents  computed  according  to  table.  Allowance 
shall  be  made  for  rot,  shake,  or  other  defect  in  logs 
measured  by  this  scale,  so  as  to  make  the  survey  express 
the  actual  quantity  of  merchantable  lumber  in  each  log. 
The  Spaulding  Table  for  the  Measurement  of  Logs  is 
as  follows : 


Length      |  Diam.  |  Diara.  |  Diam.  |  Dlam.  |  Dlam.  [  Diam.  |  Diam.  |  Diara. 
In  feet.       |       10     |       11     |       12    j       13     |       14     j       15     j       16     j       17 

Diam.  |  Diam.  |  Diam. 
18     1       19     |       20 

12  .  ...|     381     47|     58|     71 

86|  103|  121 

141|  162 

184|  207 

13  .... 

41  f     51  1     62|     76 

93|  111|  131 

152 

175 

199!  224 

14   .... 

44  1     55|     67 

82 

100|  120 

141 

164 

189 

214]  241 

15   .... 

47|     59|     72 

88 

107 

128 

151    176 

202 

2301  258 

16   .... 

50]     63|     77 

94 

114    137|  161|  188 

216 

245  1  276 

17   .... 

53|     67  1     82 

100 

121|  145|  171|  199|  229 

260    293 

18   .... 

57  1     70  1     87 

106 

129|  154|  181  1  211 

243 

276 

310 

19   .... 

60|     74|     91 

112 

136|  163 

191|  223 

256 

291 

327 

20  .... 

63|     78  1     96 

118 

143 

171 

201 

235 

270 

306 

345 

21   .... 

66|   .82|  101|  124 

150 

180 

211 

246 

283|  322 

362 

22  .... 

69  1     86|  106 

130 

157 

188 

221 

258 

297 

337 

379 

23  .... 

72  1     90|  111 

136 

164 

197 

231 

270 

310 

352 

396 

24  .... 

76)     94|  116 

142 

172 

206 

242 

282 

384 

368 

414 

Length 
in  feet. 


|  Diam. 
I       21 


Diam.  |  Diam. 

I       22     I       23 


Diam.  I  Diam.  I  Diam.  I  Diam. 


Diam.  |  Diam. 
28     I       29 


Diam.  |  Diam. 
30     I       31 


12  .... 

231 

256 

282 

309 

337|  366|  396 

427 

459 

4921  526 

13  .... 

250 

277 

305 

334 

3651  396  429 

462 

497 

533|  569 

14  .... 

269 

298 

329 

360 

393|  427 

462 

498 

535 

574 

613 

15  .... 

288|  320|  352|  387|  421  1  457 

495  533"  573 

615 

657 

16  .... 

308|  341 

376 

412 

449|  488 

528|  569|  612 

656 

701 

17  .... 

327  362|  399 

437 

477|  518 

561 

604 

650 

697 

745 

18  .... 

346 

384  1  423 

463 

505 

549 

594 

640 

688 

738 

789 

19  .... 

365  405|  446 

489 

533 

579 

627 

676 

726 

779 

832 

20  .... 

385 

426|  470  1  515 

561 

610 

660 

711 

765 

820 

876 

21  .... 

404 

448 

493 

540 

589 

640 

693 

747 

803 

861 

920 

22  .... 

423 

469 

517. 

566|  617 

671|  726 

782 

841 

902 

964 

23  .... 

442 

490 

540  1  591  1  645 

701  759 

818 

879 

943 

1008 

24  .... 

462 

512 

564  618|  674 

732  1  792 

854 

918 

984|1052 

522 


BUSINESS  LAW  FOE  BUSINESS  MEN. 


Length 

l>i:l  Ml.  |  1  )l  Mill. 

Diam. 

Diana. 

Diam.  |  Diam.  |  Diam. 

Diam. 

Diain. 

Diam. 

Diam. 

in  feet. 

32  |   33 

34 

35 

36  |   37  I   38 

39 

40 

41 

42 

12  .... 

561 

597 

634 

673 

713 

755 

798 

843 

889 

936|  984 

13  .... 

607 

646 

686 

729 

772 

817 

864 

913 

963 

101411066 

14  .... 

654 

696 

739 

785 

831 

880 

931 

983 

1037 

1092 

1148 

15  .... 

701 

746 

792 

841 

891 

943 

997 

1053 

1111 

1170 

1230 

16  .... 

748 

796 

845 

897 

950 

1006 

1064 

1124 

1185 

1248 

1312 

17  .... 

794 

845 

898 

953 

1010 

1069 

1130 

1194|1259 

1326 

1394 

18  .... 

841 

895 

951 

1009 

1069 

1132 

1197 

1264 

1333 

1404 

1476 

19  .... 

888 

945 

1003 

1065 

1128 

1195 

1263 

1334 

1407 

1482 

1558 

20  .... 

935 

995 

1056 

1121 

1188 

1258 

1330 

1405 

1481 

1560 

1640 

21  .... 

981 

1044 

1109 

1177 

1247 

1321 

1397 

1475 

1555 

1638 

1722 

22  .... 

1028 

1094 

1162 

1233 

1307 

1384 

1463 

1545 

1629 

1716 

1804 

23  .... 

1075 

1144 

1215 

1289 

1366 

1447 

1529 

1615 

1703 

1794 

1886 

24  .... 

1122 

1194 

1268 

1346 

1426 

1510 

1596 

1686 

1778 

1872 

1968 

Length 

Diami. 

Diam. 

Diani. 

Diain. 

Diam.  |  Diam. 

Diam.  |  Diam. 

Diain. 

Diam. 

Diam. 

in  feet. 

43 

44 

45 

46 

47  |   48 

49  |   50 

51 

52 

53 

12  .... 

1033 

1086 

1134 

1186 

1239 

1293 

1348 

140411461 

1519 

1578 

13  .... 

1119 

1176 

1228 

1284 

1342 

1400 

1460 

1521 

1582 

1645 

1709 

14  .... 

1205 

1267 

1323 

1383 

1445 

1508 

1572 

1638 

1704 

1772 

1841 

15  .... 

1291 

1357 

1417 

1482 

1548 

1616 

1685 

1755 

1826 

1898 

1972 

16  .... 

1377 

1448 

1512 

1581 

1652 

1724 

1797 

1872 

1948 

2025 

2104 

17  .... 

1463 

1538 

1606 

1680 

1755 

1831 

1909 

1989 

2069 

2151 

2235 

18  .... 

1549 

1629 

1701 

1779 

1858 

1939 

2022 

2106 

2191 

2278 

2367 

19  .... 

1635 

1719 

1795 

1877 

1961 

2047 

2134 

2223 

2313 

2405 

2498 

20  .... 

1721 

1810 

1890 

1976 

2065 

2155 

2246 

2340 

2435 

2531 

2630 

21  .... 

1807 

1900 

1984 

2075 

2168 

2262 

2385 

2457 

2556 

2657 

2761 

22  .... 

1893 

1991 

2079 

2174 

2271 

2370 

2470 

2574 

2678 

2784 

2893 

23  .... 

1979 

2081 

2173 

2273 

2374 

2478 

2582 

2691 

2800 

2911 

3024 

24  .... 

2066 

2172 

2268 

2372 

2478 

2586 

2696 

2808 

2922 

3038 

3156 

Length 

Diam.  |  Diam. 

Diam, 

Diam. 

Diam.  |  Diam. 

Diam.  |  Dunn. 

Diam. 

Diam. 

Diam. 

in  feet. 

54  |   55 

56 

57 

58 

59 

60  |   61 

62 

63 

64 

12  .... 

1638 

1700 

1763 

1827 

1893 

1960 

2028 

2098 

2169 

224112315 

13  .... 

1774 

1841 

1909 

1979 

2050 

2123 

2197 

2272 

2349 

2427 

2507 

14  .... 

1911 

1983 

20562131 

2208 

2286 

2366 

2447 

2530 

2614 

2700 

15  .... 

2047(2125 

2203 

2283 

2366 

2450  j  2535 

2622 

2711 

2801 

2893 

16  .... 

2184|2266 

2350 

2436 

2524 

2613 

2704 

2797 

2892 

2988 

3086 

17  .... 

2320 

2408 

2497 

2588 

2681 

2776 

2873 

2972 

3072 

3174 

3279 

18  .... 

2457 

2550 

2644 

274012839 

2940 

3042 

3147 

3253 

3361 

3472 

19  .... 

2593 

2691 

2791 

2892 

2997 

3103 

3211 

3321 

3434 

3548 

3665 

20  .... 

2730 

2833 

2938 

3045 

3155 

3266 

3380 

3496 

3615 

3735 

3858 

21  .... 

2866 

2974 

3085 

3197 

3312 

3429 

3549 

3671 

3795 

3921 

4051 

22  .... 

3003 

3116 

3232 

3349 

3470 

3592 

3718 

3846 

3976 

4108 

4244 

23  .... 

3139 

3258 

3379 

3501 

3628 

3756 

3887 

4021 

4157 

4295 

4437 

24  .... 

3276 

3400 

3526 

3654 

3786 

3920 

4056 

4196 

4338 

4482 

4630 

BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS. 


523 


Length 
in  feet. 

Diami.  |  Diam. 
65  |   66 

Diam. 
67 

Diam. 
68 

Diam.  |  Diam.  |  Diam. 
69  j   70  |   71 

Diam.  |  Diam. 
72  i   73 

Diam.  |  Diani. 
74  j   75 

12  .... 

2390 

2467 

2545 

2625 

2706 

2789 

2874 

2960 

3047 

3135 

3224 

13  .... 

2589 

2672 

2757 

2843 

2931 

3021 

3113 

3206 

3301 

3396 

3492 

14  .... 

2789 

2878 

2969 

3062 

3157 

3253 

3353 

3453 

3555 

3657 

3761 

15  .... 

2987 

3083 

3181 

3281 

3382 

3486 

3592 

3700 

3809 

3919 

4030 

16  .... 

3186 

3289 

3393 

3500 

3608 

3718 

3832 

3946 

4062 

4180 

4298 

17  .... 

3385 

3494 

3605 

3718 

3833 

3951 

4071 

4193 

4316 

4441 

4567 

18  .... 

3585 

3700 

3817 

3937 

4059 

4183 

4311 

4440 

4570 

4702 

4836 

19  .... 

3784 

3906 

4029 

4156 

4284 

4415 

4550 

4686 

4824 

4964 

5104 

20  .... 

3983 

4111 

4241 

4375 

4510 

4648 

4790 

4933 

5078 

5225 

5372 

21  

4182 

4316 

4453 

4593 

4735 

4880 

5029 

5180 

22  

4381 

4522 

4665 

4812 

4961 

5113 

5269 

5426 

23  

4580 

4728 

4877 

5031 

5186 

5345 

5508 

5673 

24  . 

4780 

4934 

5090 

5250 

5412 

5578 

5748 

5920 

Length   [  Diam.  |  Diam.  |  Diam.  |  Diam. 
in  feet.   |   76  |   77  |   78  |   79 

Diam.  |  Diam.  |  Diam.  |  Diam. 

80  j   81  |   82  |   83 

Diam. 
84 

Diam. 
85 

Diam. 
86 

12  .... 

3314 

3405 

3497 

3590 

3684 

3779 

3874 

3970 

4067 

4165 

4264 

13  .... 

3590 

3688 

3788 

3889 

3991 

4094 

4196 

4301 

4406 

4512 

4619 

14  .... 

3866 

3972 

4080 

4188 

4298 

4408 

4519 

4631 

4745 

4859 

4974 

15  .... 

4142 

4256 

4371 

4487|4605 

4723 

4842 

4962 

5084 

5206 

5330 

16  .... 

4418 

4540 

4663 

4786 

4912 

5038 

5165 

5293 

5423 

5553 

5685 

17  .... 

4694 

4823 

4954 

5085 

5219 

5353 

5488 

5624 

5762 

5900 

6040 

18  .... 

4970|5107 

5245 

5385 

5526 

5668 

5811 

5955 

6101 

6247 

6396 

19  .... 

5246J5391 

5537 

5684 

5833 

5983 

6133 

6282 

6440 

6594 

6751 

20  .... 

5522 

5675 

5829 

5983 

6140 

6298 

6456 

6616 

6778 

6941 

7106 

Length 
in  feet. 

|  Diam. 

|       87 

Diam. 

88 

Diam. 
89 

Diam. 

|       90 

Diam. 
1       91 

Diam. 
92 

Diam. 
93 

Diam. 
94 

Diam. 
95 

Diam. 
96 

12    

4364 

4465 

4566 

4668 

4771 

4875 

4980 

5085 

5199 

5300 

13    

4727 

4837 

4946 

5057 

5168 

5981 

5395 

5508 

5694 

5741 

14    

5091 

5909 

5397 

5446 

5566 

5687 

5810 

5939 

6057 

6183 

15    

5455 

5581 

5707 

5835 

5964 

6094 

6995 

6356 

6490 

6695 

16    

5818 

5953 

6088 

6994 

6361 

6500 

6640 

6780 

6999 

7066 

17    

618? 

6395 

6468 

6613 

6759 

6906 

7055 

7903 

7355 

7508 

18    

6546 

6697 

6849 

7009 

7156 

7319 

7470 

7627 

7788 

7950 

19    

6909 

7069 

7999 

7391 

7554 

7791 

7885 

8051 

8990 

8391 

20 

7273 

7441 

7610 

7780 

7951 

8125 

8300 

8475 

8653 

8833 

Section  549. — EXPLANATION  OF  TABLE. — The  length  of 
any  log  in  feet  will  be  found  in  the  left-hand  column  of 
the  table,  and  the  diameter  at  the  top  of  the  page. 

To  find  the  number  of  feet  of  square-edged  boards 
which  a  log  will  produce  when  sawed :  Take  the  length 


524  BUSINESS  LAW  FOE  BUSINESS  MEN. 

of  feet  in  left-hand  column  of  the  table,  and  its  diameter 
in  inches  at  the  top  of  the  page;  trace  the  two  columns 
of  figures  until  they  meet,  and  you  have  the  required 
amount. 

(A  log  which  is  18  feet  long  and  21  inches  in  diameter 
gives  at  the  right  of  the  length,  and  directly  under  the 
diameter,  346  feet;  and  one  23  feet  long  and  18  inches 
in  diameter,  gives  310  feet.) 

Logs  longer  than  are  given  in  this  table  can  be  easily 
measured  by  doubling  any  given  length;  for  example,  to 
find  the  number  of  feet,  board  measure,  contained  in  a 
log  28  feet  long  By  19  inches  in  diameter,  double  the 
amount  contained  in  a  log  14  feet  long,  19  inches  in 
diameter,  and  you  have  the  answer — 428  feet.  For  a  log 
42  feet  long,  19  inches  diameter,  multiply  the  amount  con- 
tained in  the  table  in  a  log  14  feet  long  by  3,  and  you  have 
the  amount;  and  so  on  to  any  length  or  size. 

Each  size  log  has  been  scaled  so  as  to  make  all  that 
can  be  practically  sawed  out  of  it,  if  economically  sawed, 
each  log  to  be  measured  at  the  top  or  small  end,  inside 
of  the  bark,  and,  if  not  round,  to  be  measured  two  ways, 
at  right  angles,  and  the  difference  taken  for  the  diameter. 
Where  there  are  any  known  defects  the  amount  deducted 
should  be  agreed  upon  by  the  buyer  and  seller,  and  no 
fraction  of  an  inch  to  be  taken  into  the  measurement. 

SEABCHEES  OF  EECOKDS. 

Section  550. — ABSTRACTS  OP  TITLE. — An  abstract  of 
title  is  a  condensed  history  of  the  title  to  the  land,  con- 
sisting pf  a  synopsis  or  summary  of  the  material  por- 
tions of  all  the  conveyances  of  record,  of  whatever  kind 
or  nature,  which  in  any  manner  affect  the  land,  or  any 
estate  or  interest  in  the  land,  together  with  a  statement 
of  all  liens,  charges,  or  liabilities  to  which  the  property 
may  be  subject,  and  of  which  it  is  in  any  way  material 
for  purchasers  to  be  apprised.  The  object  of  the  abstract 
is  to  enable  the  purchaser,  or  his  attorney,  to  pass  more 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  525 

readily  on  the  sufficiency  of  the  title.  Therefore,  a  com- 
plete abstract  should  show  whatever  appears  of  record 
which  concerns  the  sources  of  the  title  and  its  present 
condition.  The  descent  and  line  of  the  title  should  be 
clearly  traced  out,  and  all  encumbrances  and  liens  of 
every  sort,  and  all  adverse  claims,  and  the  material  parts 
of  all  patents,  deeds,  wills,  judicial  proceedings,  and  other 
records  or  documents  which  touch  the  title. 

Section  551. — SEARCHERS  OF  RECORD. — From  the  neces- 
sity of  having  an  abstract  of  record  of  the  title  to  land, 
and  the  volume  and  extent  of  the  records  themselves, 
has  grown  that  class  of  expert  searchers  known  as 
abstractors,  or  searchers  of  record,  whose  business  it  is 
to  prepare  in  a  condensed  and  convenient  form  the  data 
from  which  it  can  be  determined  whether  the  title  is  good 
or  bad,  or  free  from  encumbrance,  and  if  encumbered  at 
all,  the  character  of  the  encumbrance.  So  important  is 
their  work,  and  so  much  depends  upon  the  accuracy  and 
fidelity  of  the  abstracts  they  furnish,  that  it  is  to  be  ex- 
pected by  those  who  engage  in  the  business  of  furnishing 
abstracts  that  any  errors  or  omissions  resulting  in  dam- 
ages will  incur  a  liability  on  their  part  to  their  patrons. 

Section  552. — LIABILITY  OF  SEARCHERS  OF  RECORD. — 
One  who  holds  himself  out  to  the  world  as  an  examiner 
of  titles,  and  who  undertakes  to  furnish  correct  abs-tracts 
of  title,  is  bound  to  exercise  skill  and  care  in  making  the 
examination,  and  in  preparing  the  abstract,  and  is  liable 
in  damages  for  a  failure  to  exercise  that  duty.  Persons 
engaged  in  the  business  of  making  abstracts  of  title 
occupy  a  relation  of  confidence  towards  those  employing 
them,  which  is  second  only  in  the  sacredness  of  its  nature 
to  the  relation  which  a  lawyer  sustains  to  his  client. 
Searchers  of  record  consult  the  evidences  of  ownership, 
and  become  familiar  with  the  chains  and  histories  of  title. 
They  handle  private  title  papers,  and  become  aware  of 
whatever  weaknesses  or  defects  may  exist  in  the  legal 


526  BUSINESS  LAW  FOR  BUSINESS  MEN. 

proceedings  through  which  the  ownership  of  real  prop- 
erty is  secured.  And  the  courts  have  said,  that  they 
should  be  held  to  a  strict  responsibility  in  the  exercise  of 
the  trust  and  confidence  which  are  necessarily  reposed 
in  them. 

Section  553. — To  WHOM  LIABLE. — The  liability  of  a 
searcher  of  records  for  want  of  skill  or  ordinary  care 
and  diligence  is  only  to  the  party  employing  him.  An 
action  for  damages  for  errors  or  omissions  in  an  abstract 
of  title  cannot  be  sustained  by  a  third  person  acting  upon 
the  faith  of  the  correctness  of  the  abstract,  as  there  is  no 
contract  between  him  and  the  abstracter.  The  abstractor 
knows  that  his  records  are  to  be  seen,  and  titles  to  be 
made  in  reliance  upon  them,  but  he  is  not  bound  to  know 
that  his  certificate  is  for  the  use  or  reliance  of  any  but 
the  person  who  receives  it,  nor  can  it  be  assumed  that- 
he  gives  it  for  any  other  use.  He  contracts  with  the  per- 
son who  requests  and  pays  for  it,  to  give  a  certificate 
which  shall  state  the  facts ;  but  he  enters  into  no  relation 
of  contract  or  duty  in  respect  to  it  with  any  other  person ; 
and,  if  another  relies  upon  it  to  his  injury,  he  cannot 
recover  damages  against  the  abstracter,  because  the  latter 
assumed  no  duty  for  his  protection.  A  searcher  of 
records  is  liable  for  his  negligence  only  to  the  person  who 
requests  and  pays  for  the  certificate  of  search.  He  is 
not  liable  to  the  grantee  of  the  person  who  employed  him, 
as  there  was  no  contract  between  them.  A  searcher  of 
records,  employed  by  the  owner  to  prepare  an  abstract 
of  title  for  the  purpose  of  procuring  a  loan,  is  not  liable 
in  damages  to  the  lender,  for  a  loss  caused  by  mistake  in 
the  abstract,  there  being  no  contract  between  him  and 
the  lender.  It  is  a  general  rule  that  a  searcher  of  records 
is  liable  for  damages,  because  of  his  negligence  or  mis- 
take, only  to  his  immediate  employer,  and  not  to  the  lat- 
ter's  assigns,  vendees,  or  devisees,  nor  to  any  third 
person  between  whom  and  himself  there  is  no  contract 
relation. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  527 

Section  554. — LIABILITY  FOB  MISTAKE. — A  searcher  of 
records,  giving  a  certificate  of  title,  is  liable  to  his  em- 
ployer for  any  mistake  arising  from  want  of  due  care  or 
diligence,  or  from  ignorance  of  his  business. 

Section  555. — LIABILITY  FOE  OMITTING  ENCUMBRANCE. 
If  a  searcher  of  records  undertakes  to  furnish  a  pur- 
chaser of  land  with  a  full  abstract  of  title,  he  is  liable 
in  damages  for  his  negligence  in  carelessly  omitting  from 
the  abstract  any  mention  of  a  particular  encumbrance,  by 
which  the  purchaser  is  put  to  additional  expense  to  per- 
fect his  title. 

Section  556. — MARGINAL  EEFERENCE  IN  RECORD  BOOK. 
When  a  searcher  of  records  undertakes  to  make  a  com- 
plete abstract  of  title,  he  takes  the  obligation  upon  him- 
self to  make  a  full  and  true  search  and  examination  of 
all  records  relating  to  the  land,  and  to  note  in  the  abstract 
accurately  every  transfer,  conveyance,  or  other  instru- 
ment of  record  in  any  way  affecting  the  title.  He  is  not 
required  to  give  any  opinion  as  to  the  legal  effect  of  any 
of  the  instruments,  and  just  how  full  a  description  of 
them  he  shall  give  is,  to  a  certain  extent,  a  matter  for  him- 
self to  decide ;  but  in  so  far  as  he  assumes  to  describe  the 
recorded  instruments,  he  is  required  to  make  his  descrip- 
tions accurate.  The  record,  and  not  a  marginal  reference 
to  it  by  the  Recorder,  nor  an  index  reference  to  the  in- 
strument, is  what  determines  the  character  and  legal 
effect  of  the  instrument ;  and  the  duty  of  the  searcher  of 
records  is  not  fulfilled  by  merely  assuming  the  accuracy 
of  a  marginal  reference,  without  examining  the  instru- 
ment itself.  In  failing  to  examine  the  record  of  the  in- 
strument itself,  the  searcher  is  guilty  of  negligence.  So, 
in  a  case  where  a  partial  release  of  a  mortgage  was 
recorded,  and  a  register  of  deeds,  in  his  reference  to  it 
on  the  margin  of  the  record  of  the  mortgage  erroneously 
made  the  entry  "Satisfied"  (with  a  reference  to  the 
book  and  page  where  the  release  was  recorded),  when  in 
fact  it  should  have  been  "Partially  satisfied,"  and  the 


528  BUSINESS  LAW  FOR  BUSINESS  MEN. 

searcher,  in  making  up  the  abstract,  relied  upon  this  mar- 
ginal entry  entirely,  supposing  it  to  be  correct,  and  did 
not  examine  the  contents  of  the  instrument  of  release 
itself,  and  the  party  procuring  the  abstract  was  after- 
wards compelled  to  pay  the  mortgage ;  it  was  held  by  the 
court  that  the  searcher  was  guilty  of  negligence,  and  was 
liable  for  whatever  the  party  had  been  compelled  to  pay. 

Section  557. — OMITTING  JUDGMENT  AND  SALE. — If  a 
searcher  of  records,  employed  by  a  purchaser  to  make  an 
abstract,  omits  to  note  the  fact  of  a  judgment  and  sale 
of  the  land  for  taxes,  of  which  the  purchaser  is  ignorant 
until  the  time  for  redemption  has  expired,  whereby  he  is 
caused  to  pay  out  money  to  remove  the  cloud  from  his 
title,  the  abstractor  is  liable  in  damages  to  the  purchaser 
for  the  sum  paid  out  by  him. 

Section  558. — INCORRECT  EEPORT  OF  QUANTITY  OF  LAND 
CONVEYED. — If  a  searcher  of  records  incorrectly  reports 
in  the  abstract  the  quantity  of  land  previously  conveyed, 
he  is  liable  in  damages  to  the  person  who  employed  him 
and  relied  upon  the  information  in  purchasing  the  land. 

Section  559. — MEASURE  OF  DAMAGES. — The  damages 
suffered  must  be  actual  damages.  The  law  will  not  com- 
pel a  searcher  of  records,  even  though  he  has  been  guilty 
of  inexcusable  negligence  or  ignorance,  in  preparing  the 
abstract,  to  pay  any  damages  by  way  of  punishment. 
The  person  who  employed  him  is  entitled  to  the  actual 
money  loss,  by  reason  of  the  negligent  act  or  omission, 
and  that  is  all. 

Section  560. — WHEN  SUIT  FOR  DAMAGES  MUST  BE  COM- 
MENCED.— In  California,  a  suit  against  a  searcher  of 
records  for  damages  must  be  commenced  within  two  years 
after  the  delivery  of  the  defective  abstract,  or  it  is  barred 
by  the  statute  of  limitations. 

Section  561. — SALE  OF  GOOD  WILL  OF  ABSTRACTING 
BUSINESS. — Section  1674  of  the  Civil  Code  of  California, 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  529 

providing  that  one  who  sells  the  good  will  of  a  "busi- 
ness ' '  may  agree  with  the  buyer  to  refrain  from  carrying 
on  a  similar  "business,"  is  broad  enough  to  include,  and 
does  include,  the  business  of  abstracting. 

NOTARY  PUBLIC. 

Section  562. — DUTIES  OF  NOTARY. — The  duties  of  a 
Notary  Public  are  prescribed  by  law,  and  are  varied  and 
important.  In  business  affairs,  the  taking  of  acknowl- 
edgments to  deeds,  mortgages,  leases,  and  other  instru- 
ments, constitutes  the  greater  and  most  important  part  of 
a  Notary's  work.  His  duties,  however,  extend  to  a  num- 
ber of  other  matters.  He  is  required,  when  requested, 
to  demand  acceptance  and  payment  of  foreign,  domestic, 
and  inland  bills  of  exchange,  or  promissory  notes,  and 
protest  the  same  for  non-acceptance  and  non-payment; 
he  may  take  acknowledgment  or  proof  of  powers  of  attor- 
ney, mortgages,  deeds,  grants,  transfers,  and  other  in- 
struments of  writing  executed  by  any  person;  he  may 
take  depositions  and  affidavits,  and  administer  oaths,  to 
be  used  before  any  court,  judge,  officer,  or  board  in  this 
State. 

Section  563. — NOTARY'S  RECORD. — He  is  required  to 
keep  a  record  of  all  official  acts  done  by  him;  to  keep  a 
record  of  the  parties  to  every  instrument  acknowledged 
or  proved  before  him,  with  the  date  and  character  of  the 
instrument;  and  when  requested,  and  upon  payment  of 
his  fees,  he  must  make  and  give  a  certified  copy  of  any 
record  in  his  office. 

Section  564. — NUMBER  OF  NOTARIES. — The  governor 
may  appoint  and  commission  such  number  of  notaries 
public  for  the  several  counties  and  cities  and  counties 
of  this  State  as  he  shall  deem  necessary  for  the  public 
convenience,  except  that  in  cities  and  counties  of  the 


530  BUSINESS  LAW  FOR  BUSINESS  MEN. 

second  class  the  number  shall  not  exceed  one  hundred 
and  thirty. 

Act  of  the  Legislature,  approved  April  11, 1917; 
in  effect  July  27,  1917. 

Section  565. — BOND  OF  NOTARY. — Every  Notary  in 
California  must  give  an  official  bond  in  the  sum  of  $5000. 
which  must  be  approved  by  the  Judge  of  the  Superior 
Court,  of  his  county,  and  recorded  as  other  official  bonds 
of  county  officers. 

Section  566. — LIABILITY  OF  NOTARY. — The  law  provides 
that  for  the  official  misconduct  or  neglect  of  a  Notary 
Public,  he  and  the  sureties  on  his  official  bond  are  liable 
to  the  parties  injured  for  all  the  damages  sustained. 
Political  Code,  Section  801. 

Section  567. — WHAT  ACTS  COVERED  BY  OFFICIAL  BOND. 
The  condition  of  a  bond  of  a  Notary  Public  being,  that 
he  will  ' '  well  and  truly  perform  and  discharge  the  duties 
of  a  Notary  Public  according  to  law,"  this  embraces 
every  act  which  he  is  authorized  or  required  by  law  to 
do  in  virtue  of  his  office.  By  accepting  the  office,  a  Notary 
contracts  with  those  who  employ  him  that  he  will  per- 
form the  duties  of  the  office  with  integrity,  diligence,  and 
skill.  He  gives  his  bond  to  indemnify  those  who  shall 
suffer  by  the  unfaithful  or  unskillful  performance  of  his 
duty.  Before  a  Notary  and  his  bondsmen  can  be  held 
liable  for  damages,  it  is  necessary  to  determine  whether 
the  act  done  or  not  done  was  or  not  authorized  by  law, 
was  or  not  incumbent  upon  him,  was  or  not  required  of 
him,  whether  he  was  directed  to  do  it,  whether  he  has 
failed  to  discharge  the  duty,  and  whether  injury  has  been 
sustained.  Where  a  Notary  does  a  thing  which  the  law 
does  not  authorize  him  to  do,  although  he  does  it  in  his 
capacity  of  Notary  Public,  his  bondsmen  are  not  re- 
sponsible for  his  act.  Notaries  and  their  sureties  are 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  531 

liable  only  to  the  persons  who  have  employed  the  Notary, 
and  are  only  liable  to  those  who  suffer  injury  on  account 
of  the  Notary's  failure  to  perform  the  duty  incumbent 
upon  him  or  required  by  law. 

Section  568. — LIABILITY  OF  SURETIES  ON  OFFICIAL 
BOND. — The  surety  on  a  Notary's  official  bond  is  only 
bound  for  such  acts  of  his  as  the  law  authorizes  or  re- 
quires him  to  do  in  his  official  capacity.  By  signing  the 
bond,  the  surety  tells  all  who  may  need  the  services  of  a 
Notary:  "You  can  go  with  security  to  this  Notary;  I 
assure  you  that  he  is  a  competent  officer;  that  he  will 
well  and  faithfully  discharge  and  perform  all  the  duties 
imposed  upon  him  by  law;  and  if  he  fails  in  doing  so,  I 
will  be  responsible  to  you  for  losses  sustained."  If, 
therefore,  a  person  calls  on  a  Notary  for  the  performance 
of  a  duty  incumbent  upon  him,  and  the  Notary  fails  or 
neglects  his  duty,  and  injury  is  suffered,  the  surety  is 
liable  to  the  party  injured.  A  surety  cannot  be  held 
liable  because  the  Notary  has  done  acts  which  the  law 
did  not  authorize  or  compel  him  to  perform,  and  which 
were  therefore  not  incumbent  upon  him.  The  sureties 
upon  the  official  bond  of  a  Notary  Public  are  only  liable 
for  damages  occasioned  by  his  negligence  or  misconduct 
in  the  line  of  his  official  duty. 

Section  569. — PREMATURE  PROTEST  OF  PROMISSORY 
NOTE. — In  case  of  a  promissory  note  falling  due,  accord- 
ing to  its  face,  upon  Sunday,  a  Notary  cannot  present  it 
for  payment,  nor  make  protest,  on  the  preceding  Satur- 
day. The  following  Monday  is  the  proper  date  for  pre- 
sentment and  protest,  unless  that  is  also  a  legal  holiday, 
when  the  next  would  be  the  proper  day.  Sunday,  not 
being  a  legal  day  for  exacting  payment,  cannot  be  com- 
puted, except  when  it  is  an  intermediate  day.  To  do  so 
would  make  another  contract  for  the  parties,  and  by 
requiring  payment  on  Saturday  would  compel  the  obliga- 
tion to  be  met  before  the  contract  time  for  its  perform- 
ance had  arrived.  The  act  of  a  Notary  in  wrongfully 


532  BUSINESS  LAW  FOR  BUSINESS  MEN. 

protesting  a  promissory  note  before  it  is  due  gives  a 
right  of  action  against  him  for  damages,  and  against  his 
bondsmen,  in  favor  of  the  injured  party.  For  the  Notary 
is  presumed  to  know  the  wrongful  character  of  the  act, 
and  that,  in  the  trading  community,  the  protest  of  a  note 
is  likely  to  impair  the  maker's  credit.  If  lawfully  pro- 
tested, the  maker  cannot  complain;  but  he  can  complain, 
and  justly  so,  if  presentment  and  protest  are  made  pre- 
maturely, before  the  law  authorizes  the  acts. 

Section  570.^ — FALSE  CERTIFICATE  TO  ACKNOWLEDG- 
MENT.— The  sureties  on  the  official  bond  of  a  Notary  are 
liable  for  the  full  amount  of  a  mortgage  purchased  in 
reliance  on  the  genuineness  of  the  Notary's  certificate  of 
acknowledgment,  where  the  certificate  is  in  fact  false  and 
the  mortgage  a  forgery,  and  where  the  purported  maker 
was  solvent  and  able  to  pay  the  mortgage  debt.  When'  a 
Notary  certifies  that  the  mortgagor  duly  acknowledged 
the  execution  of  a  mortgage,  which  in  fact  is  a  forgery, 
the  measure  of  damages,  in  a  suit  against  the  Notary  or 
his  sureties,  brought  by  one  who  has  parted  with  value 
on  the  face  of  such  certificate,  is  the  amount  which  would 
be  the  value  of  the  mortgage  if  genuine.  The  value  of 
the  mortgage  depends  not  merely  upon  the  value  of  the 
mortgaged  property,  but  also  on  the  solvency  of  the  mort- 
gagor. When  it  appears,  in  such  a  suit  for  damages, 
that  the  plaintiff,  had  the  mortgage  been  genuine,  would 
have  been  able  to  collect  the  whole  amount  named  therein, 
he  is  entitled  to  recover  that  amount  from  the  Notary  or 
his  sureties,  without  regard  to  the  value  of  the  mort- 
gaged property  or  the  interest  of  the  mortgagor  in  the 
property.  If  it  should  appear  that  the  mortgage,  if  valid, 
could  not  be  collected  and  would  not  be  worth  anything, 
then  the  plaintiff  would  not  be  entitled  to  damages,  be- 
cause it  would  not  be  shown  that  he  had  suffered  any 
injury.  But  whatever  value  was  shown,  if  the  mortgage 
were  valid,  could  be  recovered  against  the  Notary  and 
his  sureties. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  533 

Section  571. — NOTARY  CANNOT  AMEND  CERTIFICATE.— 
When  an  acknowledgment  has  been  made,  before  a 
Notary,  the  party  making  it  has  done  all  that  the  law 
requires  to  make  the  instrument  his  act  and  deed.  The 
embodiment  of  the  fact  of  acknowledgment,  in  the  form 
of  the  certificate  prescribed  by  law,  devolves  upon  the 
Notary,  and  not  upon  the  party  making  it.  And  if  the 
Notary  blunders  in  certifying  to  an  acknowledgment  duly 
made,  or  if  he  makes  a  defective  or  false  certificate,  he 
cannot  alter  or  amend  it;  because,  after  taking  the  ac- 
knowledgment and  delivering  the  return,  his  functions 
cease,  and  he  is  discharged  from  all  further  authority. 
The  Superior  Court,  and  not  the  Notary,  has  power  to 
correct  a  defective  certificate  of  acknowledgment. 

Section  572. — NOTARY'S  KNOWLEDGE  OF  PARTY  AC- 
KNOWLEDGING INSTRUMENT. — A  Notary  is  bound  to  know 
the  person  acknowledging  an  instrument  before  him,  or, 
if  he  is  not  personally  acquainted  with  him,  he  is  bound 
to  have  the  person's  identity  established  by  competent 
proof.  If  he  knows  the  person,  he  may  so  state  in  his 
certificate  of  acknowledgment;  if  he  does  not  know  him 
personally,  he  may  state  in  his  certificate  of  acknowl- 
edgment the  proof  presented  to  establish  his  identity. 
When  a  Notary  Public,  in  taking  and  certifying  an  ac- 
knowledgment to  a  mortgage,  neglected  to  state  in  his 
certificate  that  the  party  acknowledging  the  instrument 
was  known  to  him,  or  was  identified  by  the  testimony  of 
a  witness  examined  by  him  for  that  purpose,  the  Supreme 
Court  of  California  held  that  the  Notary  was  guilty  of 
gross  negligence,  and  that  he  and  his  bondsmen  were 
responsible  to  the  party  injured  for  the  damages  result- 
ing from  his  negligence.  The  Court  said:  "Plaintiff 
loaned  to  one  Dupuy  a  sum  of  money,  taking  as  security 
a  mortgage  on  a  lot  in  San  Francisco.  The  mortgage 
was  acknowledged  by  Dupuy  before  defendant  Finlay, 
who  was  a  Notary  Public.  The  mortgage  used  was  an 
ordinary  printed  form,  having  a  certificate  of  acknowledg- 


534  BUSINESS  LAW  FOR  BUSINESS  MEN. 

ment  in  blank,  in  which  was  inserted,  in  the  hand  of  one 
Sanders,  who  acted  in  the  transaction  as  attorney  for 
both  mortgagor  and  mortgagee,  the  name  of  the  mort- 
gagor and  the  date  of  the  acknowledgment.  To  this  cer- 
tificate the  Notary  affixed  his  signature  and  seal,  but 
omitted  to  state  either  that  the  party  acknowledging  was 
known  to  him,  or  was  identified  by  the"  testimony  of  a 
witness  examined  for  that  purpose.  In  consequence  of 
that  omission,  the  record  of  the  mortgage  was  held  not 
to  impart  notice  to  subsequent  encumbrancers.  Plaint- 
iff's lien  was  postponed  in  favor  of  a  later  mortgage, 
which  exhausted  the  entire  property,  and  Dupuy  being 
insolvent,  the  debt  was  lost.  Plaintiff  now  seeks  to  re- 
cover, on  the  bond  of  the  Notary,  the  damages  suffered 
by  the  negligent  and  unskillful  performance  of  an  official 
act.  The  purpose  of  a  certificate  of  acknowledgment  is 
to  entitle  the  deed  to  be  recorded,  and  to  be  admitted  in 
evidence  without  further  proof.  The  certificate  fur- 
nished was  utterly  worthless  for  either  purpose.  This 
neglect  is  not  excused  by  the  fact  that  the  certificate  had 
been  partially  filled  by  the  attorney  for  the  grantee. 
The  certificate,  upon  its  face,  is  unfinished ;  the  date  and 
the  name  of  the  grantor  had  been  inserted,  leaving  it 
for  the  Notary  to  insert  his  knowledge  or  the  evidence 
received  of  the  identity  of  the  party  making  the  acknowl- 
edgment. If  the  Notary  read  the  certificate  before  sign- 
ing it,  this  omission  must  have  been  known  to  him ;  if  he 
did  not,  he  is  equally  guilty  of  negligence,  for  an  officer 
who  affixes  his  official  signature  and  seal  to  a  document, 
without  examining  it  to  find  whether  the  facts  certified 
are  true,  can  scarcely  be  said  to  faithfully  perform  his 
duty  according  to  law."  (Decided  by  the  Supreme  Court 
of  California  in  the  case  of  Fogarty  vs.  Finlay,  which 
decision  is  printed  in  Volume  10  of  the  California  Re- 
ports, page  239.) 

Section    573. — PARTY    INTRODUCED   TO    NOTARY. — The 
acknowledgment  of  an  instrument  must  not  be  taken, 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  535 

unless  the  Notary  taking  it  knows,  or  has  satisfactory 
evidence,  on  the  oath  or  affirmation  of  a  creditable  wit- 
ness, that  the  person  making  such  acknowledgment  is  the 
individual  who  is  described  in  and  who  executed  the  in- 
strument. A  Notary  has  no  right,  in  disregard  of  this 
plain  provision  of  the  law,  to  certify  that  he  knows  a 
person  whom  he  does  inot  know,  on  the  mere  introduc- 
tion of  a  third  party ;  and  if  he  does  so,  and  a  loss  results, 
he  renders  himself  and  his  sureties  liable  to  make  good 
the  loss. 

Civil  Code,  Section  1185. 

Section  574. — MISAPPROPRIATION  OF  MONEYS. — As  it  is 
no  part  of  the  official  duty  of  a  Notary  to  receive  money 
from  or  for  anybody,  his  sureties  are  not  liable  for 
money  fraudulently  obtained  and  retained  by  him.  So,  if 
a  Notary  Public,  who  is  also  a  real  estate  agent  and  en- 
gaged in  negotiating  loans,  by  false  representations  pro- 
cures money  upon  forged  mortgages,  and  then  retains 
the  money,  his  sureties  are  not  liable.  The  sureties  upon 
an  official  bond  are  not  sureties  for  the  general  good  be- 
havior of  the  officer.  They  are  responsible  only  for  his 
official  misconduct  or  neglect.  As  stated,  it  is  no  part  of 
the  duty  of  a  Notary  Public  to  receive  money  from  or  for 
anybody.  It  is  misconduct,  but  not  official  misconduct, 
for  a  Notary  to  fraudulently  obtain  money  in  the  manner 
stated.  He  does  not  receive  any  money  in  his  official 
capacity.  The  sureties  on  his  official  bond  are  not  liable 
for  such  misconduct,  because  it  is  only  against  his  official 
misconduct  that  the  sureties  consent  to  indemnify  per- 
sons injured  by  him. 

Section  575. — TAKING  OATH  OVER  TELEPHONE. — The 
general  rule  is  that  a  Notary  Public  cannot  act  as  such 
outside  of  the  county  for  which  he  is  appointed.  A  Notary 
of  one  county  of  California  is  not  authorized  to  admin- 
ister an  oath  outside  of  the  county  for  which  he  is  ap- 
pointed. 


536  BUSINESS  LAW  FOB  BUSINESS  MEN. 

A  party  taking  an  oath  before  a  Notary  should  ap- 
pear in  person ;  and  it  has  been  decided  that  an  affidavit 
on  attachment  sworn  to  over  the  telephone  before  a  No- 
tary Public  for  Kern  County,  the  affiant  at  the  time  be- 
ing in  the  County  of  Los  Angeles,  was  void,  and  an  at- 
tachment issued  thereon  must  be  released. 

(Decided  by  the  California  Court  of  Appeals,  in  the 
case  of  Fairbanks,  Morse  &  Co.  vs.  Getchell,  which  de- 
cision is  printed  in  Volume  X  of  Appellate  Decisions, 
page  714.) 

Section  576. — FEES  OF  NOTAEY. — The  fees  of  Notaries 
allowed  by  law  are  as  follows :  For  drawing  and  copying 
every  protest  for  non-payment  of  a  promissory  note,  or 
for  the  non-payment  or  non-acceptance  of  a  bill  of  ex- 
change, draft,  or  check,  two  dollars;  for  drawing  and 
serving  every  notice  of  non-payment  of  a  promissory 
note,  or  of  the  non-payment  or  non-acceptance  of  a  bill 
of  exchange,  order,  draft,  or  check,  one  dollar ;  for  record- 
ing every  protest,  one  dollar;  for  drawing  an  affidavit, 
deposition,  or  any  paper  other  than  those  above  men- 
tioned, for  each  folio,  thirty  cents ;  for  taking  an  acknowl- 
edgment or  proof  of  a  deed  or  other  instrument,  to  in- 
clude the  seal  and  the  writing  of  the  certificate,  for  the 
first  two  signatures,  one  dollar  each,  and  for  each  addi- 
tional signature,  fifty  cents ;  for  administering  an  oath  or 
affirmation,  fifty  cents;  for  every  certificate,  to  include 
writing  it,  and  the  seal,  one  dollar. 
Political  Code,  Section  798. 

A.  J.  BLEDSOE,  ATTORNEY-AT-LAW,  LOS 
ANGELES,  CAL. — General  practice  in  State  and  Fed- 
eral courts.  Legal  advice  at  office,  and  trial  of  cases  in 
court.  See  title  page  of  this  book  for  office  address  of 
A.  J.  Bledsoe. 


PART  II. 

BILLS  OF  LADING. 

Section  577.— NEW  LAW  OF  1919.— The  Legislature  of 
1919  passed  a  new  law  governing  bills  of  lading  issued 
by  common  carriers  in  California.  It  provides  as  fol- 
lows: 

Section  578. — ESSENTIAL  TEEMS  OF  BILL  OF  LADING.— 
Every  bill  must  embody  within  its  written  or  printed 
terms— 

(a)  The  date  of  its  issue; 

(b)  The  name  of  the  person  from  whom  the  goods 
have  been  received; 

(c)  The  place  where  the  goods  have  been  received; 

(d)  The  place  to  which  the  goods  are  to  be  trans- 
ported ; 

(e)  A  statement  whether  the  goods  received  will  be 
delivered  to  a  specified  person,  or  to  the  order  of  a  speci- 
fied person; 

(f)  A  description  of  the  goods  or  of  the  packages 
containing  them  which  may,  however,  be  in  such  general 
terms  as  are  referred  to  in  this  code ;  and 

(g)  The  signature  of -the  carrier. 

A  negotiable  bill  shall  have  the  words  "order  of" 
printed  thereon  immediately  before  the  name  of  the  per- 
son upon  whose  order  the  goods  received  are  deliverable. 

A  carrier  shall  be  liable  to  any  person  injured  thereby 
for  the  damage  caused  by  the  omission  from  a  negotiable 
bill  of  any  of  the  provisions  required  in  this  section. 

Section  579. — WHAT  TERMS  MAY  BE  INSERTED. — A 
carrier  may  insert  in  a  bill,  issued  by  him,  any  other 

537 


538  BUSINESS  LAW  FOR  BUSINESS  MEN. 

terms  and  conditions,  provided  that  such  terms  and  con- 
ditions shall  not — 

(a)  Be  contrary  to  law  or  public  policy,  or 

(b)  In  any  wise  impair  his  obligation  to  exercise  at 
least  that  degree  of  care  in  the  transportation  and  safe- 
keeping of  the  goods  entrusted  to  him  which  a  reason- 
ably careful  man  would  exercise  in  regard  to  simliar 
goods  of  his  own. 

Section  580. — NONNEGOTIABLE  OB  STRAIGHT  BILL. — A 
bill  in  which  it  is  stated  that  the  goods  are  consigned  or 
destined  to  a  specified  person,  is  a  nonnegotiable  or 
straight  bill. 

Section  581. — NEGOTIABLE  OR  ORDER  BILL. — A  bill  in 
which  it  is  stated  that  the  goods  are  consigned  or  des- 
tined to  the  order  of  any  person  named  in  such  bill,  is  a 
negotiable  or  order  bill. 

Any  provision  in  such  a  bill  that  it  is  nonnegotiable 
shall  not  affect  its  negotiability  within  the  meaning  of 
this  article. 

Section  582. — NEGOTIABLE  BILLS  MUST  NOT  BE  ISSUED 
IN  SETS. — Negotiable  bills  issued  in  this  state  for  the 
transportation  of  goods  to  any  place  in  the  United  States 
on  the  continent  of  North  America,  except  Alaska,  shall 
not  be  issued  in  parts  or  sets. 

If  so  issued  the  carrier  issuing  them  shall  be  liable 
for  failure  to  deliver  the  goods  described  therein  to  any 
one  who  purchases  a  part  for  value  in  good  faith,  even 
though  the  purchase  be  after  the  delivery  of  the  goods 
by  the  carrier  to  a  holder  of  one  of  the  other  parts. 

Section  583. — DUPLICATE  NEGOTIABLE  BILLS  MUST  BE 
so  MARKED. — When  more  than  one  negotiable  bill  is  issued 
in  this  state  for  the  same  goods  to  be  transported  to  any 
place  in  the  United  States  on  the  continent  of  North 
America,  except  Alaska,  the  word  "duplicate"  or  some 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  539 

other  word  or  words  indicating  that  the  document  is  not 
an  original  bill  shall  be  placed  plainly  upon  the  face  of 
every  such  bill  except  the  one  first  issued.  A  carrier  shall 
be  liable  for  the  damage  caused  by  his  failure  so  to  do  to 
any  one  who  has  purchased  the  bill  for  value  in  good 
faith  as  an  original,  even  though  the  purchase  be  after 
the  delivery  of  the  goods  by  the  carrier  to  the  holder  of 
the  original  bill. 

Section  584. — NONNEGOTIABLE  BILLS  MUST  BE  MARKED. 
A  nonnegotiable  bill  shall  have  placed  plainly  upon  its 
face  by  the  carrier  issuing  it  "nonnegotiable"  or  "not 
negotiable. ' ' 

This  section  shall  not  apply,  however,  to  memoranda 
or  acknowledgments  of  an  informal  character. 

Section  585. — INSERTION  OF  NAME  OF  PERSON  TO  BE 
NOTIFIED. — The  insertion  in  a  negotiable  bill  of  the  name 
of  a  person  to  be  notified  of  the  arrival  of  the  goods  shall 
not  limit  the  negotiability  of  the  bill,  or  constitute  notice 
to  a  purchaser  thereof  of  any  rights  or  equities  of  such 
person  in  the  goods. 

Section  586. — ACCEPTANCE  OF  BILL  INDICATES  ASSENT 
TO  TERMS. — Except  as  otherwise  provided  in  this  article 
where  a  consignor  receives  a  bill  and  makes  no  objection 
to  its  terms  or  conditions  at  the  time  he  receives  it, 
neither  the  consignor  nor  any  person  who  accepts  deliv- 
ery of  the  goods,  nor  any  person  who  seeks  to  enforce 
any  provision  of  the  bill,  shall  be  allowed  to  deny  that 
he  is  bound  by  such  terms  and  conditions,  so  far  as  they 
are  not  contrary  to  law  or  public  policy. 

Section  587. — OBLIGATION  OF  CARRIER  TO  DELIVER. — A 
carrier  in  the  absence  of  some  lawful  excuse,  is  bound  to 
deliver  goods  upon  a  demand  made  either  by  the  con- 
signee named  in  the  bill  for  the  goods,  or  if  the  bill  is 
negotiable,  by  the  holder  thereof,  if  such  demand  is  ac- 
companied by— 


540  BUSINESS  LAW  FOB  BUSINESS  MEN. 

(a)  An  offer  in  good  faith  to  satisfy  the  carrier's 
lawful  lien  upon  the  goods ; 

(b)  An  offer  in  good  faith  to  surrender,  properly  in- 
dorsed, the  bill  which  was  issued  for  the  goods  if  the  bill 
is  negotiable ;  and 

(c)  A  readiness  and  willingness  to  sign,  when  the 
goods  are  delivered,  an  acknowledgment  that  they  have 
been  delivered,  if  such  signature  is  requested  by  the 
carrier. 

In  case  the  carrier  refuses  or  fails  to  deliver  the  goods 
in  compliance  with  a  demand  by  the  consignee  or  holder 
so  accompanied,  the  burden  shall  be  upon  the  carrier  to 
establish  the  existence  of  a  lawful  excuse  for  such  refusal 
or  failure. 

Section  588. — JUSTIFICATION  OF  CARRIER  IN  DELIVER- 
ING.— A  carrier  is  justified,  subject  to  the  provisions  of 
the  three  following  sections,  in  delivering  goods  to  one 
who  is— 

(a)  A  person  lawfully  entitled  to  the  possession  of 
the  goods,  or 

(b)  The  consignee  named  in  a  nonnegotiable  bill  for 
the  goods,  or 

(c)  A  person  in  possession  of  a  negotiable  bill  for 
the  goods  by  the  terms  of  which  the  goods  are  deliver- 
able to  his  order,  or  which  has  been  indorsed  to  him  or  in 
blank  by  the  consignee  or  by  the  mediate  or  immediate 
indorsee  of  the  consignee. 

Section  589. — CARRIER'S  LIABILITY  FOR  MISDELIVERY.— 
Where  a  carrier  delivers  goods  to  one  who  is  not  lawfully 
entitled  to  the  possession  of  them,  the  carrier  shall  be 
liable  to  anyone  having  a  right  of  property  or  possession 
in  the  goods  if  he  delivered  the  goods  otherwise  than  as 
authorized  by  subdivisions  (b)  and  (c)  of  the  preceding 
section ;  and  though  he  delivered  the  goods  as  authorized 
by  either  of  said  subdivisions,  he  shall  be  so  liable  if 
prior  to  such  delivery  he— 


BUSINESS  CONTKACTS  AND  LEGAL  OBLIGATIONS.  541 

(a)  Had  been  requested,  by  or  on  behalf  of  a  person 
having  a  right  of  property  or  possession  in  the  goods, 
not  to  make  such  delivery ;  or 

(b)  Had  information  at  the  time  of  the  delivery  that 
it  was  to  a  person  not  lawfully  entitled  to  the  possession 
of  the  goods. 

A  request  or  information  to  be  effective  within  the 
meaning  of  this  section  must  be  given  to  an  officer  or 
agent  of  the  carrier,  the  actual  or  apparent  scope  of 
whose  duties  includes  action  upon  such  a  request  or  in- 
formation, and  must  be  given  in  time  to  enable  the  officer 
or  agent  to  whom  it  is  given,  acting  with  reasonable 
diligence,  to  stop  delivery  of  the  goods. 

Section  590. — NEGOTIABLE  BILLS  MUST  BE  CANCELED 
UPON  DELIVEKY  OF  GOODS. — Except  where  the  goods  have 
been  sold  to  satisfy  a  lien,  and  except  when  compelled  by 
legal  process,  if  a  carrier  delivers  goods  for  which  a 
negotiable  bill  had  been  issued,  the  negotiation  of  which 
would  transfer  the  right  to  the  possession  of  the  -goods, 
and  fails  to  take  up  and  cancel  the  bill,  such  carrier  shall 
be  liable  for  failure  to  deliver  the  goods  to  anyone  who 
for  value  and  in  good  faith  purchases  such  bill,  whether 
such  purchaser  acquired  title  to  the  bill  before  or  after 
the  delivery  of  the  goods  by  the  carrier,  and  notwith- 
standing delivery  was  made  to  the  person  entitled 
thereto. 

Section  591. — WHEN  PAET  OF  GOODS  ARE  DELIVERED. 
Except  as  above  stated,  if  a  carrier  delivers  part  of  the 
goods  for  which  a  negotiable  bill  had  been  issued  and 
fails  either — 

(a)  To  take  up  and  cancel  the  bill,  or 

(b)  To  place  plainly  upon  it  a  statement  that  a  por- 
tion of  the  goods  has  been  delivered,  with  a  description, 
which  may  be  in  general  terms,  either  of  the  goods  or 
packages  that  have  been  so  delivered  or  of  the  goods  or 
packages  which  still  remain  in  the  carrier's  possession, 


542  BUSINESS  LAW  FOB  BUSINESS  MEN. 

he  shall  be  liable  for  failure  to  deliver  all  the  goods  speci- 
fied in  the  bill,  to  anyone  who  for  value  and  in  good  faith 
purchases  it,  whether  such  purchaser  acquired  title  to  it 
before  or  after  the  delivery  of  any  portion  of  the  goods 
by  the  carrier,  and  notwithstanding  such  delivery  was 
made  to  the  person  entitled  thereto. 

Section  592. — ALTERED  BILLS. — Any  alteration,  addi- 
tion or  erasure  in  a  bill  after  its  issue  without  authority 
from  the  carrier  issuing  the  same  either  in  writing  or 
noted  on  the  bill  shall  be  void,  whatever  be  the  nature 
and  purpose  of  the  change,  and  the  bill  shall  be  enforce- 
able according  to  its  original  tenor. 

Section  593. — LOST  OR  DESTROYED  BILLS. — Where  a 
negotiable  bill  has  been  lost  or  destroyed,  a  court  of  com- 
petent jurisdiction  may  order  the  delivery  of  the  goods 
upon  satisfactory  proof  of  such  loss  or  destruction  and 
upon  the  giving  of  a  bond  with  sufficient  surety  to  be 
approved  by  the  court  to  protect  the  carrier  or  any  per- 
son injured  by  such  delivery  from  any  liability  or  loss, 
incurred  by  reason  of  the  original  bill  remaining  out- 
standing. The  court  may  also  in  its  discretion  order  the 
payment  of  the  carrier's  reasonable  costs  and  counsel 
fees. 

The  delivery  of  the  goods  under  an  order  of  the  court 
as  provided  in  this  section,  shall  not  relieve  the  carrier 
from  liability  to  a  person  to  whom  the  negotiable  bill  has 
been  or  shall  be  negotiated  for  value  without  notice  of 
the  proceedings  or  of  the  delivery  of  the  goods. 

Section  594. — EFFECT  OF  DUPLICATE  BILLS. — A  bill 
upon  the  face  of  which  the  word  "duplicate"  or  some 
other  word  or  words  indicating  that  the  document  is  not 
an  original  bill  is  placed  plainly  shall  impose  upon  the 
carrier  issuing  the  same  the  liability  of  one  who  repre- 
sents and  warrants  that  such  bill  is  an  accurate  copy  of 
an  original  bill  properly  issued,  but  no  other  liability. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  543 

Section  595. — CARRIER  CANNOT  SET  UP  TITLE  IN  HIM- 
SELF.— No  title  to  goods  or  right  to  their  possession,  as- 
serted by  a  carrier  for  his  own  benefit,  shall  excuse  him 
from  liability  for  refusing  to  deliver  the  goods  according 
to  the  terms  of  a  bill  issued  for  them,  unless  such  title 
or  right  is  derived  directly  or  indirectly  from  a  transfer 
made  by  the  consignor  or  consignee  after  the  shipment, 
or  from  the  carrier's  lien. 

Section  596. — INTERPLEADER  OF  ADVERSE  CLAIMANTS. 
If  more  than  one  person  claims  the  title  or  possession 
of  goods,  the  carrier  may  require  all  known  claimants  to 
interplead,  either  as  a  defense  to  an  action  brought 
against  him  for  nondelivery  of  the  goods,  or  as  an  orig- 
inal suit,  whichever  is  appropriate. 

Section  597. — EEASONABLE  TIME  TO  ASCERTAIN  VALID- 
ITY OF  CLAIM. — If  someone  other  than  the  consignee  or 
person  in  possession  of  the  bill,  has  a  claim  to  the  title 
or  possession  of  the  goods,  and  the  carrier  has  informa- 
tion of  such  claim,  the  carrier  shall  be  excused  from  lia- 
bility for  refusing  to  deliver  the  goods  either  to  the  con- 
signee or  person  in  possession  of  the  bill,  or  to  the  ad- 
verse claimant,  until  the  carrier  has  had  a  reasonable 
time  to  ascertain  the  validity  of  the  adverse  claim  or  to 
bring  legal  proceedings  to  compel  all  claimants  to  inter- 
plead. 

Section  598. — ADVERSE  TITLE  NO  DEFENSE. — Except  as 
provided  in  preceding  sections,  no  right  or  title  of  a  third 
person  unless  enforced  by  legal  process  shall  be  a  defense 
to  an  action  brought  by  the  consignee  of  a  nonnegotiable 
bill  or  by  the  holder  of  a  negotiable  bill  against  the  car- 
rier for  failure  to  deliver  the  goods  on  demand. 

Section  599. — LIABILITY  FOR  NONRECEIPT  OR  MISDE- 
SCRIPTION  OF  GOODS. — If  a  bill  of  lading  has  been  issued 
by  a  carrier  or  on  his  behalf  by  an  agent  or  employee  the 


544  BUSINESS  LAW  FOR  BUSINESS  MEN. 

scope  of  whose  actual  or  apparent  authority  includes  the 
issuing  of  bills  of  lading,  the  carrier  shall  be  liable  to — 

(a)  The  consignee  named  in  a  nonnegotiable  bill,  or 

(b)  The  holder  of  a  negotiable  bill, 

Who  has  given  value  in  good  faith  relying  upon  the 
description  therein  of  the  goods,  for  damages  caused  by 
the  nonreceipt  by  the  carrier  or  a  connecting  carrier  of 
all  or  part  of  the  goods  or  their  failure  to  correspond 
with  the  description  thereof  in  the  bill  at  the  time  of  its 
issue. 

If,  however,  the  goods  are  described  in  a  bill  merely 
by  a  statement  of  marks  or  labels  upon  them  or  upon 
packages  containing  them,  or  by  a  statement  that  the 
goods  are  said  to  be  goods  of  a  certain  kind  or  quantity, 
or  in  a  certain  condition,  or  it  is  stated  in  the  bill  that 
packages  are  said  to  contain  goods  of  a  certain  kind  or 
quantity  or  in  a  certain  condition,  or  that  the  contents 
or  condition  of  the  contents  of  packages  are  unknown, 
or  words  of  like  purport  are  contained  in  the  bill,  such 
statements,  if  true,  shall  not  make  liable  the  carrier  issu- 
ing the  bill,  although  the  goods  are  not  of  the  kind  or 
quantity  or  in  the  condition  which  the  marks  or  labels 
upon  them  indicate,  or  of  the  kind  or  quantity  or  in  the 
condition  they  were  said  to  be  by  the  consignor.  All 
carriers  must  issue  to  shippers  of  carload  freight  from 
agency  stations  a  clean  bill  of  lading  at  the  request  of 
the  shipper  and  in  such  cases  shall  discontinue  the  prac- 
tice of  noting  on  bill  of  lading  " Shipper's  load  and 
count."  Upon  request  of  shipper  of  carload  freight 
from  a  non-agency  station,  the  carrier  shall  send  a  man 
to  check  the  loading  and  shall  issue  a  clean  bill  of  lading, 
the  expense,  except  transportation  of  a  man  to  and  from 
point  of  loading  to  perform  service  of  checking,  to  be 
borne  by  the  shipper. 

Section  600. — ATTACHMENT  OB  LEVY  UPON  GOODS. — If 
goods  are  delivered  to  a  carrier  by  the  owner  or  by  a  per- 
son whose  act  in  conveying  the  title  to  them  to  a  pur- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  545 

chaser  for  value  in  good  faith  would  bind  the  owner  and 
a  negotiable  bill  is  issued  for  them,  they  cannot  thereafter, 
while  in  the  possession  of  the  carrier,  be  attached  by 
garnishment  or  otherwise,  or  be  levied  upon  under  an 
execution,  unless  the  bill  be  first  surrendered  to  the  car- 
rier or  its  negotiation  enjoined.  The  carrier  shall  in  no 
such  case  be  compelled  to  deliver  the  actual  possession 
of  the  goods  until  the  bill  is  surrendered  to  him  or  im- 
pounded by  the  court. 

Section  601. — CREDITOR'S  REMEDIES  TO  REACH  NEGO- 
TIABLE BILLS. — A  creditor  whose  debtor  is  the  owner  of 
a  negotiable  bill  shall  be  entitled  to  such  aid  from  courts 
of  appropriate  jurisdiction  by  injunction  and  otherwise 
in  attaching  such  bill,  or  in  satisfying  the  claim  by  means 
thereof  as  is  allowed  at  law  or  in  equity  in  regard  to 
property  which  cannot  readily  be  attached  or  levied  upon 
by  ordinary  legal  process. 

Section  602. — BILL  MUST  STATE  CHARGES  FOR  LIEN 
CLAIM. — If  a  negotiable  bill  is  issued  the  carrier  shall 
have  no  lien  on  the  goods  therein  mentioned,  except  for 
charges  on  those  goods  for  freight,  storage,  demurrage 
and  terminal  charges,  and  expenses  necessary  for  the 
preservation  of  the  goods  or  incident  to  their  transpor- 
tation subsequent  to  the  date  of  the  bill,  unless  the  bill 
expressly  enumerates  other  charges  for  which  a  lien  is 
claimed.  In  such  case  there  shall  also  be  a  lien  for  the 
charges  enumerated  so  far  as  they  are  allowed  by  law 
and  the  contract  between  the  consignor  and  the  carrier. 

Section  603. — EFFECT  OF  SALE. — Afte  r  goods  have 
been  lawfully  sold  to  satisfy  a  carrier's  lien,  or  because 
they  have  not  been  claimed,  or  because  they  are  perish- 
able or  hazardous,  the  carrier  shall  not  thereafter  be 
liable  for  failure  to  deliver  the  goods  to  the  consignee 
or  owner  of  the  goods,  or  to  a  holder  of  the  bill  given 
for  the  goods  when  they  are  shipped,  even  if  such  bill  be 
negotiable. 


546  BUSINESS  LAW  FOB  BUSINESS  MEN. 

Section  604. — NEGOTIATION  OF  NEGOTIABLE  BILLS  BY 
DELIVERY. — A  negotiable  bill  may  be  negotiated  by  de- 
livery where,  by  the  terms  of  the  bill,  the  carrier  under- 
takes to  deliver  the  goods  to  the  order  of  a  specified  per- 
son, and  such  person  or  a  subsequent  indorsee  of  the  bill 
has  indorsed  it  in  blank. 

Section  605. — INDORSEMENT. — A  negotiable  bill  may 
be  negotiated  by  the  indorsement  of  the  person  to  whose 
order  the  goods  are  deliverable  by  the  tenor  of  the  bill. 
Such  indorsement  may  be  in  blank  or  to  a  specified  per- 
son. If  indorsed  to  a  specified  person,  it  may  be  nego- 
tiated again  by  the  indorsement  of  such  person  in  blank 
or  to  another  specified  person.  Subsequent  negotiation 
may  be  made  in  like  manner. 

Section  606. — TRANSFER  OF  BILLS. — A  bill  may  be 
transferred  by  the  holder  by  delivery,  accompanied  with 
an  agreement,  express  or  implied,  to  transfer  the  title 
to  the  bill  or  to  the  goods  represented  thereby. 

A  nonnegotiable  bill  cannot  be  negotiated,  and  the 
indorsement  of  such  a  bill  gives  the  transferee  no  addi- 
tional right. 

Section  607. — WHO  MAY  NEGOTIATE  BILLS. — A  nego- 
tiable bill  may  be  negotiated  by  any  person  in  possession 
of  the  same,  however  such  possession  may  have  been 
acquired  if,  by  the  terms  of  the  bill,  the  carrier  under- 
takes to  deliver  the  goods  to  the  order  of  such  person,  or 
if  at  the  time  of  negotiation  the  bill  is  in  such  form  that 
it  may  be  negotiated  by  delivery. 

Section  608. — BIGHTS  OF  PERSON  TO  WHOM  BILL  HAS 
BEEN  NEGOTIATED. — A  person  to  whom  a  negotiable  bill 
has  been  duly  negotiated  acquires  thereby— 

(a)  Such  title  to  the  goods  as  the  person  negotiating 
the  bill  to  him  had  or  had  ability  to  convey  to  a  pur- 
chaser in  good  faith  for  value,  and  also  such  title  to  the 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  547 

goods  as  the  consignee  and  consignor  had  or  had  power 
to  convey  to  a  purchaser  in  good  faith  for  value,  and 

(b)  The  direct  obligation  of  the  carrier  to  hold  pos- 
session of  the  goods  for  him  according  to  the  terms  of 
the  bill  as  fully  as  if  the  carrier  had  contracted  directly 
with  him. 

Section  609. — EIGHTS  OF  PERSON  TO  WHOM  BILL  HAS 
BEEN  TRANSFERRED. — A  person  to  whom  a  bill  has  been 
transferred  but  not  negotiated  acquires  thereby  as 
against  the  transferor,  the  title  to  the  goods,  subject  to 
the  terms  of  any  agreement  with  the  transferor.  If  the 
bill  is  nonnegotiable,  such  person  also  acquires  the  right 
to  notify  the  carrier  of  the  transfer  to  him  of  such  bill, 
and  thereby  to  become  the  direct  obligee  of  whatever 
obligations  the  carrier  owed  to  the  transferor  of  the  bill 
immediately  before  the  notification. 

Prior  to  the  notification  of  the  carrier  by  the  trans- 
feror or  transferee  of  a  nonnegotiable  bill,  the  title  of  the 
transferee  to  the  goods  and  the  right  to  acquire  the  obli- 
gation of  the  carrier  may  be  defeated  by  garnishment  or 
by  attachment  or  execution  upon  the  goods  by  a  creditor 
of  the  transferor,  or  by  a  notification  to  the  carrier  by 
the  transferor  or  a  subsequent  purchaser  from  the  trans- 
feror of  a  subsequent  sale  of  the  goods  by  the  transferor. 

A  carrier  has  not  received  notification  within  the 
meaning  of  this  section  unless  an  officer  or  agent  of  the 
carrier,  the  actual  or  apparent  scope  of  whose  duties  in- 
cludes action  upon  such  notification,  has  been  notified; 
and  no  notification  shall  be  effective  until  the  officer  or 
agent  to  whom  it  is  given  has  had  time  with  the  exercise 
of  reasonable  diligence  to  communicate  with  the  agent 
or  agents  having  actual  possession  or  control  of  the 
goods. 

Section  610. — TRANSFER  OF  NEGOTIABLE  BILL  WITHOUT 
INDORSEMENT. — Where  a  negotiable  bill  is  transferred 
for  value  by  delivery,  and  the  indorsement  of  the  trans- 


548  BUSINESS  LAW  FOB  BUSINESS  MEN. 

feror  is  essential  for  negotiation,  the  transferee  acquires 
a  right  against  the  transferor  to  compel  him  to  indorse 
the  bill,  unless  a  contrary  intention  appears.  The  nego- 
tiation shall  take  effect  as  of  the  time  when  the  indorse- 
ment is  actually  made.  This  obligation  may  be  specially 
enforced. 

Section  611. — WAEEANTIES  ON  SALE  OF  BILL. — A  per- 
son who  negotiates  or  transfers  for  value  a  bill  by  in- 
dorsement or  delivery,  including  one  who  assigns  for 
value  a  claim  secured  by  a  bill,  unless  a  contrary  inten- 
tion appears,  warrants  - 

(a)  That  a  bill  is  genuine; 

(b)  That  he  has  a  legal  right  to  transfer  it; 

(c)  That  he  has  knowledge  of  no  fact  which  would 
impair  the  validity  or  worth  of  the  bill ;  and 

(d)  That  he  has  a  right  to  transfer  the  title  of  the 
goods,  and  that  the  goods  are  merchantable  or  fit  for  a 
particular    purpose    whenever    such   warranties    would 
have  been  implied,  if  the  contract  of  the  parties  had  been 
to  transfer  without  a  bill  the  goods  represented  thereby. 

In  the  case  of  an  assignment  of  a  claim  secured  by  a 
bill,  the  liability  of  the  assignor  shall  not  exceed  the 
amount  of  the  claim. 

Section  612. — INDORSEE  NOT  A  GUARANTOR. — The  in- 
dorsement of  a  bill  shall  not  make  tEe  indorser  liable  for 
any  failure  on  the  part  of  the  carrier  or  previous  indors- 
ers  of  the  bill  to  fulfill  their  respective  obligations. 

Section  613. — No  WARRANTY  IMPLIED  FROM  ACCEPTING 
PAYMENT  OF  DEBT. — A  mortgagee  or  pledgee,  or  other 
holder  of  a  bill  for  security  who  in  good  faith  demands 
or  receives  payment  of  the  debt  for  which  such  bill  is 
security,  whether  from  a  party  to  a  draft  drawn  for  such 
debt  or  from  any  other  person,  shall  not  be  deemed  by 
so  doing  to  represent  or  to  warrant  the  genuineness  of 
such  bill  or  the  quantity  or  quality  of  the  goods  therein 
described. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS. 

Section  614. — WHEN  NEGOTIATION  NOT  IMPAIRED  BY 
FRAUD. — The  validity  of  the  negotiation  of  a  bill  is  not 
impaired  by  the  fact  that  such  negotiation  was  a  breach 
of  duty  on  the  part  of  the  person  making  the  negotiation, 
or  by  the  fact  that  the  owner  of  the  bill  was  deprived  of 
the  possession  of  the  same  by  fraud,  accident,  mistake, 
duress  or  conversion,  if  the  person  to  whom  the  bill  was 
negotiated,  or  a  person  to  whom  the  bill  was  subsequently 
negotiated,  gave  value  therefor,  in  good  faith,  without 
notice  of  the  breach  of  duty,  or  fraud,  accident,  mistake, 
duress  or  conversion. 

Section  615. — SUBSEQUENT  NEGOTIATION. — Where  a 
person  having  sold,  mortgaged,  or  pledged  goods  which 
are  in  the  carrier's  possession  and  for  which  a  negotiable 
bill  has  been  issued,  or  having  sold,  mortgaged,  or 
pledged  the  negotiable  bill  representing  such  goods,  con- 
tinues in  possession  of  the  negotiable  bill,  the  subsequent 
negotiation  thereof  by  that  person  under  any  sale,  pledge, 
or  other  disposition  thereof  to  any  pe'rson  receiving  the 
same  in  good  faith,  for  value  and  without  notice  of  the 
previous  sale,  shall  have  the  same  effect  as  if  the  first 
purchaser  of  the  goods  or  bill  had  expressly  authorized 
the  subsequent  negotiation. 

Section  616. — FORM  or  BILL  AS  INDICATING  BIGHTS  OF 
BUYER  AND  SELLER. — Where  goods  are  shipped  by  the 
consignor  in  accordance  with  a  contract  or  order  for 
their  purchase,  the  form  in  which  the  bill  is  taken  by  the 
consignor  shall  indicate  the  transfer  or  retention  of  the 
property  or  right  to  the  possession  of  the  goods  as  fol- 
lows: 

(a)  Where  by  the  bill  the  goods  are  deliverable  to  the 
buyer  or  to  his  agent,  or  to  the  order  of  the  buyer  or  of 
his  agent,  the  consignor  thereby  transfers  the  property 
in  the  goods  to  the  buyer. 

(b)  Where  by  the  bill  the  goods  are  deliverable  to  the 
seller  or  to  his  agent,  or  to  the  order  of  the  seller  or  of 


550  BUSINESS  LAW  FOR  BUSINESS  MEN. 

his  agent,  the  seller  thereby  reserves  the  property  in  the 
goods.  But  if,  except  for  the  form  of  the  bill,  the  prop- 
erty would  have  passed  to  the  buyer  on  shipment  of  the 
goods,  the  seller's  property  in  the  goods  shall  be  deemed 
to  be  only  for  the  purpose  of  securing  performance  by 
the  buyer  of  his  obligations  under  the  contract. 

(c)  Where  by  the  bill  the  goods  are  deliverable  to  the 
order  of  the  buyer  or  of  his  agent,  but  possession  of  the 
bill  is  retained  by  the  seller  or  his  agent,  the  seller  there- 
by reserves  a  right  to  the  possession  of  the  goods,  as 
against  the  buyer. 

(d)  Where  the  seller  draws  on  the  buyer  for  the  price 
and  transmits  the  draft  and  bill  together  to  the  buyer  to 
secure  acceptance  or  payment  of  the  draft,  the  buyer  is 
bound  to  return  the  bill  if  he  does  not  honor  the  draft, 
and  if  he  wrongfully  retains  the  bill  he  acquires  no  added 
right  thereby.     If,  however,  the  bill  provides  that  the 
goods  are  deliverable  to  the  buyer,  or  to  the  order  of 
the  buyer,  or  is  endorsed  in  blank  or  to  the  buyer  by  the 
consignee  named  therein,  one  who  purchases  in  good 
faith,  for  value,  the  bill  or  goods  from  the  buyer,  shall 
obtain  the  title  to  the  goods,  although  the  draft  has  not 
been  honored,  if  such  purchaser  has  received  delivery  of 
the  bill  indorsed  by  the  consignee  named  therein,  or  of 
the  goods,  without  notice  of  the  facts  making  the  trans- 
fer wrongful. 

Section  617. — DRAFT  ON  BUYER  BY  SELLER  OF  GOODS.— 
Where  the  seller  of  goods  draws  on  the  buyer  for  the 
price  of  the  goods  and  transmits  the  draft  and  a  bill  of 
lading  for  the  goods  either  directly  to  the  buyer  or 
through  a  bank  or  other  agency,  unless  a  different  inten- 
tion on  the  part  of  the  seller  appears,  the  buyer  and  all 
other  parties  interested  shall  be  justified  in  assuming: 

(a)  If  the  draft  is  by  its  terms  or  legal  effect  payable 
on  demand  or  presentation  or  at  sight,  or  not  more  than 
three  days  thereafter  (whether  such  three  days  be  termed 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  551 

days  of  grace  or  not),  that  the  seller  intended  to  require 
payment  of  the  draft  before  the  buyer  should  be  entitled 
to  receive  or  retain  the  bill. 

(b)  If  the  draft  is  by  its  terms  payable  on  time,  ex- 
tending beyond  three  days  after  demand,  presentation 
or  sight  (whether  such  three  days  be  termed  days  of 
grace  or  not),  that  the  seller  intended  to  require  accept- 
ance, but  not  payment  of  the  draft  before  the  buyer 
should  be  entitled  to  receive  or  retain  the  bill. 

The  provisions  of  this  section  are  applicable  whether 
by  the  terms  of  the  bill  the  goods  are  consigned  to  the 
seller,  or  to  his  order,  or  to  the  buyer,  or  to  his  order, 
or  to  a  third  person,  or  to  his  order. 

Section  618. — NEGOTIATION  DEFEATS  VENDOR'S  LIEN. 
Where  a  negotiable  bill  has  been  issued  for  goods,  no 
seller's  lien  or  right  of  stoppage  in  transitu  shall  defeat 
the  rights  of  any  purchaser  for  value  in  good  faith  to 
whom  such  bill  has  been  negotiated,  whether  such  nego- 
tion  be  prior  or  subsequent  to  the  notification  to  the  car- 
rier who  issued  such  bill  of  the  seller's  claim  to  a  lien 
or  right  of  stoppage  in  transitu.  Nor  shall  the  carrier 
be  obliged  to  deliver  or  justified  in  delivering  the  goods 
to  an  unpaid  seller  unless  such  bill  is  first  surrendered 
for  cancellation. 

Section  619. — WHEN  EIGHTS  AND  EEMEDIES  ARE  NOT 
LIMITED. — Nothing  in  this  article  shall  limit  the  rights 
and  remedies  of  a  mortgagee  or  lienholder  whose  mort- 
gage or  lien  on  goods  would  be  valid,  apart  from  this 
article,  as  against  one  who  for  value  and  in  good  faith 
purchased  from  the  owner,  immediately  prior  to  the  time 
of  their  delivery  to  the  carrier,  the  goods  which  are  sub- 
ject to  the  mortgage  or  lien,  and  obtained  possession  of 
them. 

Section  620. — ISSUE  OF  BILL  FOR  GOODS  NOT  RECEIVED. 
Any  officer,  agent,  or  servant  of  a  carrier,  who  with 


552  BUSINESS  LAW  FOR  BUSINESS  MEN. 

intent  to  defraud  issues  or  aids  in  issuing  a  bill  know- 
ing that  all  or  any  part  of  the  goods  for  which  such  bill 
is  issued  have  not  been  received  by  such  carrier,  or  by 
an  agent  of  such  carrier  or  by  a  connecting  carrier,  or 
are  not  under  the  carrier's  control  at  the  time  of  issuing 
such  bill,  shall  be  guilty  of  a  crime,  and  upon  conviction 
shall  be  punished  for  each  offense  by  imprisonment  not 
exceeding  five  years,  or  by  a  fine  not  exceeding  five 
thousand  dollars,  or  by  both. 

Section  621. — ISSUE  OF  BILL  CONTAINING  FALSE  STATE- 
MENT.— Any  officer,  agent,  or  servant  of  a  carrier,  who 
with  intent  to  defraud  issues  or  aids  in  issuing  a  bill 
for  goods,  knowing  that  it  contains  any  false  statement, 
shall  be  guilty  of  a  crime,  and  upon  conviction  shall  be 
punished  for  each  offense  by  imprisonment  not  exceed- 
ing one  year,  or  by  a  fine  not  exceeding  one  thousand 
dollars,  or  by  both. 

Section  622. — ISSUE  OF  DUPLICATE  BILL  NOT  so  MAEKED. 
Any  officer,  agent,  or  servant  of  a  carrier,  who  with 
intent  to  defraud  issues  or  aids  in  issuing  a  duplicate  or 
provisions  of  this  code,  knowing  that  a  former  negotiable 
bill  for  the  same  goods  or  any  part  of  them  is  outstanding 
and  uncancelled,  shall  be  guilty  of  a  crime,  and  upon 
conviction  shall  be  punished  for  each  offense  by  impris- 
onment not  exceeding  five  years,  or  by  a  fine  not  exceed- 
ing five  thousand  dollars,  or  by  both. 

Section  623. — NEGOTIATION  OF  BILL  FOR  MORTGAGED 
GOODS. — Any  person  who  ships  goods  to  which  he  has 
not  title,  or  upon  which  there  is  a  lien  or  mortgage,  and 
who  takes  for  such  goods  a  negotiable  bill  which  he 
afterwards  negotiates  for  value  with  intent  to  deceive 
and  without  disclosing  his  want  of  title  or  the  existence 
of  the  lien  or  mortgage,  shall  be  guilty  of  a  crime,  and 
upon  conviction  shall  be  punished  for  each  offense  by 
imprisonment  not  exceeding  one  year,  or  by  a  fine  not 
exceeding  one  thousand  dollars,  or  by  both. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  553 

Section  624. — NEGOTIATION  OF  BILL  WHEN  GOODS  NOT 
IN  CARRIER'S  POSSESSION. — Any  person  who  with  intent 
to  deceive  negotiates  or  transfers  for  value  a  bill  know- 
ing that  any  or  all  of  the  goods  which  by  the  terms  of 
such  bill  appear  to  have  been  received  for  transportation 
by  the  carrier  which  issued  the  bill,  are  not  in  the  pos- 
session or  control  of  such  carrier,  or  of  a  connecting 
carrier,  without  disclosing  this  fact,  shall  be  guilty  of  a 
crime,  and  upon  conviction  shall  be  punished  for  each 
offense  by  imprisonment  not  exceeding  five  years,  or  by 
a  fine  not  exceeding  five  thousand  dollars,  or  by  both. 

Section  625. — BILL  ISSUED  WHEN  GOODS  HAVE  NOT 
BEEN  RECEIVED.— Any  person  who  with  intent  to  defraud 
secures  the  issue  by  a  carrier  of  a  bill  knowing  that  at  the 
time  of  such  issue,  any  or  all  of  the  goods  described  in 
such  bill  as  received  for  transportation  have  not  been 
received  by  such  carrier,  or  an  agent  of  such  carrier  or 
a  connecting  carrier,  or  are  not  under  the  carrier's  con- 
trol, by  inducing  an  officer,  agent,  or  servant  of  such 
carrier  falsely  to  believe  that  such  goods  have  been 
received  by  such  carrier,  or  are  under  its  control,  shall 
be  guilty  of  a  crime,  and  upon  conviction  shall  be  pun- 
ished for  each  offense  by  imprisonment  not  exceeding 
five  years,  or  by  a  fine  not  exceeding  five  thousand  dol- 
lars, or  by  both. 

Section  626. — ISSUE  OF  NONNEGOTIABLE  BILL  NOT  so 
MARKED. — Any  person  who  with  intent  to  defraud  issues 
or  aids  in  issuing  a  nonnegotiable  bill  without  the  words 
"not  negotiable"  placed  plainly  upon  the  face  thereof, 
shall  be  guilty  of  a  crime,  and  upon  conviction  shall  be 
punished  for  each  offense  by  imprisonment  not  exceed- 
ing five  years  or  by  a  fine  not  exceeding  five  thousand 
dollars,  or  by  both. 

Section  627. — DEFINITIONS. — In  this  article,  unless  the 
context  or  subject  matter  otherwise  requires— 


554  BUSINESS  LAW  FOK  BUSINESS  MEN. 

"Action"  includes  counterclaim,  set-off,  and  suit  in 
equity. 

"Bill"  means  bill  of  lading. 

"Consignee"  means  the  person  named  in  the  bill  as 
the  person  to  whom  delivery  of  the  goods  is  to  be  made. 

"Consignor"  means  the  person  named  in  the  bill  as 
the  person  from  whom  the  goods  have  been  received  for 
shipment. 

"Goods"  means  merchandise  or  chattels  in  course  of 
transportation,  or  which  have  been  or  are  about  to  be 
transported. 

"Holder"  of  a  bill  means  a  person  who  has  both 
actual  possession  of  such  bill  and  a  right  of  property 
therein. 

"Order"  means  an  order  by  indorsement  on  the  bill. 

"Owner"  does  not  include  mortgagee  or  pledgee. 

"Person"  includes  a  corporation  or  partnership  or 
two  or  more  persons  having  a  joint  or  common  interest. 

To  "purchase"  includes  to  take  as  mortgagee  and  to 
take  as  pledgee. 

"Purchaser"  includes  mortgagee  and  pledgee. 

"Value"  is  any  consideration  sufficient  to  support  a 
simple  contract.  An  antecedent  or  pre-existing  obliga- 
tion, whether  for  money  or  not,  constitutes  value  where 
a  bill  is  taken  either  in  satisfaction  thereof  or  as  security 
therefor. 

A  thing  is  done  "in  good  faith,"  within  the  meaning 
of  this  article,  when  it  is  in  fact  done  honestly,  whether 
it  be  done  negligently  or  not. 

The  provisions  of  this  article  do  not  apply  to  bills 
made  and  delivered  prior  to  the  taking  effect  thereof. 
Act  of  the  Legislature,  approved  May  21,  1919 ; 
in  effect  July  22,  1919. 

Section  628. — LOSSES  NOT  WAIVED  BY  CONTRACT. — A 
common  carrier  cannot  limit  itself  from  liabilty  in  case 
of  gross  negligence,  fraud,  or  wilful  wrong.  The  excus- 
able results  flowing  from  the  acts  of  God  are  those  only 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  555 

which  cannot  be  prevented  by  the  interposition  of  human 
agency.  In  a  suit  against  a  railroad  company  for  the 
freezing  of  potatoes  while  en  route,  this  was  held  not  to 
be  a  loss  for  which  the  company  could  claim  immunity, 
under  the  limitation  of  liability  clause  in  its  contract 
with  the  shipper.  Any  movable  object  can  be  kept  from 
freezing,  and  the  freezing  of  any  such  articles  cannot  be 
excused  as  being  an  act  of  God.  (Decided  by  the  Cali- 
fornia District  Court  of  Appeals  in  the  case  of  Wood, 
Curtiss  &  Company  vs.  the  Missouri  Pacific  Railway 
Company,  which  decision  is  printed  in  Volume  II  of  Cali- 
fornia Appellate  Decisions,  No.  88,  page  419.) 

A.  J.  Bledsoe,  Attorney-at-Law,  Los  Angeles,  Cal. 
Yearly  contracts  will  be  made  with  clients  for  legal 
advice  and  services;  no  contract  for  less  than  $300  per 
annum;  will  be  pleased  to  make  appointment  to  discuss 
the  subject. 

See  title  page  of  this  book  for  office  address  of  A.  J. 
Bledsoe. 


PART  III. 

TRADE  ACCEPTANCES— LETTERS  OF  CREDIT- 
BILLS  OF  EXCHANGE— BANK  CHECKS. 
TRADE  ACCEPTANCES 

Section  629. — DEFINITION  OF  TRADE  ACCEPTANCE. — The 
Federal  Reserve  Board  defines  a  trade  acceptance  as 
a  "  draft  or  bill  of  exchange  drawn  by  the  seller  on  the 
purchaser  of  goods  sold,  and  accepted  by  such  pur- 
chaser. ' '  A  bill  of  exchange,  as  applied  to  trade  accept- 
ances, may  be  defined  as  ''an  unconditional  order  in  writ- 
ing addressed  by  one  person  to  another,  other  than  a 
banker,  signed  by  the  person  giving  it,  requiring  the  per- 
son to  whom  it  is  addressed  to^pay,  in  the  United  States, 
at  a  fixed  or  determinable  future  time,  a  certain  sum  in 
dollars,  to  the  order  of  a  specified  person."  The  credit 
obligation  must  arise  from  the  purchase  of  goods,  must 
be  for  a  certain  sum  of  money,  payable  upon  a  definite 
date  to  the  person  named  therein  or  to  his  order.  The 
bill  must  be  drawn  by  the  seller  on  the  purchaser  of 
goods  sold,  and  be  accepted  by  such  purchaser. 

Section  630. — ACCEPTANCE  PROCEDURE. — Upon  making 
shipment  to  an  accepting  customer,  the  seller  sends  with 
the  shipping  documents  an  acceptance  form,  into  which 
has  been  written  the  net  amount  of  the  invoice,  the  date 
of  the  invoice,  and  the  date  of  maturity.  The  accept- 
ance is  often  sent  in  duplicate,  so  that  the  buyer  may 
retain  a  copy  for  his  own  record.  If  he  does  not  wish  to 
avail  himself  of  the  cash  discount,  he  is  expected  to  sign 
and  date  the  acceptance,  designate  bank  where  payable, 

556 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  OO ( 

and  return  it  to  the  seller,  withiu  the  ten-day  period. 

If  a  merchant  has  sold  a  bill  of  goods  on  the  terms 
of,  let  us  say,  2/10/60  (sixty  days  net,  2%  discount  if 
paid  within  10  days),  at  the  time  the  invoice  is  rendered, 
the  invoice  is  accompanied  by  a  sixty  days'  sight  draft 
duly  filled  out,  drawn  on  the  buyer,  together  with  a  letter 
requesting  the  buyer  to  "accept"  and  to  return  the  draft, 
or,  if  he  should  prefer,  to  pay  the  bill  less  two  per  cent, 
within  ten  days  and  return  the  draft  unaccepted.  In  case 
the  seller  does  not  wish  the  buyer  to  take  possession  of 
the  goods  unless  the  latter  has  accepted  the  draft,  the 
shipping  documents,  such  as  railroad  bill  of  lading,  etc., 
are  attached  to  the  draft.  The  draft  is  marked  "D/A" 
(documents  to  be  delivered  against  acceptance)  and  then 
given  to  the  bank  for  the  purpose  of  obtaining  the 
acceptance. 

Shipping  documents  should  be  in  negotiable  form, 
i.  e.,  the  bill  of  lading  should  be  made 'out  to  shipper's 
order  endorsed  in  blank. 

Section  631. — TRADE  ACCEPTANCE  NOT  A  NOTE. — A 
trade  acceptance  is  not  a  promissory  note.  The  promis- 
sory note  deals  with  all  kinds  of  business  transactions, 
the  trade  acceptance  with  current  merchandise  transac- 
tions alone.  The  trade  acceptance  is  not  to  be  given  for 
borrowed  money  or  past  due  obligations. 

Section  632. — TRADE  ACCEPTANCE  CANNOT  BE  USED  IN 
GENERAL  CONTRACTS. — A  trade  acceptance  cannot  be  used 
generally  in  connection  with  miscellaneous  contracts.  A 
trade  acceptance  can  be  used  only  in  connection  with  a 
sale  and  purchase  of  goods.  For  instance,  if  it  were 
attempted  to  make  such  an  instrument  in  connection  with 
a  "building  contract,"  or  a  "labor  contract,"  it  would 
not  be  a  trade  acceptance  at  all,  and  would  not  be  nego- 
tiable as  such,  because  not  drawn  in  connection  with  a 
sale  and  purchase  of  goods. 


558  BUSINESS  LAW  FOE  BUSINESS  MEN. 

Section  633. — DISCOUNT  AT  FEDERAL  EESERVE  BANK. — 
The  Federal  Eeserve  Bank  has  authorized  extra  low 
rates  for  trade  acceptances,  generally  one-half  per  cent, 
lower  than  the  rate  for  promissory  notes.  Although, 
except  in  some  special  cases,  the  law  does  not  permit  -the 
Federal  Eeserve  bank  to  discount  a  trade  acceptance  hav- 
ing a  longer  maturity  than  ninety  days,  this  does  not 
mean  that  trade  acceptances  must  not  be  drawn  for  a 
longer  period.  In  case  of  a  four  months'  acceptance,  for 
instance,  the  commercial  bank  simply  carries  it  until  it 
comes  within  the  ninety  days'  limit,  when  it  may  be  dis- 
counted with  the  Federal  Eeserve  Bank. 

Section  634. — FORM  OF  TRADE  ACCEPTANCE. — The  fol- 
lowing is  a  form  of  trade  acceptance,  approved  by  the 
American  Trade  Acceptance  Council: 

19 No 

City  of  Drawer          Date 
ON PAY  TO  THE  OEDEE  OF  OUESELVES 

Date  of  Maturity 

DOLLAES  ($ ) 

The  obligation  of  the  Acceptor  hereof  arises  out  of  the 
purchase  of  goods  from  the  Drawer.  The  Drawee  may 
accept  this  bill  payable  at  any  Bank,  Banker,  or  Trust 
Company  in  the  United  States  which  he  may  designate. 

TO : 

Name  of  Drawee 


Street  Address  Signature  of  Drawer 

BY 

City  of  Drawee 

There  must  be  endorsed  on  the  face  of  the  Accept- 
ance as  follows: 

Accepted 

Date 

Payable  at  

(Name  of  bank) 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  559 

Location  of  Bank 

(Signature  of  the  acceptor) 
By 

LETTERS  OF  CREDIT 

Section  635. — WHAT  Is  A  LETTER  OF  CREDIT. — A  letter 
of  credit  is  a  written  instrument,  addressed  by  one  per- 
son to  another,  requesting  the  latter  to  give  credit  to  the 
person  in  whose  favor  it  is  drawn. 

Section  636'. — How  ADDRESSED. — A  letter  of  credit  may 
be  addressed  to  several  persons  in  succession. 

Section  637. — LETTERS  GENERAL  OR  SPECIAL. — A  letter 
of  credit  is  either  general  or  special.  When  the  request 
for  credit  in  a  letter  is  addressed  to  specified  persons, 
by  name  or  description,  the  letter  is  special.  All  other 
letters  of  credit  are  general.  A  letter  of  credit  addressed 
to  a  particular  person  is  limited  to  him,  for  the  writer 
must  be  deemed  to  have  granted  it  in  reliance  on  his 
prudence  and  discretion  in  acting  upon  it.  A  general 
letter  of  credit  gives  to  any  person  to  whom  it  may  be 
shown,  authority  to  comply  with  its  request,  and  by  so 
doing,  it  becomes,  as  to  him,  of  the  same  effect  as  though 
addressed  to  him  by  name.  Several  persons  may  suc- 
cessively give  credit  upon  a  general  letter. 

Section  638. — LIABILITY  or  THE  WRITER. — The  writer 
of  a  letter  of  credit  is,  upon  the  default  of  the  debtor, 
liable  to  those  who  gave  credit  in  compliance  with  its 
terms.  By  giving  the  letter,  the  writer  obliges  himself 
to  accept  such  bills  or  orders  as  may  be  drawn  under  it 
in  good  faith,  and  within  the  limits  of  the  credit  speci- 
fied in  the  letter. 

Section  639. — LETTER  OF  CREDIT  MAY  BE  A  CONTINUING 
GUARANTY. — If  the  parties  to  a  letter  of  credit  appear  by 
its  terms  to  contemplate  a  course  of  future  dealing  be- 


560  BUSINESS  LAW  FOB  BUSINESS  MEN. 

tween  the  parties,  it  is  not  exhausted  by  giving  a  credit, 
even  to  the  amount  limited  by  the  letter,  which  is  subse- 
quently reduced  or  satisfied  by  payments  made  by  the 
debtor,  but  it  is  to  be  deemed  a  continuing  guaranty. 

Section  640. — WHEN  NOTICE  TO  THE  WRITER  NECES- 
SARY.— A  letter  of  credit  must  by  its  terms  express  or 
imply  the  necessity  of  giving  notice,  or  no  notice  of 
credit  obtained  upon  it  will  be  necessary.  The  writer  of 
a  letter  of  credit  is  liable  for  credit  given  upon  it  with- 
out notice  to  him,  unless  it  can  be  seen  from  the  letter 
itself  that  notice  to  the  writer  was  intended  by  the 
parties.  Unless  there  is  something  in  the  nature  of  the 
contract  or  terms  of  the  letter  making  acceptance  or 
notice  necessary  as  a  condition  of  liability,  neither  is 
necessary  to  bind  the  writer. 

Section  641. — CREDIT  GIVEN  MUST  AGREE  WITH  TERMS 
OF  LETTER. — The  law  of  California  provides,  that  if  a 
letter  of  credit  prescribes  the  persons  by  whom  or  the 
mode  in  which  the  credit  is  to  be  given,  or  the  term  of 
credit,  or  limits  the  amount,  the  writer  is  not  bound 
except  for  transactions,  which,  in  these  respects,  con- 
form strictly  to  the  terms  of  the  letter. 

Civil  Code,  Sections  2858,  2859,  2861/2862,  2864, 
2865. 

Section  642. — INTENTION  OF  PARTIES. — In  cases  where 
doubt  arises  as  to  the  real  meaning  of  a  letter  of  credit, 
the  rule  of  law  is  that  the  terms  of  the  letter  will  be  lib- 
erally and  reasonably  construed.  The  intention  of  the 
parties  is  the  essential  thing  to  be  ascertained.  But 
words  of  doubtful  meaning,  or  technical  terms,  or  local 
expressions,  used  in  a  letter  of  credit,  cannot  be  taken 
advantage  of,  to  defeat  the  liability  of  one  who  signs  and 
gives  such  a  letter.  True,  it  is  a  general  rule,  that  the 
surety  or  guarantor  should  not  be  held  beyond  the  pre- 
cise stipulations  of  his  contract,  and  he  has  a  right  to 


BUSINESS  CONTEACTS  AND  LEGAL  OBLIGATIONS.  561 

insist  upon  the  exact  performance  of  any  condition  in- 
serted in  the  letter.  But  when  the  question  is  as  to  the 
meaning  which  shall  be  given  to  the  terms  used  in  the 
instrument,  the  law  will  always  be  found  liberal  and  rea- 
sonable; for  letters  of  credit  are  commercial  instru- 
ments, generally  drawn  up  by  merchants  in  brief  lan- 
guage, and  often  loose  in  their  structure  and  aim;  and 
to  give  the  words  of  a  letter  of  credit  a  nice  and  technical 
construction,  would  not  only  defeat  the  intention  of  the 
parties  in  many  instances,  but  render  them  too  unsafe  a 
basis  to  rely  on  for  extensive  credits,  so  often  sought  in 
the  present  active  business  of  commerce  throughout  the 
world.  Therefore,  it  is  well  to  remember,  that  while 
parties  will  be  held  by  the  law  to  the  terms  of  their  con- 
tract, yet  the  law  will  not  allow  a  person  who  advances 
money  on  the  faith  of  a  letter  of  credit,  however  loosely 
drawn,  to  suffer  loss  by  any  strained  or  technical  con- 
struction of  the  language  or  directions  contained  in  it. 

BILLS  OF  EXCHANGE 

Section  643. — BILL  OF  EXCHANGE  DEFINED. — A  bill  of 
exchange  is  an  unconditional  order  in  writing  addressed 
by  one  person  to  another,  signed  by  the  person  giving  it, 
requiring  the  person  to  whom  it  is  addressed  to  pay  on 
demand  or  at  a  fixed  or  determinable  future  time  a  sum 
certain  in  money  to  order  or  to  bearer. 

A  bill  of  itself  does  not  operate  as  an  assignment  of 
the  funds  in  the  hands  of  the  drawee  available  for  the 
payment  thereof,  and  the  drawee  is  not  liable  on  the  bill 
unless  and  until  he  accepts  the  same. 

A  bill  may  be  addressed  to  two  or  more  drawees 
jointly,  whether  they  are  partners  or  not ;  but  not  to  two 
or  more  drawees  in  the  alternative  or  in  succession. 

Section  644. — INLAND  AND  FOREIGN  BILLS. — An  inland 
bill  of  exchange  is  a  bill  which  is,  or  on  its  face  purports 
to  be,  both  drawn  and  payable  within  this  state.  Any 


562  BUSINESS  LAW  FOR  BUSINESS  MEN. 

other  bill  is  a  foreign  bill.  Unless  the  contrary  appears 
on  the  face  of  the  bill,  the  holder  may  treat  it  as  an  inland 
bill. 

Section  645. — BILL  TREATED  AS  PROMISSORY  NOTE.— 
Where  in  a  bill  drawer  and  drawee  are  the  same  person, 
or  where  the  drawee  is  a  fictitious  person,  or  a  person 
not  having  capacity  to  contract,  the  holder  may  treat  the 
instrument,  at  his  option,  either  as  a  bill  of  exchange  or 
a  promissory  note. 

Section  646. — EEFEREE  IN  CASE  OF  NEED. — The  drawer 
of  a  bill  and  any  indorser  may  insert  thereon  the  name  of 
a  person  to  whom  the  holder  may  resort  in  case  of  need, 
that  is  to  say  in  case  the  bill  is  dishonored  by  nonaccept- 
ance  or  nonpayment.  Such  person  is  called  the  referee 
in  case  of  need.  It  is  in  the  option  of  the  holder  to  resort 
to  the  referee  in  case  of  need  or  not  as  he  may  see  fit. 

Section  647. — ACCEPTANCE. — The  acceptance  of  a  bill 
is  the  signification  by  the  drawee  of  his  assent  to  the 
order  of  the  drawer.  The  acceptance  must  be  in  writing 
and  signed  by  the  drawee.  It  must  not  express  that  the 
drawee  will  perform  his  promise  by  any  other  means 
than  the  payment  of  money. 

The  holder  of  a  bill  presenting  the  same  for  accept- 
ance may  require  that  the  acceptance  be  written  on  the 
bill  and,  if  such  request  is  refused,  may  treat  the  bill  as 
dishonored. 

Where  an  acceptance  is  written  on  a  paper  other 
than  the  bill  itself,  it  does  not  bind  the  acceptor  except 
in  favor  of  a  person  to  whom  it  is  shown  and  who,  on  the 
faith  thereof,  receives  the  bill  for  value. 

An  unconditional  promise  in  writing  to  accept  a  bill 
before  it  is  drawn  is  deemed  an  actual  acceptance  in  favor 
of  every  person  who,  upon  the  faith  thereof,  receives  the 
bill  for  value. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  563 

Section  648. — TIME  ALLOWED  DRAWEE  TO  ACCEPT. — 
The  drawee  is  allowed  twenty-four  hours  after  present- 
ment, in  which  to  decide  whether  or  not  he  will  accept 
the  bill ;  but  the  acceptance,  if  given,  dates  as  of  the  day 
of  presentation. 

Where  a  drawee  to  whom  a  bill  is  delivered  for  accept- 
ance destroys  the  same,  or  refuses  within  twenty-four 
hours  after  such  delivery,  or  within  such  other  period  as 
the  holder  may  allow,  to  return  the  bill  accepted  or  non- 
accepted  to  the  holder,  he  will  be  deemed  to  have  accept- 
ed the  same. 

• 

Section  649. — ACCEPTANCE  OF  INCOMPLETE  BILL. — A 
bill  may  be  accepted  before  it  has  been  signed  by  the 
drawer,  or  while  otherwise  incomplete,  or  when  it  is  over- 
due, or  after  it  has  been  dishonored  by  a  previous  refusal 
to  accept,  or  by  nonpayment.  But  when  a  bill  payable 
after  sight  is  dishonored  by  nonacceptance  and  the 
drawee  subsequently  accepts  it,  the  holder  in  the  absence 
of  any  different  agreement,  is  entitled  to  have  the  bill 
accepted  as  of  the  date  of  the  first  presentment. 

Section  650. — KINDS  OF  ACCEPTANCE. — An  acceptance 
is  either  general  or  qualified.  A  general  acceptance 
assents  without  qualification  to  the  order  of  the  drawer. 
A  qualified  acceptance  in  express  terms  varies  the  effect 
of  the  bill  as  drawn. 

An  acceptance  to  pay  at  a  particular  place  is  a  gen- 
eral acceptance,  unless  it  expressly  states  that  the  bill 
is  to  be  paid  there  only  and  not  elsewhere. 

An  acceptance  is  qualified,  which  is— 

(1)  Conditional,  that  is  to   say,  which  makes  pay- 
ment by  the  acceptor  dependent  on  the  fulfillment  of  a 
condition  therein  stated; 

(2)  Partial,  that  is  to  say,  an  acceptance  to  pay  part 
only  of  the  amount  for  "which  the  bill  is  drawn ; 

(3)  Local,  that  is  to  say,  an  acceptance  to  pay  only 
at  a  particular  place; 


564  BUSINESS  LAW  FOR  BUSINESS  MEN. 

(4)  Qualified  as  to  time; 

(5)  The   acceptance   of   some   one   or  more   of  the 
drawees,  but  not  of  all. 

Section  651. — EIGHTS  OF  PARTIES  AS  TO  QUALIFIED 
ACCEPTANCES. — The  holder  may  refuse  to  take  a  qualified 
acceptance,  and  if  he  does  not  obtain  an  unqualified 
acceptance,  he  may  treat  the  bill  as  dishonored  by  non- 
acceptance.  Where  a  qualified  acceptance  is  taken  the 
drawer  and  indorsers  are  discharged  from  liability  on 
the  bill,  unless  they  have  expressly  or  inipliedly  author- 
ized the  holder  to  take  *a  qualified  acceptance,  or  subse- 
quently assent  thereto.  When  the  drawer  or  an  indorser 
receives  notice  of  a  qualified  acceptance,  he  must  within 
a  reasonable  time,  express  his  dissent  to  the  holder,  or 
he  will  be  deemed  to  have  assented  thereto. 

Section  652. — WHEN  PRESENTMENT  FOR  ACCEPTANCE 
MUST  BE  MADE. — Presentment  for  acceptance  must  be 
made— 

(1)  Where  the  bill  is  payable  after  sight,  or  in  any 
other  case,  where  presentment  for  acceptance  is  neces- 
sary in  order  to  fix  the  maturity  of  the  instrument ;  or 

(2)  Where  the  bill  expressly  stipulates  that  it  shall 
be  presented  for  acceptance ;  or 

(3)  Where  the  bill  is  drawn  payable  elsewhere  than 
at  the  residence  or  place  of  business  of  the  drawee. 

In  no  other  case  is  presentment  for  acceptance  neces- 
sary in  order  to  render  any  party  to  the  bill  liable. 

Except  as  herein  otherwise  provided,  the  holder  of  a 
bill  which  is  required  by  the  next  preceding  section  to  be 
presented  for  acceptance  must  either  present  it  for 
acceptance  or  negotiate  it  within  a  reasonable  time.  If 
he  fails  to  do  so,  the  drawer  and  all  indorsers  are  dis- 
charged. 

Presentment  for  acceptance  must  be  made  by  or  on 
behalf  of  the  holder  at  a  reasonable  hour,  on  a  business 
day  and  before  the  bill  is  overdue,  to  the  drawee  or  some 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  565 

person,  authorized  to  accept  or  refuse  acceptance  on  his 
behalf;  and — 

(1)  Where  a  bill  is  addressed  to  two  or  more 
drawees  who  are  not  partners,  presentment  must  be 
made  to  them  all,  unless  one  has  authority  to  accept  or 
refuse  acceptance  for  all,  in  which  case  presentment  may 
be  made  to  him  only ; 

(2)  Where  the  drawee  is  dead,  presentment  may  be 
made  to  his  personal  representative ; 

(3)  Where  the  drawee  has  been  adjudged  a  bankrupt 
or  an  insolvent  or  has  made  an  assignment  for  the  benefit 
of  creditors,  presentment  may  be  made  to  him  or  to  his 
trustee  or  assignee. 

A  bill  may  be  presented  for  acceptance  on  any  day 
on  which  negotiable  instruments  may  be  presented  for 
payment.  When  Saturday  is  not  otherwise  a  holiday, 
presentment  for  acceptance  may  be  made  before  twelve 
o  'clock,  noon,  on  that  day. 

Where  the  holder  of  a  bill  drawn  payable  elsewhere 
than  at  the  place  of  business  or  the  residence  of  the 
drawee  has  not  time  with  the  exercise  of  reasonable 
diligence  to  present  the  bill  for  acceptance  before  pre- 
senting it  for  payment  on  the  day  that  it  falls  due,  the 
delay  caused  by  presenting  the  bill  for  acceptance  before 
presenting  it  for  payment  is  excused  and  does  not  dis- 
charge the  drawers  and  indorsers. 

Section  653. — WHEN  PRESENTMENT  Is  EXCUSED. — Pre- 
sentment for  acceptance  is  excused  and  a  bill  may  be 
treated  as  dishonored  by  nonacceptance,  in  either  of  the 
following  cases: 

(1)  Where  the  drawee  is  dead,  or  has  absconded,  or 
is  a  fictitious  person  or  a  person  not  having  capacity 
to  contract  by  bill ; 

(2)  Where,  after  the  exercise  of  reasonable  diligence, 
presentment  cannot  be  made; 

(3)  Where,  although  presentment  has  been  irregu- 
lar, acceptance  has  been  refused  on  some  other  ground. 


566  BUSINESS  LAW  FOE  BUSINESS  MEN. 

Section  654. — BILL  DISHONORED  BY  NONACCEPTANCE. — 
A  bill  is  dishonored  by  nonacceptance— 

(1)  When  it  is  duly  presented  for  acceptance  and 
such  an  acceptance  as  is  prescribed  by  this  title  is  refused 
or  cannot  be  obtained ;  or 

(2)  When  presentment  for  acceptance  is  excused  and 
the  bill  is  not  accepted. 

Where  a  bill  is  duly  presented  for  acceptance  and  is 
not  accepted  within  the  prescribed  time  the  person  pre- 
senting it  must  treat  the  bill  as  dishonored  by  nonaccept- 
ance or  he  loses  the  right  to  recourse  against  the  drawers 
and  indorsers. 

When  a  bill  is  dishonored  by  nonacceptance,  an  imme- 
diate right  of  recourse  against  the  drawers  and  indorsers 
accrues  to  the  holder  and  no  presentment  for  payment  is 
necessary. 

Section  655. — PEOTEST  OF  BILL  OF  EXCHANGE. — Where 
a  foreign  bill  appearing  on  its  face  to  be  such  is  dishon- 
ored by  nonacceptance,  it  must  be  duly  protested  for  non- 
acceptance,  and  where  such  a  bill  which  has  not  previ- 
ously been  dishonored  by  nonacceptance  is  dishonored 
by  nonpayment,  it  must  be  duly  protested  for  nonpay- 
ment. If  it  is  not  so  protested,  the  drawer  and  indorsers 
are  discharged.  Where  a  bill  does  not  appear  on  its  face 
to  be  a  foreign  bill,  protest  thereof  in  case  of  dishonor  is 
unnecessary. 

Section  656. — PEOTEST  —  How  MADE. --The  protest 
must  be  annexed  to  the  bill,  or  must  contain  a  copy  there- 
of and  must  be  under  the  hand  and  seal  of  the  notary 
making  it,  and  must  specify— 

(1)  The  time  and  place  of  presentment; 

(2)  The  fact  that  presentment  was  made  and   the 
manner  thereof; 

(3)  The  cause  or  reason  for  protesting  the  bill; 

(4)  The  demand  made  and  the  answer  given,  if  any, 
or  the  fact  that  the  drawee  or  acceptor  could  not  be  found. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  567 

Section  657. — PROTEST — BY  WHOM  MADE. — Protest 
may  be  made  by— 

(1)  A  notary  public;  or 

(2)  By  any  respectable  resident  of  the  place  where 
the  bill  is  dishonored,  in  the  presence  of  two  or  more  cred- 
ible witnesses. 

Section  658. — PROTEST — WHEN  MADE. — When  a  bill  is 
protested,  such  protest  must  be  made  on  the  day  of  its 
dishonor,  unless  delay  is  excused  as  herein  provided. 
When  a  bill  has  been  duly  noted,  the  protest  may  be  sub- 
sequently extended  as  of  the  date  of  the  noting. 

Section  659. — PROTEST — WHERE  MADE. — A  bill  must  be 
protested  at  the  place  where  it  is  dishonored,  except  that 
when  a  bill  drawn  payable  at  the  place  of  business,  or 
residence  of  some  person  other  than  the  drawee,  has  been 
dishonored  by  nonacceptance,  it  must  be  protested  for 
nonpayment  at  the  place  where  it  is  expressed  to  be  pay- 
able, and  no  further  presentment  for  payment  to,  or  de- 
mand on,  the  drawee  is  necessary. 

A  bill  which  has  been  protested  for  nonacceptance  may 
be  subsequently  protested  for  nonpayment. 

Section  660. — PROTEST  BEFORE  MATURITY. — Where  the 
acceptor  has  been  adjudged  a  bankrupt  or  an  insolvent,  or 
has  made  an  assignment  for  the  benefit  of  creditors,  be- 
fore the  bill  matures,  the  holder  may  cause  the  bill  to 
be  protested  for  better  security  against  the  drawer  and 
indorsers. 

Section  661. — PROTEST  —  WHEN  DISPENSED  WITH. — 
Protest  is  dispensed  with  by  any  circumstances  which 
would  dispense  with  notice  of  dishonor.  Delay  in  noting 
or  protesting  is  excused  when  delay  is  caused  by  circum- 
stances beyond  the  control  of  the  holder  and  not  im- 
putable  to  his  default,  misconduct  or  negligence.  When 
the  cause  of  delay  ceases  to  operate,  the  bill  must  be  noted 
or  protested  with  reasonable  diligence. 


568  BUSINESS  LAW  FOE  BUSINESS  MEN. 

Section  662. — PROTEST  or  LOST  BILL. — When  a  bill  is 
lost  or  destroyed  or  is  wrongly  detained  from  the  person 
entitled  to  hold  it,  protest  may  be  made  on  a  copy  or 
written  particulars  thereof. 

Section  663. — ACCEPTANCE  FOB  HONOR. — Where  a  bill 
of  exchange  has  been  protested  for  dishonor  by  non- 
acceptance  or  protested  for  better  security,  and  is  not 
overdue,  any  person  not  being  a  party  already  liable 
thereon  may,  with  the  consent  of  the  holder,  intervene 
and  accept  the  bill  supra  protest  for  the  honor  of  any 
party  liable  thereon,  or  for  the  honor  of  the  person  for 
whose  account  the  bill  is  drawn.  The  acceptance  for 
honor  may  be  for  the  part  only  of  the  sum  for  which  the 
bill  is  drawn;  and  where  there  has  been  an  acceptance  for 
honor  for  one  party,  there  may  be  a  further  acceptance 
by  a  different  person  for  the  honor  of  another  party. 

An  acceptance  for  honor  supra  protest  must  be  in 
writing,  and  indicate  that  it  is  an  acceptance  for  honor, 
and  must  be  signed  by  the  acceptor  for  honor. 

Where  an  acceptance  for  honor  does  not  expressly 
state  for  whose  honor  it  is  made,  it  is  deemed  to  be  an 
acceptance  for  the  honor  of  the  drawer. 

Section  664. — LIABILITY  OF  ACCEPTOR. — The  acceptor 
for  honor  is  liable  to  the  holder  and  to  all  parties  to  the 
bill  subsequent  to  the  party  for  whose  honor  he  has 
accepted.  *  :^t^ 

The  acceptor  for  honor,  by  such  acceptance  engages 
that  he  will  on  due  presentment  pay  the  bill  according  to 
the  te,rms  of  his  acceptance;  provided,  it  shall  not  have 
been  paid  by  the  drawee ;  and,  provided,  also,  that  it  shall 
have  been  duly  presented  for  payment  and  protested  for 
nonpayment  and  notice  of  dishonor  given  him. 

Section  665. — BILL  PAYABLE  AFTER  SIGHT. — Where  a 
bill  payable  after  sight  is  accepted  for  honor,  its  maturity 
is  calculated  from  the  date  of  the  noting  for  non-accept- 
ance and  not  from  the  date  of  the  acceptance  for  honor. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  569 

Section  666. — PROTEST  OP  DISHONORED  BILL. — Where  a 
dishonored  bill  has  been  accepted  for  honor  supra  protest 
t>r  contains  a  reference  in  case  of  need,  it  must  be  pro- 
tested for  non-payment  before  it  is  presented  for  pay- 
ment to  the  acceptor  for  honor  or  referee  in  case  of  need. 

Section  667. — PRESENTMENT  TO  ACCEPTOR  FOR  HONOR. 
Presentment  for  payment  to  the  acceptor  for  honor  must 
be  made  as  follows : 

(1)  If  it  is  to  be  presented  in  the  place  where  the 
protest  for  nonpayment  was  made,  it  must  be  presented 
not  later  than  the  day  following  its  maturity. 

(2)  If  it  is  to  be  presented  in  some  other  place  than 
the  place  where  it  was  protested,  then  it  must  be  for- 
warded by  mail. 

When  the  bill  is  dishonored  by  the  acceptor  for  honor 
it  must  be  protested  for  nonpayment  by  him. 

Section  668. — PAYMENT  FOR  HONOR. — Where  a  bill  has 
been  protested  for  non-payment,  any  person  may  inter- 
vene and  pay  it  supra  protest  for  the  honor  of  any  per- 
son liable  thereon  or  for  the  honor  of  the  person  for 
whose  account  it  was  drawn. 

The  payment  for  honor  supra  protest  in  order  to 
operate  as  such  and  not  as  a  mere  voluntary  payment 
must  be  attested  by  a  notarial  act  of  honor  which  may  be 
appended  to  the  protest  or  form  an  extension  to  it. 

The  notarial  act  of  honor  must  be  founded  on  a 
declaration  made  by  the  payer  for  honor  or  by  his  agent 
in  that  behalf  declaring  his  intention  to  pay  the  bill  for 
honor  and  for  whose  honor  he  pays. 

Section  669. — PREFERENCE  OF  PARTIES. — Where  two  or 
more  persons  offer  to  pay  a  bill  for  the  honor  of  different 
parties,  the  person  whose  payment  will  discharge  most 
parties  to  the  bill  is  to  be  given  the  preference. 

Section  670. — SUBSEQUENT  PARTIES  DISCHARGED. — 
Where  a  bill  has  been  paid  for  honor,  all  parties  sub- 


570  BUSINESS  LAW  FOR  BUSINESS  MEN. 

sequent  to  the  party  for  whose  honor  it  is  paid  are  dis- 
charged, but  the  payer  for  honor  is  subrogated  for,  and 
succeeds  to,  both  the  rights  and  duties  of  the  holder  as 
regards  the  party  for  whose  honor  he  pays  and  all  parties 
liable  to  the  latter. 

Where  the  holder  of  a  bill  refuses  to  receive  payment 
supra  protest,  he  loses  his  right  of  recourse  against  any 
party  who  would  have  been  discharged  by  such  payment. 

The  payer  for  honor,  on  paying  to  the  holder  the 
amount  of  the  bill  and  the  notarial  expenses  incidental 
to  its  dishonor,  is  entitled  to  receive  both  the  bill  itself 
and  the  protest. 

Section  671. — BILLS  IN  SETS  ONE  BILL. — Where  a  bill 
is  drawn  in  a  set,  each  part  of  the  set  being  numbered 
and  containing  a  reference  to  the  other  parts,  the  whole 
of  the  parts  constitutes  one  bill. 

Where  two  or  more  parts  of  a  set  are  negotiated  to 
different  holders  in  due  course,  the  holder  whose  title 
first  accrues  is  as  between  such  holders  the  true  owner 
of  the  bill.  But  nothing  in  this  section  affects  the  rights 
of  a  person  who  in  due  course  accepts  or  pays  the  part 
first  presented  to  him. 

Section  672. — LIABILITY  OF  HOLDER.— Where  the  holder 
of  a  set  indorses  two  or  more  parts  to  different  persons 
he  is  liable  on  every  such  part,  and  every  indorser  sub- 
sequent to  him  is  liable  on  the  part  he  has  himself  in- 
dorsed, as  if  such  parts  were  separate  bills. 

The  acceptance  may  be  written  on  any  part  and  it 
must  be  written  on  one  part  only.  If  the  drawee  accepts 
more  than  one  part,  and  such  accepted  parts  are  nego- 
tiated to  different  holders  in  due  course,  he  is  liable  on 
every  such  part  as  if  it  were  a  separate  bill. 

Section  673. — PAYMENT  BY  ACCEPTOR. — When  the  ac- 
ceptor of  a  bill  drawn  in  a  set  pays  it  without  requiring 
the  part  bearing  his  acceptance  to  be  delivered  up  to 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  571 

him,  and  that  part  at  maturity  is  outstanding  in  the  hands 
of  a  holder  in  due  course,  he  is  liable  to  the  holder  thereon. 
Except  as  herein  otherwise  provided  where  any  one 
part  of  a  bill  drawn  in  a  set  is  discharged  by  payment  or 
otherwise  the  whole  bill  is  discharged. 

Act  of  the  Legislature,  approved  June  1,  1917 ; 
in  effect  July  31,  1917. 

Section  674. — DAMAGES  ALLOWED  ON  DISHONOR  OF  BILL 
OF  EXCHANGE. — Damages  are  allowed,  as  a  full  compen- 
sation, for  interest  accrued  before  notice  of  dishonor,  re- 
exchange,  expenses,  and  all  other  damages,  in  favor  of 
holders  for  value  only,  upon  bills  of  exchange  drawn  or 
negotiated  within  this  State,  and  protested  for  non- 
acceptance  or  non-payment.  The  rate  of  damages  al- 
lowed, on  dishonor  of  a  foreign  bill  of  exchange,  is  as 
follows:  (1)  If  drawn  upon  any  person  in  this  State, 
two  dollars  upon  each  one  hundred  dollars  of  the  prin- 
cipal sum  specified  in  the  bill;  (2)  If  drawn  upon  any 
person  out  of  this  State,  but  in  any  of  the  other  States 
west  of  the  Eocky  Mountains,  five  dollars  upon  each 
hundred  dollars  of  the  principal  sum  specified  in  the  bill ; 

(3)  If  drawn  upon  any  person  in  any  of  the  United  States 
east  of  the  Eocky  Mountains,  ten  dollars  upon  each  hun- 
dred dollars  of  the  principal  sum  specified  in  the  bill ; 

(4)  If  drawn  upon  any  person  in  any  place  in  a  foreign 
country,  fifteen  dollars  upon  each  hundred  dollars  of  the 
principal  sum  specified  in  the  bill. 

From  the  time  of  notice  of  dishonor  and  demand  of 
payment,  lawful  interest  is  allowed  upon  the  aggregate 
amount  of  the  principal  sum  specified  in  the  bill,  and  the 
damages  mentioned  in  the  preceding  paragraph. 

If  the  amount  of  a  protested  bill  of  exchange  is  ex- 
pressed in  money  of  the  United  States,  damages  are 
estimated  upon  such  amount  without  regard  to  the  rate 
of  exchange. 

If  the  amount  of  a  protested  bill  of  exchange  is  ex- 
pressed in  foreign  money,  damages  are  estimated  upon 


572  BUSINESS  LAW  FOR  BUSINESS  MEN. 

the  value  of  a  similar  bill  at  the  time  of  protest,  in  the 
place  nearest  to  the  place  where  the  bill  was  negotiated, 
and  where  such  bills  are  currently  sold. 

BANK  CHECKS 

Section  675. — NATURE  OF  BANK  CHECKS. — In  its  es- 
sential features  a  bank  check  has  been  sometimes  likened 
to  a  bill  of  exchange,  but  it  is  evident  that  there  are  very 
material  differences  between  them.  A  bill  of  exchange 
must  be  presented  for  acceptance,  and  again  for  payment. 
A  check  is  an  order  to  pay  the  holder  a  sum  of  money 
at  a  bank,  on  the  presentation  of  the  check  and  demand 
of  the  money;  and  no  further  notice  is  necessary,  no  ac- 
ceptance is  required  or  expected.  It  is  well  said  that  one 
radical  difference  between  a  check  and  a  bill  of  exchange 
is,  that  the  former  need  not  be  accepted,  while  the  latter 
must  be,  in  order  to  fix  the  liability  on  the  drawee.  It  is 
requisite  to  a  check  that  it  be  drawn  on  a  bank  or  banker, 
and  that  it  be  payable  on  demand. 

Section  676. — DELIVERY  OF  CHECK. — It  is  necessary 
that  there  should  be  delivery  of  a  check  before  the  payee 
can  acquire  any  rights  in  it.  The  same  rule  applies  to  a 
check  which  applies  to  a  note  or  to  a  bill  of  exchange. 
It  is  not  valid  unless  it  has  been  delivered  to  the  payee. 

Section  677. — NEGOTIABILITY. — A  check  is  a  negotiable 
instrument,  when  payable  to  '  *  bearer, "  or  to  the  ' '  order ' ' 
of  a  person. 

Section  678. — POSSESSION  OF  CHECK. — The  mere  pos- 
session of  a  check  will  not  justify  a  bank  in  making  pay- 
ment to  the  person  in  possession,  without  some  identifica- 
tion, or  some  evidence  of  genuineness  of  the  indorse- 
ment, if  an  indorsement  is  in  question. 

Section  679. — CERTIFIED  CHECK. — The  certification  of 
a  check,  when  made  before  delivery,  operates  in  favor  of 
third  parties  simply  as  an  assurance  that  it  is  genuine, 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  573 

and  will  be  paid.  The  bank  certifying  it  becomes  bound. 
Beyond  this,  nothing  is  added  to  the  legal  force  or  effect 
of  the  check.  A  bank,  by  certification  of  a  check,  becomes 
entitled  to  charge  the  amount  thereof  to  the  account  of 
the  drawer  at  the  time  of  certification,  thus  appropriating 
to  the  payment  of  the  check  the  necessary  amount  of 
money  from  the  funds  on  deposit  to  the  credit  of  the 
drawer.  By  certification  of  a  check  the  bank  enters  into 
an  absolute  undertaking  to  pay  it  when  presented,  within 
the  period  of  limitation  of  actions.  The  certification  is 
equivalent  to  an  acceptance.  When  the  holder  gets  the 
check  accepted  or  certified,  the  drawer  and  all  indorsers 
are  discharged  from  liability  thereon. 

Section  680. — PRESENTMENT  AND  DEMAND  FOR  PAY- 
MENT.— A  person  who  takes  a  check  does  so  with  the  legal 
obligation  to  present  it  at  the  bank  for  payment,  within 
a  reasonable  time.  A  check  is  not  designed  for  circula- 
tion, but  for  immediate  presentment  for  payment,  and  if 
not  thus  presented  within  a  reasonable  time  according  to 
the  circumstances,  the  indorsers  will  be  released  from 
liability  on  it.  A  check  must  be  presented  for  payment 
with  all  the  dispatch  and  diligence  consistent  with  the 
transactions  of  commercial  concerns. 

Section  6'81. — STOPPING  PAYMENT. — The  drawer  of  a 
check  may  stop  payment,  by  notifying  the  bank  on  which 
it  is  drawn  that  payment  is  stopped  and  giving  instruc- 
tion not  to  pay  it.  In  such  case,  it  is  the  duty  of  the  bank 
to  refuse  payment,  and  give  its  reasons  for  so  doing, 
leaving  the  drawer  and  the  holder  to  settle  the  difficulty 
between  them.  But  where  the  check  has  been  certified,  it 
cannot  be  countermanded  by  the  drawer,  because  it  has 
passed  beyond  his  control. 

Section  682. — PAYMENT  OF  CHECK  BY  MISTAKE. — A 
bank  is  bound  to  know  the  state  of  its  depositor's  ac- 
count; and  if  it  makes  a  mistake  in  this  respect  it  must 


574  BUSINESS  LAW  FOR  BUSINESS  MEN. 

abide  the  consequences.  Banks  are  required,  and  for 
their  own  safety  are  compelled,  to  know  at  all  times  the 
balance  of  the  credit  of  each  individual  depositor,  and 
they  take  and  pay  checks  at  their  own  risk  and  peril. 
If,  from  negligence  or  inattention  to  its  own  affairs,  a 
bank  improvidently  pays  when  the  account  of  a  customer 
is  not  in  condition  to  warrant  it,  or  if,  by  mistake,  a  check 
is  paid  when  the  drawer  has  no  funds  in  bank,  it  must 
look  to  the  customer  for  rectification  or  repayment,  and 
not  to  the  party  to  whom  the  check  was  paid. 

Section  683. — EIGHTS  AND  LIABILITIES  OF  INDORSEES. — • 
The  rights  and  liabilities  of  indorsers  are  the  same  as 
to  all  negotiable  instruments.  Checks,  bills  of  exchange, 
and  promissory  notes,  with  respect  to  indorsers,  are  con- 
sidered according  to  the  same  rules.  For  the  law  as  to 
indorsers,  their  rights  and  liabilities,  see  the  subject  of 
"Promissory  Notes,"  where  the  subject  is  fully  treated. 

Section  684. — REFUSAL  TO  PAY.— A  check  being  pay- 
able immediately  and  on  demand,  the  holder  can  only 
present  it  for  payment,  and  the  bank  can  fulfill  its  duty 
to  the  depositor  only  by  paying  the  amount  demanded. 
The  holder  has  no  right  to  demand  from  the  bank  any- 
thing but  payment  of  the  check,  and  the  bank  has  no  right 
as  against  the  drawer,  to  do  anything  but  pay  it.  If  the 
bank  refuses  to  pay  the  check,  when  there  are  funds 
sufficient  on  deposit,  the  holder  has  recourse  against  the 
maker  and  the  indorsers,  and  the  maker,  in  turn,  has  a 
right  to  sue  the  bank. 

Section  685. — LIABILITY  OF  BANK  TO  DEPOSITOR  FOR 
REFUSAL  TO  PAY  CHECKS. — "Where  there  is  money  on 
deposit  in  a  bank,  sufficient  to  pay  checks  drawn  by  the 
depositor,  and  the  bank  refuses  to  pay  the  checks,  the 
liability  of  the  bank  is  only  for  the  money  deposited  and 
interest  from  the  date  of  refusal  to  pay.  The  bank 
is  not  liable  in  damages  for  loss  of  credit,  or  sacrifice 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  575 

of  goods,  or  expenses  of  litigation,  or  other  injuries 
sustained. 

Smith's  Cash  Store,  of  San  Francisco,  sued  the  First 
National  Bank  of  San  Francisco  for  $100,000  damages, 
the  plaintiff  alleging  that  it  deposited  with  the  bank  on 
a  certain  date  the  sum  of  $4,000,  and  drew  checks  against 
this  deposit  aggregating  $3,679.55,  which  the  hank  failed 
and  refused  to  pay;  and  that  plaintiff  was  injured  and 
damaged  in  its  credit,  was  compelled  to  sell  goods  at  a 
sacrifice,  had  to  make  an  assignment  of  property,  and 
was  compelled  to  pay  out  large  sums  in  litigation;  all 
by  reason  of  the  bank's  refusal  to  pay  the  checks.  The 
Supreme  Court  decided  against  the  plaintiff,  on  the 
ground  that  it  was  not  entitled  to  damages  at  all,  and 
that  it  could  only  recover  the  money  deposited.  The 
decision  says:  "It  is  well  settled  here  that  the  relation 
between  a  general  depositor  and  the  bank  in  which  his 
deposit  is  made  is  simply  that  of  debtor  and  creditor. 
The  moneys  deposited  immediately  become  the  property 
of  the  bank,  and  the  latter  becomes  the  debtor  of  the 
depositor  for  the  amount  of  the  deposit.  The  original 
and  every  subsequent  deposit  by  the  customer  is  in  strict 
legal  effect  a  loan  by  the  customer  to  the  bank,  and  every 
payment  by  the  bank  to  or  on  account  of  the  customer  is 
a  repayment  of  the  loans  to  that  extent.  Wherefore  it 
follows  that  the  customer  can  never  hold  or  charge  the 
bank  as  a  trustee,  quasi  trustee,  factor,  or  agent.  The 
money  placed  in  the  custody  of  a  banker  is,  to  all  intents 
and  purposes,  the  money  of  the  banker,  to  do  with  it  as 
he  pleases ;  he  is  guilty  of  no  breach  of  trust  in  employ- 
ing it ;  he  is  not  answerable  to  the  principal  if  he  puts  it 
into  jeopardy,  if  he  engages  in  a  hazardous  speculation ; 
he  is  not  bound  to  keep  it,  or  deal  with  it  as  the  property 
of  his  principal ;  but  he  is,  of  course,  answerable  for  the 
amount,  because  he  has  contracted,  having  received  that 
money,  to  repay  to  the  principal,  when  demanded,  a  sum 
equivalent  to  that  paid  into  his  hands."  The  defendant 
in  this  case  was  not  liable  in  damages  for  a  conversion  of 


576  BUSINESS  LAW  FOR  BUSINESS  MEN. 

plaintiff 's  money  to  its  own  use ;  for  the  money  deposited 
by  plaintiff  became,  by  such  deposit,  the  property  of 
defendant,  and  the  latter  could  not  convert  its  own  money. 
(Decided  by  the  Supreme  Court  of  the  State  of  Califor- 
nia, in  the  case  of  Smith's  Cash  Store  vs.  First  National 
Bank  of  San  Francisco,  which  decision  is  printed  in 
Volume  31  of  California  Decisions,  No.  1686,  page  307.) 

Section  686. — FOEGED  CHECKS. — If  a  bank  pays  a 
forged  check,  whether  the  forgery  be  in  the  amount  of  the 
check,  or  in  the  signature,  it  cannot  deduct  the  amount 
so  paid  from  the  depositor's  account.  A  bank  is  bound 
to  know  the  handwriting  and  the  signature  of  its  de- 
positors, and  it  takes  all  the  risk  of  paying  a  check  which 
is  a  forgery.  If  it  does  pay  a  forged  check  it  will  have 
to  stand  the  loss. 

It  is  the  duty  of  the  depositor  to  promptly  notify  the 
bank  of  the  discovery  of  a  forged  check,  and  negligence 
on  the  part  of  the  depositor  in  this  respect  may  be  used 
by  the  bank  as  a  defense,  if  sued  for  money  which  it  has 
paid  out  on  forged  checks.  "Where  a  bank  balances  a 
depositor's  pass  book,  containing  a  debit  against  him  for 
a  payment  made  on  a  forged  check,  and  returns  the  book 
to  him  at  the  same  time,  this  constitutes  a  statement  of 
his  account,  making  it  his  duty  to  examine  it  within  a 
reasonable  time,  and  to  return  it  to  the  bank  without  un- 
reasonable delay,  with  notice  of  his  objections  to  it. 
Where,  in  any  case,  the  depositor  gives  notice  to  the  bank 
of  the  forgery  as  soon  as  possible  after  detecting  it,  and 
without  unreasonable  delay  in  the  examination  of  his 
accounts,  the  forgery  of  his  check  is  wholly  inoperative, 
and  gives  no  rights  to  the  bank  which  pays  it ;  on  the  con- 
trary, the  depositor,  if  the  bank  insists  on  debiting  his 
account  with  the  amount  paid  out  on  a  forged  check,  can 
sue  the  bank  and  recover  the  money  from  it. 

Section  687. — FORGED  INDORSEMENTS. — The  drawer  of 
a  check  is  not  presumed  to  know  the  signature  of  the 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  577 

payee.  The  bank  must  at  its  peril  determine  the  genu- 
ineness of  the  signature  of  indorsers.  When,  therefore, 
a  bank  returns  to  its  depositor  a  check,  as  evidence  of  a 
payment  made  by  his  direction,  he  has  the  right  to 
assume  that  the  bank  has  ascertained  the  indorsement 
upon  it  to  be  genuine.  A  bank  is  bound  to  satisfy  itself 
of  the  genuineness  of  indorsements  on  a  check  made  pay- 
able to  a  certain  person  or  order,  and  must  alone  bear 
the  responsibility  of  determining  that  question. 

Section  688. — GARNISHMENT  OP  MONEY  ON  DEPOSIT. — 
A  check  is  not  an  assignment  of  the  funds  upon  which  it 
is  drawn,  and  there  is  no  obligation  of  a  bank  to  the 
holder  of  a  check  of  a  depositor  until  the  check  is  pre- 
sented for  payment  and  accepted  or  certified.  The  de- 
livery of  a  check  does  not  operate  as  an  assignment  of 
the  funds  drawn  upon;  and  where  the  funds  are  gar- 
nished as  those  of  the  drawer,  before  the  check  is  pre- 
sented for  payment,  the  garnishment  will  hold.  An 
ordinary  uncertified  check  upon  a  general  bank  account 
is  neither  a  legal  nor  an  equitable  assignment  of  any  part 
of  the  sum  standing  to  the  credit  of  the  depositor,  and 
confers  no  right  upon  the  payee  which  he  can  enforce 
against  the  bank.  Therefore,  any  attaching  creditor  of 
the  depositor  will  hold  the  funds,  by  serving  a  garnish- 
ment upon  the  bank  before  a  check  given  another  for  the 
money  deposited  has  been  presented  for  payment  at  the 
bank.  (Decided  by  the  Supreme  Court  in  the  case  of 
Donohoe-Kelly  Banking  Company  vs.  Southern  Pacific 
Company,  which  decision  is  printed  in  Volume  25,  No 
1350,  California  Decisions,  page  60.) 

Section  689. — LOST  CHECK. — The  rule  that  the  holder 
of  a  check  upon  a  bank  has  no  recourse  upon  the  drawer 
thereof,  until  he  has  presented  it  to  the  bank  upon  which 
it  was  drawn  and  had  payment  refused,  has  no  applica- 
tion to  a  lost  check.  No  rule  of  law  would  require  a  bank 
without  the  consent  of  the  depositor,  to  pay  out  the  money 


578  BUSINESS  LAW  FOE  BUSINESS  MEN. 

of  its  depositor,  upon  an  alleged  lost  check,  and  a  demand 
that  it  do  so  would  be  fruitless.  Its  obligation  is  to  pay 
the  depositor's  money  to  holders  of  checks  issued  by  him, 
and  its  protection,  and  the  protection  of  all  depositors, 
requires  that  the  checks  be  produced  and  surrendered 
before  payment  is  made.  Until  the  check  is  presented, 
no  liability  attaches  to  the  bank.  No  hardship  results  to 
the  drawer  of  a  check  in  such  a  case.  If  it  be  non- 
negotiable,  he  can,  upon  notice  of  the  loss,  fully  protect 
his  interests  by  countermanding  the  order  and  stopping 
payment.  If  it  be  negotiable,  and  likely  to  reach  the 
hands  of  a  bona  fide  holder,  he  may  insist  upon  an  in- 
demnity bond  before  giving  a  new  check,  or  otherwise 
paying  the  debt  intended  to  be  discharged  by  it.  (Decided 
by  the  District  Court  of  Appeals,  in  the  case  of  California 
National  Bank  vs.  Weldon,  which  decision  is  printed  in 
Vol.  11,  California  Appellate  Decisions,  page  649.) 

Section  690. — LIABILITY  OF  BANK  FOB  PAYMENT  OF 
CHECK  AFTER  DEATH  OF  DRAWER. — The  delivery  of  a  check, 
with  instructions  not  to  present  it  for  payment  until  after 
the  death  of  the  drawer,  does  not  operate  as  an  assign- 
ment of  the  funds  drawn  upon,  and  is  not  valid  as  a  gift ; 
and  where  the  bank  pays  the  check  after  the  drawer's 
death,  an  action  will  lie  against  the  bank  to  recover  the 
money  for  the  estate  of  the  decedent.  (Decided  by  the 
Supreme  Court  in  the  case  of  Pullen  vs.  Placer  County 
Bank,  which  decision  is  printed  in  Volume  25,  No.  1349, 
California  Decisions,  page  51.) 

Section  691. — DRAWING  CHECK  WITH  INTENT  TO  DE- 
FRAUD.— Every  person  who,  wilfully,  with  intent  to  de- 
fraud, draws  or  delivers  to  another  person  any  check  or 
draft,  on  a  bank,  knowing  at  the  time  that  he  has  not 
sufficient  funds  in  or  credit  with  the  bank  to  meet  such 
draft  or  check  in  full  upon  its  presentation,  is  guilty  of  a 
felony.  The  punishment  is  fixed  at  not  less  than  one  nor 
more  than  fourteen  years  in  the  State  prison. 

Act  of  the  Legislature,  approved  March  19,  1907. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  579 

WRITTEN  OPINIONS. — A.  J.  Bledsoe,  Attorney-at-law, 
Los  Angeles,  Cal.,  will  prepare  opinions  in  writing  on 
any  legal  question  submitted  to  him,  each  opinion  giving 
the  authorities  and  decisions.  For  this  service  he 
charges  a  minimum  fee  of  $10,  with  an  increased  fee  in 
cases  where  the  necessary  labor  and  research  justify  it. 
See  title  page  of  this  book  for  office  address  of  A.  J. 
Bledsoe. 


PART  IV. 
ASSIGNMENT  FOE  BENEFIT  OF  CREDITORS 

Section  692. — ASSIGNMENT  BY  INSOLVENT  DEBTOK. — An 
insolvent  debtor  may  in  good  faith  execute  an  assignment 
of  his  property  in  trust  for  the  benefit  of  his  creditors 
and  the  satisfaction  of  their  claims.  Every  such  assign- 
ment must  be  in  writing,  and  must  contain  a  list  of  the 
names  of  the  creditors  of  the  assignor,  and  their  places 
of  residence  and  amounts  of  their  respective  demands, 
and  the  amounts  and  nature  of  any  security  therefor,  and 
must  be  made  to  the  Sheriff  of  the  county,  or  city  and 
county,  wherein  the  assignor  resides,  if  the  assignor 
resides  within  this  State;  or  in  case  the  assignor  resides 
out  of  this  State,  then  to  the  Sheriff  of  the  county,  or  city 
and  county,  wherein  the  property  assigned,  or  some  of  it, 
is  situated;  but  when  the  assignor  resides  out  of  the 
State,  an  assignment  may,  by  its  terms,  transfer  any 
property  of  the  assignor  in  this  State.  The  Sheriff  must 
take  possession  of  all  the  property  so  assigned  to  him. 
When  the  assignment  has  been  made,  the  Sheriff  must 
immediately,  by  mail,  notify  the  creditors  named  in  the 
assignment,  at  their  places  of  business  or  residence  as 
given  therein,  to  meet  at  his  office  on  a  day  and  hour  to 
be  appointed  by  him,  of  not  less  than  eight  or  more  than 
ten  days  from  the  date  of  the  delivery  of  the  assign- 
ment to  him,  for  the  purpose  of  electing  one  or  more 
assignees,  as  they  may  determine,  in  the  place  and  stead 
of  the  Sheriff,  and  must  also  publisli  a  notice  of  such 
meeting,  and  the  purpose  thereof,  at  least  once  before 
such  meeting,  in  some  newspaper  published  in  his  county, 

580 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  581 

* 

or  city  and  county.  The  notice  so  to  be  mailed  must  also 
contain  a  statement  of  the  amount  of  the  demand  of  the 
creditor,  and  the  amount  and  nature  of  any  security 
therefor,  as  set  forth  in  the  assignment;  and  if  any 
creditor  shall  not  find  the  amount  of  his  claim  to  be  cor- 
rectly so  stated,  he  may  file  with  the  Sheriff,  at  or  before 
such  meeting,  a  statement,  under  oath,  of  his  demand, 
and  such  statement  shall,  for  the  purpose  of  voting,  be 
accepted  by  the  Sheriff  as  correct;  and  when  no  such 
statement  is  filed,  the  statement  of  amount  as  set  forth 
in  the  assignment  must  be  accepted  by  the  Sheriff  as 
correct.  No  creditor  having  a  mortgage  or  pledge  of  real 
or  personal  property  of  the  debtor,  or  lien  thereon,  for 
securing  the  payment  of  a  debt  owing  to  him  from  the 
debtor,  shall  be  allowed  to  vote  any  part  of  his  claim  at 
such  meeting  of  creditors  unless  he  shall  have  first  con- 
veyed, released,  or  delivered  up  his  security  to  the 
Sheriff,  for  the  benefit  of  all  creditors  of  the  assignor. 
At  such  meeting,  the  Sheriff  must  preside,  and  a  majority 
in  amount  of  demands  present  or  represented  by  proxy 
must  control  all  questions -and  decisions.  The  creditors 
may  adjourn  the  meeting  from  time  to  time,  and  may 
vote  on  all  questions,  either  in  person,  or  by  proxy  signed 
and  acknowledged  before  any  officer  authorized  to  take 
acknowledgments,  and  filed  with  the  Sheriff.  At  the 
meeting,  the  creditors  may  elect  one  or  more  assignees 
from  their  own  number,  in  the  place  and  stead  of  the 
Sheriff,  and  the  person  or  persons  so  elected  shall  after- 
ward be  the  assignee  or  assignees;  and  the  Sheriff,  by 
transfer  in  writing,  must  at  once  assign  to  such  elected 
assignee  or  assignees  all  the  property  so  assigned  to  him, 
and  deliver  possession  thereof.  The  Sheriff,  before  the 
delivery  of  the  assignment,  must  be  paid  the  expenses 
incurred  by  him,  and  fees  in  such  amount  as  would  by 
law  be  collectible  if  the  property  assigned  had  been  levied 
upon  and  safely  kept  under  attachment.  Thereupon  such 
elected  assignee  or  assignees  shall  take,  and  hold,  and 


582  BUSINESS  LAW  FOR  BUSINESS  MEN. 

dispose  of  all  such  property  and  its  •  proceeds,  for  the 
benefit  of  the  creditors  of  the  debtor. 
Civil  Code,  Section  3449. 

Section  693. — WHAT  is  INSOLVENCY. — A  debtor  is  in- 
solvent, within  the  meaning  of  the  law,  when  he  is  unable 
to  pay  his  debts  from  his  own  means,  as  they  become 
due.  But  a  person,  although  insolvent,  is  not  prevented 
by  the  law  from  transferring,  and  may  lawfully  transfer 
property  in  this  State  to  a  particular  creditor  or  cred- 
itors, for  the  purpose  of  paying  or  securing  a  debt  due, 
provided  the  transfer  is  made  in  good  faith. 

Section  694. — VOID  ASSIGNMENT. — An  assignment  for 
the  benefit  of  creditors  is  void  against  any  creditor  of  the 
assignor  not  assenting  thereto,  in  the  following  cases: 
(1)  If  it  give  a  preference  of  one  debt  or  class  of  debts 
over  another;  (2)  If  it  tend  to  coerce  any  creditor  to 
release  or  compromise  his  demand;  (3)  If  it  provide  for 
the  payment  of  any  claim  known  to  the  assignor  to  be 
false  or  fraudulent,  or  for  the  payment  of  more  upon 
any  claim  than  is  known  to  be  justly  due  from  the  as- 
signor; (4)  If  it  reserve  any  interest  in  the  assigned 
property,  or  in  any  part  thereof,  to  the  assignor,  or  for 
his  benefit,  before  all  his  existing  debts  are  paid;  (5)  If 
it  confer  upon  the  assignee  any  power  which,  if  exercised, 
might  prevent  or  delay  the  immediate  conversion  of  the 
assigned  property  to  the  purposes  of  the  trust;  (6)  If  it 
exempt  him  from  liability  for  neglect  of  duty  or  mis- 
conduct. 

Civil  Code,  Section  3457. 

Section  695. — INVENTORY  TO  BE  MADE  BY  DEBTOR.-— 
Within  twenty  days  after  making  an  assignment  for  the 
benefit  of  his  creditors,  the  debtor  must  make  and  file,  in 
the  office  of  the  County  Recorder  of  the  county  in  which 
he  resided  at  the  date  of  the  assignment,  a  full  and  true 
inventory  showing:  (1)  All  the  creditors  of  the  assignor; 


BUSINESS  CONTBACTS  AND  LEGAL  OBLIGATIONS.  583 

(2)  The  place  of  residence  of  each  creditor,  if  known  to 
the  assignor ;  or,  if  not  known,  that  fact  must  be  stated ; 

(3)  The  sum  owing  to  each  creditor,  and  the  nature  of 
each  debt  or  liability,  whether  arising  on  written  security, 
account,  or  otherwise;  (4)  The  true  consideration  of  the 
liability  in  each  case,   and  the  place   where  it   arose; 

(5)  Every  existing  judgment,  mortgage,  or  other  security 
for  the  payment  of  any  debt  or  liability  of  the  assignor ; 

(6)  All  property  of  the  assignor  at  the  date  of  the  assign- 
ment, which  is  exempt  by  law  from  execution;  and,  (7) 
All  of  the  assignor's  propert}r  at  the  date  of  the  assign- 
ment,  both   real   and  personal,   of  every  kind,   not   so 
exempt,  and  the  encumbrances  existing  thereon,  and  all 
vouchers  and  securities  thereto,  and  the  value  of  such 
property  according  to  the  best  knowledge  of  the  assignor. 

The  inventory  must  be  sworn  to  by  the  assignor. 
Civil  Code,  Section  3461. 

Section  696. — FAILURE  TO  FILE  INVENTORY. — A  failure 
on  the  part  of  a  debtor  to  make  and  file  the  inventory 
mentioned  in  the  last  section  does  not  render  the  assign- 
ment void.  The  law  provides  that  if  the  debtor  fails  in 
his  duty  to  file  the  inventory,  the  assignees  may  make  and 
file  for  record  a  verified  inventory  of  all  assets  received 
by  them ;  and  the  court,  on  petition  of  the  assignee,  will 
compel  the  debtor  to  appear  and  be  examined  relative  to 
all  matters  embraced  in  the  assignment,  and  will  also 
compel  him  to  bring  with  him  into  court  all  his  books, 
vouchers,  and  papers  relating  to  the  assigned  property. 
The  court  will  then  have  power  to  order  the  surrender  of 
the  books,  papers,  and  vouchers  to  the  assignee,  to  be 
retained  by  him  until  his  trust  is  fully  completed  and 
performed. 

Section  697. — EFFECT  OF  FAILURE  TO  RECORD  ASSIGN- 
MENT.— An  assignment  for  the  benefit  of  creditors  is  void 
against  creditors  of  the  assignor,  and  against  purchasers 
and  encumbrancers  in  good  faith  and  for  value,  unless 


584  BUSINESS  LAW  FOR  BUSINESS  MEN. 

it  is  recorded,  and  unless  either  the  inventory  required  of 
the  assignor,  or  the  inventory  required  of  the  assignee  or 
assignees,  is  filed  in  the  manner  provided  by  law. 
Civil  Code,  Section  3465. 

Section  698. — BOND  OF  ASSIGNEE. — No  bond  is  given 
by  the  Sheriff,  but  he  is  liable  on  his  official  bond  for  the 
care  and  custody  of  the  property  while  in  his  possession. 
Within  forty  days  after  the  date  of  the  transfer  by  the 
Sheriff,  the  assignee  must  enter  into  a  bond,  in  such 
amount  as  may  be  fixed  by  a  judge  of  the  Superior  Court 
of  the  county,  or  city  and  county,  in  which  an  inventory 
is  filed,  with  sufficient  sureties  to  be  approved  by  such 
judge,  and  conditioned  for  the  faithful  discharge  of  the 
trust  and  the  due  accounting  for  all  moneys  received  by 
the  assignee,  which  bond  must  be  filed  in  the  same  office 
with  the  inventory ;  and  any  assignee  failing  to  give  such 
bond  may  be  removed  by  the  Superior  Court  on  petition 
of  the  assignor  or  any  creditor,  and  his  successor  may 
be  appointed  by  the  court. 

Civil  Code,  Section  3467. 

Section  699. — ACCOUNTING  BY  ASSIGNEE. — After  six 
months  from  the  date  of  an  assignment  for  the  benefit  of 
creditors,  the  assignee  may  be  required,  on  the  petition 
of  any  creditor,  to  account  before  the  Superior  Court  of 
the  county  where  the  inventory  was  filed.  The  assignee's 
account,  when  rendered,  must  make  a  full  and  true  show- 
ing of  all  his  acts  with  relation  to  the  property  assigned 
to  him. 

Section  700. — PROPERTY  EXEMPT  FROM  ASSIGNMENT.— 
Property  exempt  from  execution,  and  insurance  upon  the 
life  of  the  assignor,  do  not  pass  to  the  assignee  by  a 
general  assignment  for  the  benefit  of  creditors,  unless  the 
instrument  specially  mentions  them,  and  declares  an  in- 
tention that  they  shall  pass  thereby. 
Civil  Code,  Section  3470. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  585 

Section  701. — COMPENSATION  OF  ASSIGNEE. — The  as- 
signee is  entitled  to  a  reasonable  compensation  for  his 
services,  and  also  to  all  necessary  expenses  incurred  by 
him  in  the  management  of  his  trust. 

Section  702. — ASSIGNEE  PROTECTED  FOR  ACTS  DONE  IN 
GOOD  FAITH. — The  assignee  is  protected  for  acts  done  in 
good  faith,  and  will  not  be  held  liable  for  such  acts  if  the 
assignment  is  afterward  declared  by  a  court  to  be  void. 

Section  703. — ASSIGNMENT  NOT  REVOCABLE. — An  as- 
signment for  the  benefit  of  creditors,  which  has  been 
executed  and  recorded  so  as  to  transfer  the  property  to 
the  Sheriff,  or  a  transfer  by  the  Sheriff  to  the  elected 
assignee  or  assignees  which  has  been  executed  and  re- 
corded, cannot  afterward  be  modified  or  canceled  by  the 
parties  without  the  consent  of  the  assignor  and  of  every 
cerditor. 

Civil  Code,  Section  3473. 

Section  704. — CREDITORS'  CLAIMS. — Notice  to  the  cred- 
itors must  be  published  by  the  assignee,  and  a  copy  mailed 
by  him  to  each  creditor,  and  the  creditors  must  prove 
their  claims ;  and  after  the  expiration  of  thirty  days  from 
the  first  publication  of  the  notice,  the  assignee  may,  in 
his  discretion,  declare  and  pay  dividends  to  the  creditors 
whose  claims  have  been  presented  and  allowed.  No  divi- 
dend already  declared  shall  be  disturbed  by  reason  of 
claims  being  subsequently  presented  and  allowed ;  but  the 
creditor  presenting  such  claim  shall  be  entitled  to  a 
dividend  equal  to  the  per  cent  already  declared  and  paid 
before  any  further  dividend  is  made ;  provided,  however, 
that  there  be  assets  sufficient  for  that  purpose ;  and  pro- 
vided, that  the  failure  to  present  such  claim  shall  not 
have  resulted  from  his  own  neglect ;  and  the  creditor  shall 
attach  to  such  claim  a  statement,  under  his  oath,  showing 
fully  why  it  was  not  before  presented. 


586  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Section  705. — CREDITOR  HOLDING  MORTGAGE  OR  PLEDGE. 
When  a  creditor  has  a  mortgage,  or  a  pledge  of  personal 
property  of  the  debtor,  or  a  lien  thereon  as  security  for 
the  payment  of  a  debt  due  him  from  the  debtor,  and 
shall  not  have  conveyed,  released,  or  delivered  up  such 
security  to  the  Sheriff,  he  shall  be  admitted  as  a  creditor 
only  for  the  balance  of  the  debt,  after  deducting  the  value 
of  such  mortgage,  pledge,  or  lien,  to  be  ascertained  by 
agreement  between  him  and  the  assignee,  or  by  a  sale 
thereof,  to  be  made  in  such  manner  as  the  Superior  Court 
of  the  county  in  which  the  assignment  is  made  shall 
direct;  or  the  creditor  may  release  or  convey  his  claim 
to  the  assignee  upon  such  property,  and  be  admitted  to 
prove  his  whole  debt.  If  the  value  of  the  property  ex- 
ceeds the  sum  for  which  it  is  so  held  as  security,  the 
assignee  may  release  to  the  creditor  the  debtor's  right  of 
redemption  on  receiving  such  excess ;  or  he  may  sell  the 
property,  subject  to  the  claim  of  the  creditor,  and  in  either 
case  the  assignee  and  creditor,  respectively,  shall  execute 
all  deeds  and  writings  necessary  or  proper  to  consum- 
mate the  transaction.  If  the  property  is  not  sold  or  re- 
leased, and  delivered  up,  the  creditor  will  not  be  allowed 
to  prove  any  part  of  his  debt. 

OPINIONS  BY  MAIL. — Opinions  will  be  prepared  in 
writing,  and  sent  by  mail,  to  any  client  in  any  part  of  the 
State.  Bequest  by  letter  for  a  legal  opinion,  on  any  sub- 
ject covered  by  the  California  laws,  will  receive  prompt 
attention  and  careful  investigation.  A.  J.  BLEDSOE, 
ATTORNEY-AT-LAW,  Los  Angeles,  Cal.  See  title  page  of 
this  book  for  office  address  of  A.  J.  Bledsoe. 


PART  V. 
COLLECTION  OF  BILLS  AND  ACCOUNTS 

Section  706. — METHODS  OF  MAKING  COLLECTIONS.— 
Custom  will  control  to  a  great  extent  the  methods  of 
making  collections  in  force  in  different  localities,  but 
whether  collections  be  made  monthly,  quarterly, .  semi- 
annually,  or  annually,  there  are  certain  provisions  of  the 
law  of  the  State  which  apply  to  all  methods,  and  which 
must  constantly  be  kept  in  mind.  Whether  a  creditor 
collects  his  bills  monthly,  or  at  longer  intervals  of  time, 
the  law  leaves  to  his  own  choice.  The  parties  may  con- 
tract for  payment  at  any  time  or  place,  and  the  law  will 
enforce  the  contract. 

Section  707. — PRESENTMENT  OF  BILLS  OB  STATEMENTS 
OF  ACCOUNT.- — The  debtor  is  entitled  to  have  a  bill  or 
statement  of  account,  showing  the  claim  of  his  creditor. 
This  is  usual  in  every  business,  and  it  is  more  necessary 
in  commercial  affairs  than  in  any  other,  for  the  book 
accounts  of  sales  of  merchandise,  and  other  similar  com- 
mercial transactions,  are  usually  kept  by  the  creditor 
alone. 

Section  708. — ITEMIZED  ACCOUNT. — When  a  bill  has 
been  presented  which  is  not  itemized,  the  debtor  has  a 
right  to  demand  of  the  creditor  an  itemized  account,  show- 
ing in  detail  all  the  items  of  the- claim  presented  to  him. 

Section  709.— OPEN  AND  CURRENT  ACCOUNT.— An  open 
account  is  an  account  where  no  balance  has  been  struck. 

587 


588  BUSINESS  LAW  FOB  BUSINESS  MEN. 

Until  a  balance  is  struck,  even  though  there  have  been 
mutual  dealings  between  the  parties,  the  account  is  open 
and  current. 

Section  710. — WHEN  OPEN  ACCOUNT  OUTLAWS. — An 

*v* 
open  account  will  outlaw  in  four  years.    That  is,  if  there 

is  a  claim,  for  goods  purchased,  for  instance,  upon  an 
open  account,  all  items  dating  back  more  than  fo«r  years 
will  be  outlawed,  and  in  a  suit  for  the  amount  of  the  bill 
the  plaintiff  cannot  recover  for  any  item  more  than  f«2& 
years  old.  So,  in  a  suit  for  work  or  labor  performed  by 
the  day  or  month,  where  there  has  not  been  a  mutual 
account,  no  part  can  be  collected  except  for  the  work  done 
within  feW-years. 

Code  of  Civil  Procedure,  Section  337. 

Section  711. — MUTUAL  ACCOUNT. — To  constitute  a 
mutual  account  there  must  be  reciprocal  demands.  An 
account  is  mutual  when  each  party  makes  charges  against 
the  other  in  his  books  for  property  sold,  service  per- 
formed, or  money  loaned  or  advanced.  A  payment  on 
account  will  not  make  the  account  mutual.  Mutual  ac- 
counts are  only  where  each  party  has  a  demand  or  right 
of  action  against  the  other.  Thus,  where  a  merchant  sells 
a  farmer  goods,  and  the  latter  sells  and  delivers  to.  the 
merchant,  hay,  grain,  or  a  horse,  or  any  other  article  of 
personal  property,  in  the  ordinary  course  of  business,  he 
has  a  demand  against  the  merchant,  and  the  merchant 
has  a  demand  against  him,  and  thus  the  account  between 
them  is  a  mutual  account.  In  the  course  of  mutual  deal- 
ings between  parties,  the  balance  due  may  sometimes  be 
on  the  one  side,  and  sometimes  on  the  other,  and  in  the 
ascertainment  of  the  state  of  account,  each  may  use  his 
own  demands  as  set  off  against  that  of  the  other  until 
the  less  is  exhausted  by  the  greater.  Where  it  appears, 
first,  that  the  account  between  the  parties  consists  of 
reciprocal  demands;  second,  that  the  account  is  open; 
and  third,  that  the  account  consists  of  different  items  of 


^L  COLLECTION  OF  BILLS  AND  ACCOUNTS 

^Section  710,  page  588 — Wherever  in  said  section  the  words  "four  years" 
appear,  cTfange  so  as  to  read  "two  years." 

Page  597,  add  the  following: 

•(a)  FRAUDULENT  REMOVAL  OF  PROPERTY— Every  debtor 
who  fraudulently  removes  his  property  or  effects  out  of  this  state,  or  fraudu- 
lently sells,  conveys,  assigns  or  conceals  his  property  with  intent  to  defraud, 
hinder  or  delay  his  creditors  of  their  rights,  claims  or  demands,  is  punishable 
by  imprisonment  in  the  county  jail  not  exceeding  one  year,  or  by  fine  not  ex- 
ceeding five  thousand  dollars,  or  by  both;  provided,  however,  that  where  the 
property  so  removed  or  sold  or  conveyed  or  assigned  or  concealed,  consists  of 
a  stock  in  trade  or  a  part  thereof,  of  a  value  exceeding  one  hundred  dollars, 
the  offense  shall  be  a  felony  and  punishable  as  such. 

Act  of  Legislature  of  California,  approved  May  9,  1921;  in  effect 
July  9,  1921. 

(b)  SMALL  CLAIMS  COURT— A  small  claims  court  has  been  created. 
All  Justice  Courts  are  small  claims  courts,  where  the  money  only  is  sued  for 
not  over  $50.  An  affidavit  must  be  made  before  the  Justice  of  the  amount  due. 
The  Justice  fixes  the  time  for  the  defendant  to  appear,  not  more  than  15  days 
nor  less  than  5  days  from  the  date  of  the  order.  No  attorney  is  allowed  to 
appear  in  the  case  on  either  side.  No  complaint  or  answer  is  required.  The 
defendant  may  appeal  to  the  Superior  Court,  but  if  he  loses  there  he  must 
pay  attorney's  fee  to  the  plaintiff  of  $15.  The  law  provides  that  no  fee  or 
charge  of  any  kind  or  nature  shall  be  charged  or  collected  by  the  Justice  or 
any  officer  for  services  rendered  in  the  case. 

Act  of  the  Legislature  of  California,  approved  May  16,  1921;  in  effect 
July  16,  1921. 


BUSINESS  CONTKACTS  AND  LEGAL  OBLIGATIONS.  589 

different  dates ;  it  is  then  said  to  be  a  mutual,  open,  and 
current  account. 

Section  712. — WHEN  MUTUAL  ACCOUNT  OUTLAWS.— 
A  suit  may  be  brought  on  a  mutual  account  at  any  time 
within  four  years  from  the  date  of  the  last  item  proved 
in  the  account  on  either  side.  When  any  item  of  a  mutual 
account  is  within  the  four  years,  none  of  the  account  is 
outlawed,  though  some  of  the  items  may  be  more  than 
four  years  old. 

Code  of  Civil  Procedure,  Section  337. 

Section  713. — STATED  ACCOUNT. — An  account  stated  is 
where  an  account  is  balanced  and  rendered,  and  the  per- 
son to  whom  it  is  rendered  assents  to  it  as  being  a  cor- 
rect statement  of  the  balance  due,  and  agrees  to  pay  it. 
The  stated  account  is  usually  in  writing,  but  under  cer- 
tain circumstances  it  may  be  verbal.  Where  there  is  an 
open  account,  and  the  parties  meet  and  agree  orally  be- 
fore any  portion  of  the  account  is  outlawed  upon  the 
balance  that  is  due,  and  there  is  an  agreement  to  pay 
such  balance,  this  will  be  good  as  an  account  stated.  The 
assent  to  an  account  stated  by  the  person  to  whom  it  is 
rendered  may  be  expressly  and  directly  given,  or  such 
assent  may  be  inferred  from  circumstances.  If  the  per- 
son receiving  the  statement  makes  no  objection  to  it,  and 
holds  it  for  a  long  time  apparently  satisfied  with  it,  his 
assent  to  it  will  be  inferred. 

Section  714. — WHEN  STATED  ACCOUNT  OUTLAWS.— 
When  the  parties  have  stated  and  adjusted  their  accounts, 
and  thus  ascertained  the  balance,  what  was  before  an 
implied  promise  to  pay  what  was  reasonable,  by  such 
adjusting  and  stating  of  accounts,  at  once  becomes  an 
expressed  promise  to  pay  a  sum  certain.  Where  an  ac- 
count stated  is  based  upon  an  account  of  one  item,  a  suit 
must  be  brought  within  four  years  from  the  date  of  said 
item ;  and  where  an  account  stated  is  based  upon  an  ac- 


55)0  BUSINESS  LAW  TOR  BUSINESS  MEN. 

count  of  more  than  one  item,  the  four  years  will  begin  to 
run  from  the  date  of  the  last  item. 

Act  of  the  Legislature,  approved  May  10,  1917 ; 
in  effect  July  27,  1917. 

Section  715. — INTEREST  ON  A  STATED  ACCOUNT. — The 
uniform  custom  of  a  merchant  or  manufacturer  is  pre- 
sumed to  be  known  to  those  who  are  in  the  habit  of  deal- 
ing with  him,  and  in  their  dealings  they  are  supposed  to 
act  with  reference  to  that  custom.  When  it  is  the  uni- 
versal custom  of  a  merchant  to  charge  interest  after 
thirty  days  upon  monthly  balances  due  upon  open  ac- 
counts, and  where  such  an  account  showing  the  interest 
charged  up  regularly  is  received  by  the  debtor  and  fully 
understood  by  him,  and  where  such  account  becomes 
stated,  either  by  the  prolonged  failure  of  the  debtor  to 
object  or  by  a  settlement  between  the  parties,  the  debtor 
is  bound  to  pay  the  balance  found  due,  including  the 
interest  charged. 

Section  716. — ASSIGNMENT  FOR  COLLECTION. — An  open 
account,  a  mutual  account,  or  an  account  stated,  may  be 
assigned  to  a  third  person  for  collection.  No  money  need 
be  paid  for  the  assignment.  The  consideration  will  be 
sufficient  to'  sustain  the  assignment,  if  the  person  to  whom 
the  account  is  assigned  undertakes  on  his  part  to  make 
collection.  If  the  assignee  brings  suit  on  the  account,  and 
the  debtor  makes  the  defense  that  there  was  no  considera- 
tion for  the  assignment,  it  will  be  a  sufficient  answer  to 
that  defense  to  show  that  the  account  was  assigned  for 
collection. 

Section  717. — ASSIGNEE  MAY  SUE  IN  His  OWN  NAME. — 
The  assignee  for  collection  may  bring  the  suit  in  his  own 
name.  The  law  of  California  provides  that  every  suit 
must  be  brought  in  the  name  of  the  real  party  in  interest ; 
but  the  assignee  for  collection  must  contribute  his  labor 
and  services,  and  his  presumed  undertaking  and  promise 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  59i 

to  do  so  is  a  sufficient  consideration  for  the  assignment  to 
enable  him  to  sue  in  his  own  name. 

Section  718. — ASSIGNMENT  MAY  BE  VERBAL  OK  WHIT- 
TEN. — The  assignment  of  an  account,  open,  mutual,  or 
stated,  may  be  made  verbally  or  in  writing.  It  is  usual 
to  make  such  assignments  in  writing,  because  this  of 
itself  affords  documentary  proof  of  the  assignment;  but 
a  verbal  assignment  will  be  sufficient,  where  the  proof  is 
conclusive. 

Section  719. — ASSIGNMENT  BY  ONE  PARTNER  OF  PART- 
NERSHIP ACCOUNT. — One  partner  may  make  an  assign- 
ment of  a  partnership  account,  in  the  name  of  the  firm, 
and  the  assignment  will  be  good.  It  is  of  no  consequence 
to  the  debtor,  as  it  in  no  respect  affects  his  liability, 
whether  the  assignment  was  made  at  one  time  or  another, 
or  with  or  without  consideration,  or  by  one  or  by  all  the 
members  of  the  firm.  One  member  of  a  firm  may  even 
assign  a  partnership  claim,  in  the  name  of  the  firm,  to 
himself  individually,  and  this  will  be  sufficient  to  enable 
him  to  sue  on  it,  if  the  other  partners  do  not  object.  The 
other  partners  making  no  objections,  the  debtor  will  not 
be  allowed  to  do  so. 

Section  720. — COLLECTION  OF  ACCOUNTS  WHEN  BOOKS 
ARE  LOST. — Though  the  books  in  which  the  accounts  were 
kept  are  lost,  from  whatever  cause,  by  fire,  or  theft,  or 
by  being  mislaid,  yet  the  accounts  can  be  collected,  if  they 
can  be  proved  in  some  other  way.  First,  the  loss  of  the 
books  of  original  entry  must  be  shown,  and  diligent 
search  to  find  them ;  then,  the  accounts  may  be  proved  by 
producing  other  books  into  which  they  were  copied  from 
me  original  entry  book,  or,  if  none  such  exist,  by  the 
verbal  testimony  of  bookkeepers,  agents,  clerks,  pro- 
prietors, or  any  one  who  may  know  what  the  accounts 
consisted  of. 


592  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Section  721. — WHAT  DEBTOR  MAY  SET  OFF  AGAINST 
ASSIGNED  ACCOUNT. — When  the  assignee  of  an  account 
sues  to  recover  the  amount  due,  the  debtor  may  set  off 
against  the  claim  any  claim  which  he  had  against  the 
creditor  himself  at  the  time  of  the  assignment,  or  before 
notice  to  him  of  the  assignment.  But  his  claim  must  be 
one  upon  which  he  could  have  maintained  an  independent 
action,  and  be  one  of  contract ;  for  he  could  not,  in  a  suit 
against  him  upon  an  account,  brought  by  either  the 
creditor  or  his  assignee,  defend  by  setting  up  a  demand 
for  damages  for  a  wrong  suffered  by  him. 

Code  of  Civil  Procedure,  Section  368. 

Section  722. — AUTHORITY  OF  AGENT  IN  MAKING  COL- 
LECTIONS.— The  authority  of  agents  in  making  collections 
will  be  equal  to  the  power  actually  or  ostensibly  delegated 
to  them  by  the  principal.  If  the  debtor  is  informed  by 
the  creditor  that  a  certain  person  or  a  bank  is  his  agent 
to  make  collections,  there  can  seldom  be  any  danger  in 
inferring  full  and  extensive  authority  on  the  part  of  the 
agent  to  do  everything  necessary  in  and  about  the  col- 
lection. But  it  often  happens  that  the  authority  of  the 
agent,  and  the  extent  of  his  powers,  must  be  ascertained, 
not  by  any  direct  communication  from  the  creditor,  but 
from  a  long-continued  course  of  dealing  or  custom  of 
trade.  If  an  agent  for  collection  has  been  in  the  habit 
of  collecting  in  a  certain  manner,  or  of  making  discounts 
upon  certain  accounts,  or  has  collected  regularly  for  the 
same  firm  or  person  at  a  particular  place  for  a  long  time, 
these  facts  being  known,  it  will  be  presumed  that  he  has 
authority  from  his  principal  coextensive  with  his  acts. 

Section  723. — RATIFICATION  OF  AGENT'S  ACTS. — Even 
though  one  who  represents  himself  as  an  agent  to  make 
collections  really  has  no  such  authority,  the  creditor  for 
whom  the  collection  is  made  may  so  conduct  himself  as 
to  create  a  ratification  of  the  agent's  acts.  Thus,  if  he 
receives  the  proceeds  from  the  agent,  or  knows  of  the 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  593 

manner  of  collection  and  makes  no  objection,  or  in  any 
way  leads  the  debtor  to  believe  that  he  is  satisfied  with 
the  agent's  conduct,  he  will  be  deemed  to  have  ratified  the 
acts  of  the  agent,  and  thus  bind  himself. 

Section  724. — AGENT'S  COMMISSIONS  UPON  COLLEC- 
TIONS.— The  law  leaves  the  agent's  commissions  upon  col- 
lections made  by  him  to  be  regulated  by  the  agreement 
of  the  parties.  But  if  a  creditor  sends  a  bill  or  account 
to  an  agent,  with  instructions  to  collect  the  same  from 
the  debtor,  and  the  agent  proceeds  to  make  the  collection, 
and  nothing  is  said  about  the  agent's  compensation,  there 
will  be  an  implied  obligation  on  the  part  of  the  creditor 
to  pay  the  agent  a  reasonable  commission.  What  is  a 
reasonable  commission  will  depend  upon  circumstances, 
taking  into  consideration  the  nature  of  the  collection,  the 
amount  of  labor  and  skill  employed,  and  the  amount 
usually  paid,  if  there  is  any  custom,  for  such  collections 
in  the  particular  locality  or  business. 

Section  725. — COLLECTION  OP  BILLS  AND  ACCOUNTS 
WHEN  DEBTOR  is  DEAD. — When  the  debtor  is  dead,  a  claim 
upon  the  account  must  be  presented  to  his  Administrator 
or  Executor.  The  claim  must  be  allowed  and  approved 
by  the  Administrator  or  Executor  and  the  Judge  of  the 
Superior  Court.  If  the  claim  is  not  allowed,  the  creditor 
can  then  sue  the  Administrator  or  Executor,  as  the  case 
may  be.  See  the  subject, ' '  Estates  of  Deceased  Persons. ' ' 

Section  726. — SUIT  IN  JUSTICE  COURT  ON  BILLS  AND 
ACCOUNTS. — A  suit  to  collect  the  amount  of  a  bill  or  ac- 
count must  be  brought  in  the  Justice  Court,  when  the 
amount  is  less  than  $300,  exclusive  of  interest.  In  actions 
for  the  recovery  of  wages  for  labor  performed,  the  Court 
must  add,  as  part  of  the  costs,  an  attorney's  fee  not  ex- 
ceeding twenty  per  cent  of  the  amount  recovered.  This 
also  applies  to  suits  in  the  Superior  Court. 

Act  of  the  Legislature,  in  effect  April  28,  1907. 


594  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Section  727. — IN  WHAT  TOWNSHIP  SUIT  MUST  BE 
BROUGHT. — If  the  money  is  to  be  paid  at  a  certain  place, 
then  the  suit  may  be  brought  in  the  township  and  county 
where  the  place  of  payment  is  situated.  But  if  goods 
are  sold  in  San  Francisco  to  a  person  in  Ukiah,  and  the 
bill  is  to  be  paid  at  Ukiah,  then  the  creditor  must  sue  in 
the  Justice  Court  in  Ukiah  Township.  If  the  bill  is  to 
be  paid  at  San  Francisco,  the  suit  may  be  brought  in  the 
Justice  Court  there.  If  there  is  no  agreement  as  to  where 
the  obligation  to  pay  is  to  be  performed,  then  the  suit 
must  be  brought  in  the  township  and  county  where  the 
debtor  resides. 

Section  728. — SUIT  IN  SUPERIOR  COURT  ON  BILLS  AND 
ACCOUNTS. — If  the  bill  amounts  to  $300  or  more,  exclusive 
of  interest,  a  suit  to  collect  the  amount  due  must  be  com- 
menced in  the  Superior  Court.  However,  the  creditor 
may  waive  all  the  excess  of  his  claim,  and  sue  in  the 
Justice  Court  for  a  sum  less  than  $300,  exclusive  of  in- 
terest, thus  remitting  to  the  debtor  all  of  the  account 
exceeding  the  amount  sued  for. 

Section  729. — IN  WHAT  COUNTY  SUIT  IN  SUPERIOR 
COURT  MUST  BE  BROUGHT. — The  same  rule  applies  to  suits 
in  the  Superior  Court  as  obtains  in  the  matter  of  Justice 
Court  suits.  That  is,  where  there  is  no  place  agreed  upon 
for  the  performance  of  the  debtor's  obligation  to  pay,  the 
debtor  has  a  right  to  have  the  suit  tried  in  the  Superior 
Court  of  the  county  where  he  resides ;  but  if  the  bill  is  to 
be  paid  where  the  creditor  resides,  or  at  some  other  place, 
the  suit  may  be  tried  there.  The  creditor  may  bring  his 
suit  in  the  Superior  Court  of  the  county  where  he  lives 
or  has  his  place  of  business,  in  any  event,  and  the  suit  wiU 
be  tried  there,  unless  the  debtor  appears  and  moves  for 
the  transfer  of  the  case  to  the  Superior  Court  of  the 
county  of  his  own  residence. 

Section  730. — ATTACHMENT  OF  DEBTOR'S  PROPERTY  IN 
SUIT  TO  COLLECT  ACCOUNT. — What  property  of  the  debtor 


M I  SI  N  ESS  CON  TRACTS  AND  LEGAL  OBLIGATIONS.  595 

is  the  subject  of  attachment,  to  secure  the  collection  of  an 
account,  in  a  suit  by  the  creditor  or  his  assignee,  and  what 
property  is  exempt  from  attachment  and  execution,  will 
be  found  fully  stated  under  the  head  of  "  Attachments  and 
Executions." 

Section  731. — MEANS  FOR  COLLECTION  TO  BE  EMPLOYED 
BY  AGENT. — Authority  of  an  agent  to  collect  implies  and 
includes  the  right  on  his  part  to  use  all  the  ordinary  means 
for  collection,  and  among  these  are  the  employment  of 
attorneys  and  the  commencement  of  suits. 

Section  732. — PAYMENT  TO  WIFE  OF  CREDITOR. — Where 
a  man's  wife  is  in  the  habit  of  transacting  business  for 
him,  receiving  and  paying  out  money  for  him  with  his 
consent,  payment  to  her  of  a  debt  due  him  in  his  presence, 
without  objection  from  him,  is  a  payment  to  him. 

Section  733. — PAYMENT  OF  NOTE  TO  SUPPOSED  AGENT.— 
A  party  who  in  good  faith  makes  payments  upon  a  prom- 
issory note  to  one  whom  he  has  reason  to  believe  is  the  au- 
thorized agent  of  the  holder  thereof,  and  whose  acts  in 
receiving  such  payments  have  come  to  the  knowledge  of 
the  holder,  and  have  not  been  repudiated  by  him,  cannot 
be  held  for  the  money  so  paid  to  the  agent. 

Section  734. — TAKING  GOODS  FOR  CREDITORS'  CLAIMS.— 
Where  creditors,  after  receiving  an  offer  of  a  bill  of  sale 
from  their  debtor,  assign  their  claims  to  a  collecting  agent 
for  the  purpose  of  conducting  the  transaction,  with  au- 
thority "to  take  the  goods  in  full  of  the  creditor's  claims," 
the  agent  has  authority  to  agree  with  the  debtor  that  the 
sale  shall  be  conditional,  and  that  the  goods  will  be  sur- 
rendered to  him,  when  enough  is  realized  from  the  sales 
to  satisfy  the  claim. 

Section  735. — ACCEPTING  PROMISSORY  NOTE. — Under 
authority  to  settle  with  the  debtor,  and  take  anything  he 
can  get,  an  agent  lias  power  to  accept  a  promissory  note. 


596  BUSINESS  LAW  FOB  BUSINESS  MEN. 

Section  736. — COLLECTION  OF  NOTES  BY  AGENT. — Au- 
thority given  an  agent  to  collect  money,  due  on  a  note  and 
mortgage,  is  not  authority  to  the  agent  to  accept  a  convey- 
ance of  the  mortgaged  premises  in  payment. 

One  who  holds  a  note  for  collection  cannot,  without 
authority  from  the  payee,  agree  to  discharge  one  of  the 
joint  makers  upon  payment  by  him  of  a  part  of  the  sum 
due. 

Although  a  mortgagee  has  authorized  an  agent  to  col- 
lect interest  and  to  receive  payment  of  the  principal  when 
due,  the  agency  does  not  extend  to  receiving  payment  of 
principal  before  maturity. 

The  existence  of  an  agent's  authority  to  receive  pay- 
ment of  notes  may  be  inferred  from  the  mutual  conduct 
and  relations  of  the  parties,  or  from  the  general  nature  of 
the  transactions  in  which  they  are  concerned  and  the  cir- 
cumstances surrounding  them. 

Section  737. — APPLICATION  OF  PAYMENTS  ON  ACCOUNT. 

Where  a  payment  is  made  upon  general  account,  with 
no  direction  as  to  its  application,  the  law  applies  it  to  the 
oldest  items;  that  is,  the  first  debits  are  to  be  charged 
against  the  first  credits,  and  the  debt  paid  according  to 
priority  of  time.  In  the  case  of  a  running:  account  between 
parties,  where  there  are  various  items  of  debit  on  one  side 
and  of  credit  on  the  other,  occurring  at  different  times, 
and  no  special  appropriation  of  payments  constituting  the 
credits  has  been  made  by  either  party,  the  successive  pay- 
ments and  credits  are  to  be  applied  in  discharge  of  the 
items  of  debit  antecedently  due,  in  the  order  of  time  in 
which  they  stand  in  the  accounts.  In  other  words,  each 
item  of  payment  or  credit  is  applied  in  extinguishment  of 
the  earliest  items  of  debt,  until  it  is  exhausted. 

Section  738. — FORM  OF  ASSIGNMENT  OF  AN  ACCOUNT. — 
The  following  is  a  form  of  assignment  of  an  account : 

Know  all  men  by  these  presents,  that  I 

of ,  State  of  California,  in  consideration  of 

dollars  to  be  paid  by of State  of 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  597 

California,  the  receipt  whereof  is  hereby  acknowledged, 

do  hereby  sell,  assign,  and  transfer  to  said all 

and  whatsoever  sum  or  sums  of  money  now  due  and  be- 
coming due  to  me  from of 

State  of  California;  to  have  and  to  hold  the  same  to  the 

said ,  with  power  to  collect  the  same  in  my 

name  and  as  my  attorney  hereunto  duly  authorized,  to 
his  own  use. 

It  is  expressly  understood,  however,  that  I,  the  said 

,  am  forever  to  be  kept  and  saved  harmless 

by  the  said from  all  cost  or  charge  here- 
after, in  any  way  or  manner,  for  and  from  the  expense  of 
the  collection  of  the,  sup&  and  sums  hereby  sold  and  as- 
signed. 

In  witness  whereof  I  have  hereunto  set  my  hand  and 

seal  this day  of 19 

(Seal.) 

A.  J.  BLEDSOE,  ATTOENEY-AT-LAW,  Los  Angeles,  Cal. — 
Corporations  organized  and  advised;  capital  stock;  issue 
and  sale  of  stocks  and  bonds;  assessments;  increase  of 
capital  stock;  election  of  directors;  general  corporation 
law  of  California  applied  to  particular  cases.  See  title 
page  of  this  book  for  office  address  of  A.  J.  Bledsoe. 


PART  VI. 


Section  739. — WHAT  Is  A  PROMISSORY  NOTE. — The  stat- 
ute law  of  California  defines  a  promissory  note  to  be  "an 
instrument  negotiable  in  form,  whereby  the  signer  prom- 
ises to  pay  a  specified  sum  of  money."  But,  while  it  is 
defined  as  an  instrument  "negotiable  in  form,"  it  may 
be  not  negotiable,  and  still  be  a  promissory  note.  And  the 
law  of  the  State,  as  well  as  the  rules  of  commercial  busi- 
ness, recognizes  two  classes  of  promissory  notes,  nego- 
tiable and  non-negotiable.  The  difference  between  these 
two  classes, — what  constitutes  a  negotiable  note,  and 
what  is  meant  by  a  non-negotiable  note, — will  be  found 
stated  further  on,  in  other  sections. 
Civil  Code,  Section  3244. 

Section  740. — WHO  MAY  BE  PARTIES. — All  persons 
capable  of  entering  into  a  contract  may  be  parties  to  a 
promissory  note,  and  be  bound  by  it.  And  all  persons  in 
California  are  capable  of  contracting  except  minors,  per- 
sons of  unsound  mind,  and  persons  deprived  of  civil 
rights.  A  minor  in  California  is  a  male  under  the  age  of 
21  years,  or  a  female  under  the  age  of  18  years.  A  minor 
under  the  age  of  18  cannot  make  a  contract  relating  to 
real  property,  or  relating  to  any  personal  property  not 
in  his  immediate  possession  or  control ;  but  he  may  make 
any  other  contract  in  the  same  manner  as  an  adult,  sub- 
ject to  certain  conditions,  stated  in  the  next  Section.  A 
person  of  unsound  mind,  entirely  without  understanding, 
as  an  idiot  or  lunatic,  has  no  power  to  make  a  contract  of 

598 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  599 

any  kind;  but  a  contract  may  be  made  by  a  person  of 
unsound  mind  who  is  not  entirely  without  understanding, 
such  a  contract,  however,  being  subject  to  be  set  aside  in 
court.  A  person  deprived  of  civil  rights  is  not  capable  of 
making  a  contract  while  in  that  condition.  A  person  is 
deprived  of  civil  rights  when  he  is  sentenced  to  imprison- 
ment in  the  State  Prison  for  life,  and  his  civil  rights  are 
suspended  during  the  term  when  he  is  sentenced  for  a 
term  less  than  life.  A  convict  may,  however,  make  and 
acknowledge  a  sale  and  conveyance  of  property. 

Civil  Code,  Sections  33,  34,  38,  39,  1556;  Penal 
Code,  Sections  673,  674,  675. 

Section  741. — NOTE  MADE  BY  MINOR. — A  minor  may 
make  a  promissory  note  at  any  time  before  he  comes  of 
age.  But,  if  he  does  make  a  promissory  note  while  under 
the  age  of  18  years,  he  may  disown  and  repudiate  it,  either 
before  he  comes  of  age  or  within  a  reasonable  time  after- 
wards, by  giving  notice  that  he  disaffirms  it.  If  he  dies 
before  coming  of  age,  his  heirs  or  executors  have  a  right 
to  disown  and  repudiate  the  note.  No  part  of  a  note  made 
by  a  minor  under  the  age  of  18  years  can  be  collected,  if 
he  repudiates  and  disaffirms  it  before  he  reaches  his 
majority,  or  within  a  reasonable  time  afterwards.  If  a 
minor  over  18  years  of  age  makes  a  note,  he  may  likewise 
repudiate  and  disaffirm  it,  before  becoming  of  age  or  with- 
in a  reasonable  time  afterwards,  but  he  must  restore  the 
consideration  to  the  party  from  whom  it  was  received. 
Thus,  if  a  young  man,  over  the  age  of  18  and  under  21 
years  of  age,  borrows  a  sum  of  money,  and  makes  his 
note  as  security,  he  may  disown  and  repudiate  the  con- 
tract in  the  manner  before  stated,  but  he  must  return  to 
the  lender  the  money  he  actually  received.  The  reason  of 
the  distinction  between  the  contracts  of  minors  under  the 
age  of  18  and  the  contracts  of  minors  over  18  years  is  this, 
that  a  minor  under  the  age  of  18  is  presumed  not  to  have 
arrived  at  an  age  of  judgment  and  discretion  sufficient  to 
protect  him  from  the  schemes  of  those  who  might  take 


600  BUSINESS  LAW  FOE  BUSINESS  MEN. 

advantage  of  his  infancy  to  defraud  him ;  and  all  persons 
who  enter  into  a  contract  with  a  minor  under  the  age  of 
18  must  do  so  at  the  peril  of  having  such  a  contract  abso- 
lutely disowned  and  disaffirmed. 
Civil  Code,  Section  35. 

Section  742. — NOTE  MADE  TO  MINOK. — A  promissory 
note  may  be  made  to  a  minor,  and  he  takes  it  subject  to 
the  same  right  to  disaffirm  the  contract  as  he  possesses 
with  relation  to  a  note  made  by  him.  If  he  takes  a  note 
made  to  himself,  and  does  not  give  notice  of  disaffirm- 
ance  to  the  maker,  before  he  attains  his  majority  or  with- 
in a  reasonable  time  afterwards,  the  maker  will  be  bound, 
and  the  note  can  be  collected.  Also  a  minor  who  takes  a 
note  made  to  himself  may  transfer  it  by  indorsement  to 
another,  and  the  person  to  whom  he  indorses  the  note  can 
collect  it,  unless  after  indorsement  the  minor  gives  notice 
to  the  maker  that  he  disaffirms  and  repudiates  the  note. 
In  other  words,  the  person  to  whom  a  minor  indorses  a 
note  will  take  it  subject  to  the  right  of  the  minor  to  dis- 
affirm it. 

Section  743. — NOTE  MADE  BY  MARRIED  WOMAN. — In  this 
state  a  married  woman  may  enter  into  any  contract  with 
any  person,  respecting  property,  which  she  might  do  if 
unmarried.  She  may  buy  or  sell,  lease  or  mortgage,  lend 
or  borrow,  in  her  own  name  and  on  her  own  account.  It 
follows,  as  a  matter  of  course,  that  a  note  made  by  a  mar- 
ried woman  is  a  valid  and  binding  obligation,  for  she  has 
the  right  to  make  it.  But  a  note  made  by  a  married 
woman,  and  signed  by  her  alone,  can  only  be  collected  out 
of  her  separate  property.  The  community  property  be- 
longing to  the  husband  and  wife  is  not  liable  for  the  con- 
tracts of  the  wife  made  before  marriage.  The  separate 
property  of  the  wife,  out  of  which  alone  a  note  made  by 
her  can  be  collected,  includes  all  property  which  she 
owned  before  marriage,  and  all  property  which  she 
acquires  after  marriage  by  gift,  or  by  will,  or  by  descent 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  601 

to  her  as  heir,  and  the  rents  and  profits  of  such  property. 
If  a  note  made  by  a  married  woman  is  sued  on,  the  judg- 
ment can  only  be  enforced  against  her  separate  property. 
A  married  woman  may  contract  with  her  husband  as  well 
as  with  others,  and  a  valid  note  may  be  made  by  her  to 
him. 

Civil  Code,  Sections  158, 162. 

Section  744. — NOTE  MADE  TO  MAKEIED  WOMAN. — A 
promissory  note  may  be  made  to  a  married  woman,  and 
she  may  collect  it  alone,  without  reference  to  her  husband, 
if  it  relates  to  her  separate  property.  She  may  legally 
take  a  promissory  note  from  her  husband,  as  well  as  from 
others.  She  may  sue  in  her  own  name  to  collect  a  note 
made  to  her,  if  it  concerns  her  separate  property,  and  her 
husband  need  not  be  a  party  to  the  suit. 

Code  of  Civil  Procedure,  Section  370. 

Section  745. — NOTE  MADE  BY  CORPORATION. — A  promis- 
sory note  may  be  made  by  a  corporation,  as  well  as  by  a 
natural  person.  But  there  are  certain  necessary  requis- 
ites to  the  validity  of  a  note  made  by  a  corporation  which 
do  not  exist  in  the  case  of  a  natural  person.  While  a  man 
may  act  as  his  own  individual  will  shall  dictate,  a  corpora- 
tion, being  a  creature  without  a  soul,  can  only  act  by 
means  of  agents.  These  agents  may  have  general  powers 
delegated  to  them,  which  serve  for  all  occasions,  or  they 
may  have  special  powers  given  them,  for  a  certain  pre- 
scribed purpose.  In  either  case,  many  important  ques- 
tions frequently  arise  as  to  the  power  of  its  agents  to  bind 
a  corporation.  A  corporation  must  be  managed  and  con- 
trolled by  a  Board  of  Directors,  having  under  them,  and 
subject  to  their  directions,  certain  officers  or  other  agents. 
In  California,  the  Board  of  Directors  of  a  corporation 
may  consist  of  a  number,  not  less  than  three,  or  any  larger 
number,  selected  from  among  the  members  or  stockhold- 
ers. A  majority  of  the  Board  constitutes  a  quorum.  Un- 
less a  quorum  of  the  Board  of  Directors  is  present  and 


002  BUSINESS  LAW  FOB  BUSINESS  MEN. 

acting,  no  business  performed  is  valid  as  against  the  cor- 
poration. The  Directors  are  agents  of  the  corporation 
only  when  they  act  as  a  Board.  Therefore,  if  a  corpora- 
tion makes  a  note,  such  action  must  be  authorized  by  its 
Board  of  Directors,  a  majority  of  the  Board  being  pres- 
ent. A  corporation  must  have  a  seal.  It  can  only  do  the 
business  for  which  it  was  organized.  A  corporation  or- 
ganized for  one  purpose  cannot  carry  on  business  for 
another  purpose.  In  the  course  of  its  legitimate  business, 
a  corporation  may  borrow  money,  or  secure  a  creditor, 
and  make  its  note  therefor.  This  is  done  by  the  vote  of 
the  Directors,  at  a  regular  meeting,  a  majority  being 
present.  A  record  of  the  votes  must  be  kept,  the  ayes  and 
noes  being  recorded.  A  majority  of  the  Board  must  vote 
in  favor  of  the  proposition.  The  execution  of  the  note 
being  thus  authorized,  the  President  may  sign  the  name 
of  the  corporation,  affix  the  seal  of  the  corporation,  and 
deliver  the  note  for  the  corporation.  No  director  must 
be  financially  interested  in  the  transaction  in  which  the 
note  is  authorized  to  be  executed,  in  any  way  which  con- 
flicts with  the  interests  of  the  corporation.  If  any  direc- 
tor is  so  interested,  and  it  requires  his  vote  to  make  a 
majority  in  favor  of  the  proposition,  the  action  of  the. 
Board  will  not  be  legal,  and  the  note  will  be  void.  The 
note  must  be  made  in  the  legitimate  business  of  the  cor- 
poration, otherwise  it  will  be  void.  For  instance,  if  the 
directors  of  a  banking  corporation  should  borrow  money 
to  build  a  railroad,  the  building  of  railroads  not  being  one 
of  its  purposes,  the  act  of  the  directors  is  outside  of  their 
power,  and  the  note  is  invalid.  Every  person  taking  a 
note  from  a  corporation  is  presumed  to  know  the  pur- 
poses of  its  organization,  and  is  presumed  to  know 
whether  the  execution  of  the  note  was  authorized  as  the 
law  directs.  Therefore  the  person  to  whom  the  note  is 
made  is  bound  to  inform  himself  of  the  facts ;  for,  if  the 
note  has  not  been  made  by  legal  authorization  of  the 
directors,  or  if  it  is  outside  the  power  of  the  corporation, 
and  not  within  its  legitimate  business,  in  a  suit  on  the 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  603 

note,  the  corporation  can  make  that  defense  and  defeat 
the  collection  of  the  note.  If  a  note  has  been  made,  in 
the  manner  and  for  a  purpose  authorized  by  law,  the 
corporation  is  legally  bound  to  pay  it.  And,  further,  each 
stockholder  in  the  corporation  becomes  bound  for  the  pay- 
ment of  the  note.  Each  stockholder  is  individually  and 
personally  liable  for  such  proportion  of  the  note  of  the 
corporation  as  the  amount  of  stock  or  shares  owned  by 
him  bears  to  the  whole  of  the  subscribed  capital  stock  or 
shares  of  the  corporation.  The  liability  of  each  stock- 
holder is  determined  by  the  amount  of  stocks  or  shares 
owned  by  him  at  the  time  the  note  was  made.  In  corpora- 
tions having  no  capital  stock,  each  member  is  individually 
and  personally  liable  for  his  proportion  of  the  amount 
due  on  the  note.  It  sometimes  happens,  too,  that,  after 
the  president  or  other  agent  of  the  corporation  has  made 
a  note  for  it,  without  authority  first  given,  but  for  the 
legitimate  uses  and  purposes  of  the  corporation,  the  direc- 
tors afterward  ratify  the  act  of  the  agent.  This  ratifica- 
tion may  be  by  a  resolution  passed  at  a  meeting  of  the 
board,  or  it  may  occur  where  the  corporation  enjoys,  in 
its  proper  business,  the  fruits  of  the  transaction.  In  either 
case,  the  corporation  and  its  stockholders  or  members  are 
equally  bound  as  when  the  note  is  made  by  previous 
authority.  Where  the  transaction  concerning  the  execu- 
tion of  a  promissory  note  by  a  corporation  is  fully  entered 
in  the  books  of  the  corporation,  and  notice  thus  imparted 
to  it,  and  after  such  notice  the  corporation  retains  the 
consideration  of  the  transaction,  and  thus  accepts  the 
benefits,  it  must  be  held  to  have  ratified  the  transaction. 
(Decided  by  the  Supreme  Court  of  California,  in  the  case 
of  Curtin  vs.  Salmon  Eiver  Hydraulic  Gold  Mining  and 
Ditch  Company,  which  decision  is  printed  in  Volume  26, 
California  Decisions,  page  949.) 

Civil  Code,  Sections  290,  305,  308,  322. 

Section  746. — NOTE  MADE  TO  CORPORATION. — A  note 
may  be  made  to  a  corporation,  as  well  as  by  it.    The  note 


604  BUSINESS  LAW  FOB  BUSINESS  MEN. 

should  be  made  to  the  corporation  by  its  corporate  name, 
but  a  mistake  in  the  name  will  not  invalidate  the  note.  If 
there  is  a  mistake  in  the  name  of  the  corporation,  in  the 
note,  that  will  make  no  difference,  if  it  can  be  reasonably 
ascertained  from  the  note  what  corporation  is  intended. 
Having  taken  and  received  the  note,  the  corporation  has 
•the  same  rights,  with  reference  to  its  collection,  as  an 
individual  would  have. 

Civil  Code,  Section  357. 

Section  747. — NOTE  MUST  BE  IN  WHITING. — There  is 
no  such  thing  as  a  verbal  promissory  note.  A  promissory 
note  must  be  in  writing. 

Section  748. — NOTE  MAY  BE  IN  PENCIL. — While  a 
promissory  note  must  be  in  writing,  such  writing  need  not 
be  in  ink;  it  may  be  in  pencil;  and  it  need  not  be  all  in 
the  handwriting  of  the  maker ;  for  it  may  be  printed,  or 
it  may  be  typewritten,  yet  if  the  name  of  the  maker  is 
signed  to  it,  the  note  will  be  valid. 

Section  749. — MUST  BE  FOB  THE  PAYMENT  OF  MONEY.— 
A  promissory  note  must  be  for  the  payment  of  money, 
and  for  the  payment  of  money  only.  So,  a  written  prom- 
ise to  pay  money  and  goods,  or  to  pay  goods  alone,  is  not 
a  legal  promissory  note.  No  written  promise  to  pay  is  a 
valid  promissory  note,  unless  it  be  for  the  payment  of 
money,  and  of  money  only.  But  it  may  be  made  payable 
in  the  money  or  currency  of  any  other  country,  as  well  as 
in  the  money  of  the  United  States.  It  may  be  made  pay- 
able in  the  money  of  England,  or  France,  or  Spain,  or 
Holland,  or  Italy,  or  of  any  other  country,  and  will  be  just 
as  binding  as  though  made  payable  in  the  coin  of  the 
United  States.  It  may  be  made  payable  in  coins,  such  as 
guineas,  ducats,  doubloons,  crowns,  or  in  dollars,  or  in 
pounds  sterling. 

Civil  Code,  Section  3244. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  605 

Section  750. — MUST  BE  FOE  A  CERTAIN  SPECIFIED 
AMOUNT. — Not  only  must  the  note  be  for  the  payment  of 
money,  but  it  must  also  be  for  a  certain  specified  amount. 
The  amount  stated  in  the  note  must  be  fixed  and  certain. 
Therefore,  if  the  promise  be,  to  pay  a  specified  sum  of 
money,  with  all  other  sums  that  may  be  due ;  or,  to  pay  a 
specified  sum  of  money,  and  the  demands  of  another  per- 
son ;  or,  to  pay  a  specified  sum  of  money,  after  deducting 
allowances  and  expenses ;  in  all  such  cases  the  instrument 
is  void  as  a  promissory  note,  because  the  amount  to  be 
paid  is  not  fixed  with  certainty  on  the  face  of  the  note. 
The  amount  to  be  paid,  however,  if  it  be  a  fixed  sum,  need 
not  be  written  in  words,  but  may  be  expressed  in  figures. 
Civil  Code,  Section  3244. 

Section  751. — MUST  NOT  BE  SUBJECT  TO  ANY  CONDI- 
TION OR  CONTINGENCY. — The  note,  to  be  valid,  must  not  be 
subject  to  any  condition  or  contingency  which  might 
defeat  the  promise  to  pay.  The  money  must  be  payable 
absolutely,  and  must  not  depend  upon  the  happening  or 
not  happening  of  some  event.  Consequently,  if  a  note  is 
made  payable  provided  a  thing  is  done,  or  provided  a 
thing  is  not  done,  or  which  makes  the  payment  depend 
upon  any  contingency  or  uncertainty,  it  is  not  a  promis- 
sory note. 

Section  752. — FORM  OF  NOTE. — A  promissory  note 
need  not  be  in  any  particular  form,  so  long  as  it  is  cer- 
tainly to  be  seen  on  the  face  of  it  who  is  the  maker,  to 
whom  it  is  payable,  the  sum  to  be  paid,  and  an  absolute 
promise  to  pay  it.  The  most  common  form  of  negotiable 
promissory  note  in  use  in  California,  and  one  which 
answers  every  purpose,  is  as  follows: 

,  CaL, ,  19 

after  date,  for  value  received,  I  promise 

to  pay ,  or  order,  at , 

California,  the  sum  of Dollars, 

Gold  Coin  of  the  United  States,  with  interest  thereon  in 


606  BUSINESS  LAW  FOB  BUSINESS  MEN. 

like  Gold  Coin  at  the  rate  of per  cent  per  annum 

from  date  until  paid.  Interest  payable  semi-annually, 
and  if  not  so  paid  to  be  added  to  the  principal  and  bear 
interest  at  the  same  rate  until  paid. 

Or  the  note  may  be  made  as  follows :— 

,  Cal., ,19 

One  day  after  date,  for  value  received,  I  promise  to 

pay ,  or  order,  at 

California,  the  sum  of Dollars,  Gold 

Coin  of  the  United  States,  with  interest  thereon  in  like 

Gold  Coin  at  the  rate  of per  cent  per  annum  from 

date  until  paid.  Interest  payable  semi-annually,  and  if 
not  so  paid  to  be  added  to  the  principal  and  bear  interest 
at  the  same  rate  until  paid. 

Or  the  note  may  be  made  as  follows :— 

,  Cal., ,  19 

For  value  received,  I  promise  to  pay 

or  bearer  the  sum  of Dollars,  Gold 

Coin  of  the  United  States,  with  interest  thereon  in  like 

Gold  Coin  at  the  rate  of per  cent  per  annum  from 

date  until  paid.  Interest  payable  semi-annually,  and  if 
not  so  paid  to  be  added  to  the  principal  and  bear  interest 
at  the  same  rate  until  paid. 


Section  753. — TIME  OF  PAYMENT. — It  is  not  absolutely 
necessary  that  a  note  should  state  the  time  of  payment. 
If  it  does  state  the  time  of  payment,  it  is  due  on  the  day 
stated,  or,  when  that  day  is  a  holiday,  the  next  business 
day.  If  it  does  not  specify  the  time  of  payment,  but  mere- 
ly ''For  value  received  I  promise  to  pay,"  it  is  payable 
immediately.  If  the  day  of  payment  falls  on  Sunday,  or 
Fourth  of  July,  or  Christmas,  or  Thanksgiving,  or  any 
other  legal  holiday,  the  note  is  due  on  the  next  day. 
Civil  Code,  Sections  3099,  3132. 

Section  754. — PLACE  OF  PAYMENT. — A  note  is  valid 
which  does  not  specify  any  place  of  payment.  If  the  note 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  607 

specifies  a  place  of  payment,  as,  "At  San  Francisco,"  it 
must  be  paid  at  the  place  specified.  If  the  note  does  not 
specify  any  place  of  payment  at  all,  it  is  payable  at  the 
residence  or  place  of  business  of  the  maker,  or  wherever 
he  may  be  found.  The  holder  of  the  note,  when  no  place 
of  payment  is  specified,  may  present  it  for  payment  at 
either  the  maker's  residence,  his  place  of  business,  or 
wherever  he  is  found,  at  his  option. 
Civil  Code,  Section  3100. 

Section  755. — DATE  OP  NOTE. — The  date  of  a  note  need 
not  necessarily  be  at  the  beginning.  The  date  may  be 
placed  upon  any  part  of  the  paper,  at  the  top,  or  at  the 
bottom,  or  anywhere  else  on  its  face,  and  it  will  be  suf- 
ficient. It  is  not  necessary  to  insert  the  true  date  of  its 
signing.  Any  date  may  legally  be  inserted  by  the  maker, 
whether  past,  present,  or  future,  and  the  note  will  still 
be  valid  and  binding.  In  any  dispute  in  court  the  holder 
or  the  maker  will  be  allowed  to  show  the  actual  time  when 
the  note  was  executed  or  delivered,  or  when  it  was  intend- 
ed by  the  parties  to  take  effect. 

Civil  Code,  Section  3094. 

Section  756. — NOTE  NOT  DATED  Is  VALID. — A  note  is 
valid  although  not  dated  at  all.  If  it  bears  no  date,  it  will 
be  considered  as  dated  at  the  time  it  was  executed.  And 
if  the  holder  of  a  note  which  bears  no  date  at  all  sues  to 
collect  it,  he  will  be  allowed  to  show  by  verbal  testimony 
when  the  note  was  actually  signed,  or  when  it  was  intend- 
ed by  the  parties  to  take  effect. 
Civil  Code,  Section  3091. 

Section  757. — How  MUST  BE  SIGNED  BY  MAKER.— 
The  name  of  the  maker  may  be  affixed  to  any  portion  of 
the  note,  and  it  will  be  good.  It  may  be  at  the  beginning, 
or  in  the  middle,  or  signed  at  the  end.  For  instance,  if 
a  note  begins,  "I,  John  Smith,  promise  to  pay,"  etc.,  and 


608  BUSINESS  LAW  FOR  BUSINESS  MEN. 

is  not  other  subscribed  at  all,  it  will  be  a  valid  note,  be- 
cause the  intention  to  bind  the  maker  is  apparent.  The 
maker's  name  may  be  signed  in  pencil.  If  the  maker 
cannot  write,  his  signature  may  be  by  an  X,  or  mark,  his 
name  being  written  near  the  mark  by  another  person,  who 
writes  his  own  name  as  a  witness. 
Civil  Code,  Section  14. 

Section  758. — FORM  OF  NOTE  SIGNED  WITH  AN  X. — The 
following  is  a  good  form  of  note  signed  with  an  X,  or 
mark,  by  a  person  who  cannot  write : 

,  Gal., ,19 

after  date,  for  value  received,  I  promise 

to  pay ,  or  order,  at , 

California,  the  sum  of Dollars,  Gold 

Coin  of  the  Uniteed  States,  with  interest  thereon  in  like 

Gold  Coin  at  the  rate  of per  cent  per  annum  from 

date  until  paid.  Interest  payable  semi-annually,  and  if 
not  so  paid  to  be  added  to  the  principal  and  bear  interest 
at  the  same  rate  until  paid. 

his 
SAMUEL   X   GREEN. 

mark. 
GEORGE  JONES, 

Witness  to  signature  of  Samuel  Green. 

Section  759. — MAKER'S  NAME  SPELLED  WRONG. — It  will 
make  no  difference  in  the  validity  of  a  note  that  the  name 
of  the  maker  is  misspelled  in  his  signature.  The  note  is 
good  if  it  can  be  determined,  by  the  face  of  the  note,  or 
the  indorsement  on  its  back,  who  the  maker  is. 

Section  760. — NAME  OF  PERSON  TO  WHOM  NOTE  Is  PAY- 
ABLE.— The  payee  need  not  be  named  in  person,  if  some 
one  be  indicated.  Therefore  it  is  sufficient  if  the  note  is 
made  payable  "to  John  Smith,  or  bearer,"  or  "to  the 
holder,"  or  "to  order,"  for  this  must  be  intended  to  mean 
whoever  comes  into  lawful  possession  of  it. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  609 

Section  761. — NOTE  PAYABLE  ON  OB  BEFORE  A  CERTAIN 
DATE. — A  note  may  be  made  payable  on  or  before  a  cer- 
tain date,  and  this  will  give  the  maker  the  right  to  pay 
the  note  at  any  time  before  the  date  named,  at  his  option. 
But  the  holder  cannot  compel  the  maker  to  pay  the  note 
until  the  date  named  in  it.  Thus,  if  a  note  is  made  pay- 
able ''on  or  before  one  year  after  date,"  the  maker  has  a 
right,  if  he  chooses,  to  pay  the  note  at  any  time  during 
the  year ;  but  the  holder  cannot  compel  him  to  pay  until 
the  year's  time  has  expired. 

Section  762. — FORM  or  NOTE  PAYABLE  ON  OR  BEFORE  A 
CERTAIN  DATE. — A  good  form  of  note,  giving  the  maker 
the  option  of  paying  at  any  time  before  the  date  named, 
is  as  follows : 

,  Cal., ,19.. 

On  or  before  one  year  after  date,  for  value  received,  I 

promise  to  pay ,or  order,  at , 

California,  the  sum  of Dollars,  Gold 

Coin  of  the  United  States,  with  interest  thereon  in  like 

Gold  Coin  at  the  rate  of per  cent  per  annum  from 

date  until  paid.  Interest  payable  semi-annually,  and  if 
not  so  paid  to  be  added  to  the  principal  and  bear  interest 
at  the  same  rate  until  paid. 


Section  763. — NOTE  WITH  PAYEE  BLANK. — A  note  may 
be  made  with  the  payee  blank,  that  is,  with  a  blank  space 
for  the  payee 's  name  to  be  inserted,  and  it  will  be  payable 
to  bearer.  It  passes  by  delivery,  and  any  bona  fide  holder 
for  value  may  fill  it  up  with  his  own  name  and  sue  upon  it. 

Section  764. — NOTE  PAYABLE  TO  ORDER  OF  MAKER. — A 
note  may  be  made  payable  to  the  order  of  the  maker. 
For  instance,  the  note  may  call  for  payment  * '  to  the  order 
of  myself,"  and  be  indorsed  by  the  maker  to  another 
person.  The  holder  will  take  a  valid  note  by  such  indorse- 
ment, and  the  maker  will  be  bound. 


610  BUSINESS  LAW  FOE  BUSINESS  MEN. 

Section  765. — WHEN  NOTE  IN  NEGOTIABLE.— In  order 
for  a  note  to  be  negotiable,  it  must  be  made  payable  to 
"order,"  or  to  "bearer."  Without  these  words,  the  note 
is  not  negotiable.  By  a  negotiable  note  is  meant  an  in- 
strument which  passes  from  one  person  to  another  by 
indorsement  and  delivery,  and  which,  if  transferred  be- 
fore it  is  due,  entitles  the  holder  to  collect  the  full  amount 
which  its  face  calls  for.  But  there  must  be  something  on 
the  face  of  the  note  to  indicate  the  intention  of  the  parties 
that  it  shall  be  transferable  by  indorsement,  negotiable; 
and  commercial  custom  and  the  law  of  California  pro- 
vide that  such  intention  must  be  made  manifest  on  the 
face  of  the  note,  by  the  use  of  the  word  "order"  or 
"bearer." 

Civil  Code,  Section  3087. 

Section  766. — WHEN  NOTE  Is  NOT  NEGOTIABLE. — A 
note  which  is  merely  made  payable  to  a  certain  per- 
son, and  not  to  "order,"  or  not  to  "bearer,"  is  not 
negotiable.  But,  besides  the  omission  of  these  words  of 
negotiability,  there  are  other  things  which  destroy  the 
negotiable  character  of  a  note.  Thus,  if  a  note  is  made 
payble  out  of  a  certain  specified  fund,  it  is  not  negotiable. 

Section  767. — DIFFERENCE  BETWEEN  NEGOTIABLE  NOTE 
AND  NOTE  NOT  NEGOTIABLE. — In  the  law  of  California,  as 
applied  to  common  business  affairs,  the  essential  differ- 
ence between  the  two  kinds  of  notes,  a  note  which  is  nego- 
tiable and  a  note  which  is  not  negotiable,  will  be  found  to 
be  this:  A  negotiable  note  passes  from  one  to  another 
by  delivery  and  indorsement,  and  may  pass  through  an 
indefinite  number  of  hands,  and  so  long  as  it  is  indorsed 
for  value,  before  becoming  due,  the  holder  acquires  an 
absolute  claim  against  the  maker.  The  note,  by  being 
made  payable  to  order,  or  to  bearer,  being  negotiable,  is  a 
circulating  credit,  and  it  makes  no  difference  to  the  holder 
that  the  maker  of  the  note  and  the  payee  named  in  it  may 
have  had  other  dealings  between  themselves,  on  account 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  611 

of  which  the  payee  may  have  become  indebted  to  the  mak- 
er; and  in  a  suit  upon  a  negotiable  note,  which  has  been 
indorsed  for  value  to  a  third  person,  the  maker  cannot 
set  up  against  the  note  anything  which  the  payee  owes 
him.  The  maker  of  a  negotiable  note,  indorsed  by  the 
payee  for  value  to  another,  must  pay  the  whole  note.  But 
a  note  which  is  not  negotiable  stands  upon  a  different 
footing.  It  may  pass  from  the  payee  to  whom  it  was 
made,  for  it  may  be  assigned  by  the  original  holder  to 
another.  But  the  assignee  of  a  non-negotiable  note  takes 
it  subject  to  all  set  offs  which  the  maker  may  have  against 
the  original  holder.  Let  us  suppose  that  Jones  makes  his 
note  to  Smith  for  $500,  and  the  note  is  not  negotiable,  and 
Smith  assigns  it  to  Green,  but  at  that  time  Smith  has  be- 
come indebted  to  Jones  upon  another  contract,  in  the 
amount  of  $250;  when  Green  sues  to  collect  the  note, 
Jones  can  set  off  against  the  $500  note  the  $250  which 
Smith  owed  him.  It  will  make  no  difference  that  Green 
paid  Smith  the  full  $500  called  for  by  the  note ;  the  note 
was  not  negotiable,  and  he  was  bound  to  take  it,  if  he 
chose  to  take  it  at  all,  subject  to  any  defense  which  the 
maker  might  have  acquired  against  his  assignor. 
Civil  Code,  Section  1459. 

Section  768. — JOINT  NOTE. — Two  or  more  persons  may 
make  a  note,  and  become  jointly  liable  to  pay  it.  That 
is,  the  intention  may  be  expressed  by  two  or  more  makers 
of  a  note  that  they  will  take  upon  themselves  the  mutual 
and  joint  obligation  of  paying  the  sum  of  money  speci- 
fied in  it. 

Civil  Code,  Section  1430. 

Section  769. — FORM  OF  JOINT  NOTE. — A  joint  note  may 
1)0  made  in  the  following  form : 

,  Cal., ,  19 

after  date,  for  value  received,  we  prom- 
ise to  pay  to ,  or  order,  the  sum  of 

Dollars,  Gold  Coin  of  the  United 


612  BUSINESS  LAW  FOB  BUSINESS  MEN. 

States,  with  interest  thereon  in  like  Gold  Coin  at  the  rate 
of per  cent  per  annum  from  date  until  paid.  Inter- 
est payable  semi-annually,  and  if  not  so  paid  to  be  added 
to  the  principal  and  bear  interest  at  the  same  rate  until 
paid. 


Section  770. — LIABILITY  ON  JOINT  NOTE. — The  makers 
of  a  joint  note  are  all  liable  together,  each  for  his  propor- 
tionate share,  and  must  all  be  sued  together.  But  one  of 
the  makers  of  a  joint  note,  who  satisfies  more  than  his 
share  of  the  claim  against  all,  may  compel  all  the  parties 
joined  with  him  to  contribute  their  proportion  of  the 
amount  so  paid  by  him. 

Civil  Code,  Section  1432. 

Section  771. — JOINT  AND  SEVERAL  NOTE. — Several  per- 
sons may  make  a  note  so  as  to  become  jointly  and  sever- 
ally liable  to  pay  it ;  such  a  note  expressing  the  intention, 
that  the  holder  may  have  the  right  to  call  upon  all  or  any 
one  or  more  of  the  makers  for  payment  of  the  note,  at  his 
option. 

Civi  Code,  Section  1430. 

Section  772. — FORM  OF  JOINT  AND  SEVERAL  NOTE. — A 
joint  and  several  note  may  be  made  in  the  following  form : 
,  Cal., ,19 

after  date,  for  value  received,  we  or 

either  of  us  promise  to  pay ,  or 

order,  at ,  California,  the  sum  of 

Dollars,  Gold  Coin  of  the  United  States,  with 

interest  thereon  in  like  Gold  Coin  at  the  rate  of per 

cent  per  annum  from  date  until  paid.  Interest  payable 
semi-annually,  and  if  not  so  paid  to  be  added  to  the  prin- 
cipal and  bear  interest  at  the  same  rate  until  paid. 


Section  774,  page  613,  and  Sections  838,  840,  page  647,  "Business 
Law  for  Business  Men." — INTEREST — The  law  of  California  about 
interest  has  been  changed.  The  law  now  is,  that  the  rate  of  interest 
upon  the  loan  or  forbearance  of  any  money,  goods  or  things  in  action, 
or  on  accounts  after  demand  or  judgments  rendered  in  any  court  of  this 
state,  shall  be  seven  dollars  upon  the  one  hundred  dollars  for  one  year 
and  at  that  rate  for  a  greater  or  less  sum  or  for  a  longer  or  a  shorter 
time;  but  it  shall  be  competent  for  parties  to  contract  for  the  payment 
and  receipt  of  a  rate  of  interest  not  exceeding  twelve  dollars  on  the  one 
hundred  dollars  for  one  year,  and  not  exceeding  that  rate  for  a  greater 
or  less  sum  or  for  a  longer  or  shorter  time,  in  which  case  such  rate 
exceeding  seven  dollars  on  one  hundred  dollars  shall  be  clearly  expressed 
in  writing. 

Compound  interest  can  only  be  charged  when  there  is  an  express 
agreement  in  writing  to  that  effect. 

Every  person,  company,  association  or  corporation,  who  for  any  loan 
or  forbearance  of  money,  goods  or  things  in  action  shall  have  paid  or 
delivered  any  greater  sum  or  value  than  is  allowed  to  be  received,  may 
either  in  person  or  his  or  its  personal  representative,  recover  in  an  action 
at  law  against  the  person,  company,  association  or  corporation  who  shall 
have  taken  or  received  the  same,  or  his  or  its  personal  representative, 
treble  the  amount  of  the  money  so  paid  or  value  delivered  in  violation  of 
said  sections,  providing  such  action  shall  be  brought  within  one  year 
after  such  payment  or  delivery. 

No  more  than  five  per  cent  on  sums  less  than  $1,000,  or  three  per 
cent  on  sums  over  $1,000,  can  be  charged  for  commissions,  where  the 
loan  procured  is  secured  by  mortgage,  trust  deed,  bill  of  sale,  assign- 
ment, pledge,  or  other  evidence  of  debt.  No  commission  can  be  charged 
where  the  loan  procured  is  for  a  shorter  period  than  six  months  and  is 
not  secured  by  a  mortgage  or  pledge  upon  real  estate. 

Violation  of  the  law  is  a  misdemeanor,  and  shall  be  punished  for  the 
first  offense  by  a  fine  of  not  less  than  twenty-five  dollars  nor  more  than 
three  hundred  dollars,  or  by  imprisonment  not  more  than  six  months, 
or  by  both  such  fine  and  imprisonment,  and  for  each  subsequent  offense 
and  conviction  shall  be  punished  by  a  fine  not  less  than  one  hundred 
dollars  nor  more  than  five  hundred  dollars,  and  by  imprisonment  not  less 
than  six  months  nor  more  than  one  year.  The  penalties  shall  apply  to 
and  be  imposed  upon  each  member  of  any  unincorporated  company, 
association,  or  of  any  co-partnership,  and  upon  each  officer  and  director 
of  a  corporation  who  shall  violate  the  law. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  613 

Section  773. — LIABILITY  OF  MAKERS  OF  JOINT  AND  SEV- 
ERAL NOTE. — The  makers  of  a  joint  and  several  note  are 
liable  in  a  twofold  capacity.  All  are  liable  together,  each 
for  his  proportionate  share  of  the  sum  specified  in  the 
note,  and  each  one  of  the  makers  is  severally  liable,  stand- 
ing alone.  The  holder  of  the  note  may  sue  all  of  the  mak- 
ers together,  and  recover  a  judgment  against  all,  or  he 
may,  at  his  option,  sue  any  one  of  the  makers  alone,  and 
compel  him  to  pay  the  whole  note.  If  one  of  the  makers 
is  compelled  to  pay  the  whole  note,  he,  in  turn,  may  com- 
pel the  others  to  pay  him  their  proportionate  share  for 
which  they  became  liable  on  the  note.  With  this,  how- 
jver,  the  holder  has  nothing  to  do.  He  has  the  right  to 
ingle  out  any  one  or  more  of  the  signers  of  a  joint  and 
everal  note,  and  collect  from  him  or  them,  or  he  may  col- 
iect  from  all. 

Section  774. — INTEREST. — The  California  law  of  inter- 
est does  not  recognize  usury,  and  any  rate  may  be  charged 
which  the  parties  agree  upon.     In  many  states  of  the 
Union  the  law  limits  the  rate  of  interest  which  can  be 
charged  to  a  certain  per  cent  per  annum,  ranging  in 
amount  from  5  to  12  per  cent;  but  in  California  the  con- 
litions  of  settlement  and  early  business  dealings  always 
Tere  such  as  to  encourage  inflation  and  speculation,  and 
•onsequent  high  rates  of  interest,  and  the  Legislature  has 
everal  times  refused  to  enact  a  law  against  usury.  There- 
-re  the  law  now  is  that  the  parties  to  a  promissory  note 
ay  agree  upon  any  rate  of  interest,  and  the  note  will  be 
lid. 

Section  775. — LEGAL  BATE  OF  INTEREST. — The  legal 
rate  of  interest  in  California,  that  is,  the  rate  allowed  by 
law  when  the  note  does  not  say  anything  about  interest, 
is  seven  per  cent  per  annum.  Therefore,  if  a  note  is  made 
which  does  not  say  anything  at  all  about  interest,  and 
suit  is  brought  to  collect  it,  the  judgment  against  the 
maker  will  bear  interest  at  the  rate  of  seven  per  cent  per 


614  BUSINESS  LAW  FOR  BUSINESS  MEN. 

annum.    This  interest  will  commence  at  the  date  when  the 
note  became  due. 

Section  776. — ATTORNEY  PEES. — A  note  may  be  made 
providing  that,  in  the  event  of  the  holder  commencing 
suit  to  collect  it,  the  maker  will  pay  an  attorney  fee  to 
the  payee.  Such  a  note  is  negotiable.  The  session  of  the 
Legislature  of  1905  adopted  an  amendment  to  the  Civil 
Code,  providing  that  a  negotiable  note  may  provide  for 
the  payment  of  attorney's  fees  and  costs  of  suit,  in  case 
suit  be  brought  to  collect  the  note,  and  the  note  will  still 
be  negotiable. 

Civil  Code,  Section  3088. 

Section  777. — WHEN  NOTE  Is  OUTLAWED. — In  Cali- 
fornia a  note  is  outlawed  if  it  is  allowed  to  run  more  than 
four  years  after  it  becomes  due.  For  instance,  if  a  note 
is  made  payable  one  year  after  date,  it  will  not  outlaw  for 
five  years ;  the  holder  may  commence  a  suit  on  the  note 
after  the  expiration  of  the  one  year ;  but  he  may  wait,  and 
commence  the  suit  at  any  time  within  four  years  after 
the  note  by  its  terms  becomes  due.  The  same  rule  of 
course  applies  to  a  note  made  payable  at  any  other  term. 
The  note  remains  good  for  four  years  after  it  is  due. 
After  four  years  from  the  date  when  the  note  becomes 
due,  in  a  suit  upon  the  note,  the  maker  or  other  person 
liable  to  pay  it  can  set  up  a  defense  that  it  is  outlawed. 
And  if  in  fact  the  holder  has  waited  more  than  four  years 
after  the  note  has  become  due,  before  commencing  a  suit 
upon  it,  the  note  will  be  outlawed,  and  cannot  be  collected 
if  such  defense  is  made. 

Code  of  Civil  Procedure,  Section  337. 

Section, 778. — APPARENT  MATURITY  OF  NOTE. — The  ap- 
parent maturity  of  a  promissory  note,  payable  at  sight 
or  demand,  is  as  follows :  If  it  bears  interest,  one  year 
after  its  date ;  or,  if  it  does  not  bear  interest,  six  months 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  615 

after  its  date.  Therefore,  if  an  interest-bearing  note  is 
made,  reading,  "For  value  received  I  promise  to  pay," 
etc.,  it  matures  one  year  after  its  date.  If  the  holder 
presents  the  note  for  payment  within  one  year  from  its 
date,  he  has  four  years  from  the  time  when  he  demands 
payment  in  which  to  sue  upon  the  note.  If  he  does  not 
demand  payment  until  after  one  year  from  its  date,  the 
four  years  will  not  begin  at  the  time  when  he  demands 
payment,  but  will  begin  one  year  after  the  date  of  the 
note.  Where  a  promissory  note  is  payable  at  a  certain 
time  after  sight  or  demand,  such  time  is  to  be  added  to 
the  periods  mentioned. 

What  has  been  said  above  applies  only  to  promissory 
notes  in  which  the  time  of  maturity  does  not  appear  upon 
the  face  of  the  note,  that  is,  where  the  time  when  the  note 
becomes  due  is  not  stated. 

Civil  Code,  Sections  3135,  3136. 

Section  779. — WHEN  OUTLAWED  NOTE  Is  RENEWED/ — A 
note  is  renewed  by  the  promise  of  the  maker  to  pay  the 
sum  due.  But  the  promise  must  be  in  writing,  in  all  cases, 
or  the  note  will  not  be  renewed.  There  must  be  a  written 
acknowledgment  of  the  debt  and  unconditional  promise 
to  pay  it,  in  order  to  revive  it,  after  a  note  is  outlawed. 
The  acknowledgment  and  promise  are  not  required  to 
be  in  any  particular  form.  It  may  be  indorsed  on  the 
note;  it  may  be  by  letters  written  by  the  maker  to  the 
creditor;  or  it  may  be  by  writing,  in  the  form  of  a  con- 
tract, to  revive  and  keep  alive  the  note.  But  in  whatever 
form  the  writing  is,  whether  by  indorsement,  or  letter, 
or  formal  contract,  the  written  promise  must  be  signed 
by  the  debtor  and  made  to  the  creditor.  If  the  maker  of 
the  note  admits,  after  it  is  outlawed,  to  a  third  person 
that  he  owes  the  money,  the  note  will  still  remain  out- 
lawed. The  law  is  that  the  acknowledgment  of  an  out- 
lawed debt  and  the  new  promise  to  pay  it,  must  be  made 
to  the  creditor  himself,  and  must  be  in  writing,  signed  by 
the  debtor.  The  payment  of  interest  will  not  revive  an 


616  BUSINESS  LAW  FOR  BUSINESS  MEN. 

outlawed  note,  unless  such  payment  is  accompanied  by  a 
written  acknowledgment  of  the  principal  debt  and  a  prom- 
ise to  pay  it.  A  part  payment  of  the  amount  of  a  note, 
after  it  has  become  outlawed,  will  not  revive  the  whole 
debt  without  a  written  acknowledgment.  A  letter  from 
the  maker  of  the  note  to  the  creditor,  after  it  is  outlawed, 
expressing  a  desire  to  pay  it,  will  revive  the  debt  and 
create  a  new  promise  to  pay.  The  holder  of  the  note  may 
then  sue  to  collect  the  amount  due,  at  any  time  within  four 
years  after  the  new  promise  was  made.  The  effect  of  the 
new  promise  to  pay  is  to  extend  the  obligation  of  the 
debtor  four  years  longer.  If  one  only  of  several  joint 
makers  of  a  note,  after  it  is  outlawed,  signs  a  written 
acknowledgment  and  promise  to  pay  the  debt,  he  binds 
himself  alone.  He  cannot  bind  anybody  but  himself,  and 
if  the  creditor  wants  the  obligation  extended  as  to  all  the 
joint  makers  of  the  note,  he  must  get  the  signatures  of  all. 
Code  of  Civil  Procedure,  Section  360. 

Section  780. — INDORSEMENT  OF  NEGOTIABLE  NOTE. — A 
negotiable  note,  if  payable  "to  order,"  passes  from  one 
person  to  another  by  indorsement.  This  indorsement 
must  be  in  writing.  One  who  agrees  to  indorse  a  nego- 
tiable note  is  bound  to  write  his  signature  upon  the  back 
of  the  note,  if  there  is  sufficient  space  on  the  back  for  that 
purpose.  But  it  sometimes  happens  that  the  holder  of  a 
note  has  written  on  the  back  acknowledgments  of  money 
paid,  or  that  many  previous  indorsers  have  signed  their 
names,  and  in  this  manner  the  entire  back  of  the  note  is 
covered,  and  there  is  no  more  room  for  any  further  writ- 
ing upon  it.  The  law  of  California  provides,  that  when 
this  happens,  the  holder  may  pin  or  -paste  on  a  piece  of 
paper  sufficient  for  his  own  or  subsequent  indorsements. 
Such  addition  to  the  original  note  thus  becomes  incor- 
porated as  a  part  of  it.  A  note  with  the  name  of  the 
holder  written  by  him  on  the  back,  or,  if  there  is  no  room 
on  the  back,  on  a  piece  of  paper  pinned  or  pasted  to  the 


BUSINESS  CONTEACTS  AND  LEGAL  OBLIGATIONS.  617 

note,  passes  the  legal  title  in  the  debt  to  the  person  to 
whom  the  note  is  delivered. 

Civil  Code,  Sections  3108,  3109,  3110. 

Section  781. — INDOBSEMENT  OF  NON-NEGOTIABLE  NOTE. 
One  who  writes  his  name  upon  the  back  of  a  non-nego- 
tiable promissory  note,  to  give  it  credit,  is  a  guarantor, 
and  is  liable  prima  facie  for  the  payment  of  the  note  upon 
default  of  the  maker. 

Where  a  corporation  has  received  the  money  obtained 
on  a  promissory  note,  upon  which  its  name  appears  as  an 
indorser,  it  cannot  thereafter  question  the  authority  of  its 
officers  to  make  such  indorsement.  (Decided  by  the  Cali- 
fornia District  Court  of  Appeals,  in  the  case  of  Tilden  vs. 
Goldy  Machine  Co.,  which  decision  is  printed  in  California 
Appellate  Decisions,  Volume  7,  page  323.) 

Section  782. — INDOKSEMENT  OF  ENTIEE  INSTRUMENT.— 
The  indorsement  must  be  an  indorsement  of  the  entire 
instrument.  An  indorsement  which  purports  to  trans- 
fer to  the  indorsee  a  part  only  of  the  amount  payable,  or 
which  purports  to  transfer  the  instrument  to  two  or  more 
indorsees  severally,  does  not  operate  as  a  negotiation  of 
the  instrument.  But  where  the  instrument  has  been 
paid  in  part,  it  may  be  indorsed  as  to  the  residue. 

Section  783. — KINDS  OF  INDORSEMENT. — An  indorse- 
ment may  be  either  special  or  in  blank;  and  it  may  also 
be  either  restrictive  or  qualified,  or  conditional. 

A  special  indorsement  specifies  the  person  to  whom, 
or  to  whose  order,  the  instrument  is  to  be  payable;  and 
the  indorsement  of  such  indorsee  is  necessary  to  the  fur- 
ther negotiation  of  the  instrument.  An  indorsement  in 
blank  specifies  no  indorsee,  and  an  instrument  so  indorsed 
is  payable  to  bearer,  and  may  be  negotiated  by  delivery. 

The  holder  may  convert  a  blank  indorsement  into  a 
special  indorsement  by  writing  over  the  signature  of  the 
indorser  in  blank  any  contract  consistent  with  the  char- 
acter of  the  indorsement. 


618  BUSINESS  LAW  FOB  BUSINESS  MEN. 

(a)  Indorsement  Restrictive. — An  indorsement  is  re- 
strictive, which  either— 

(1)  Prohibits  the  further  negotiation  of  the  instru- 
ment; or 

(2)  Constitutes  the  indorsee  the  agent  of  the  indors- 
er;  or 

(3)  Vests  the  title  in  the  indorsee  in  trust  for  or  to  the 
use  of  some  other  person. 

But  the  mere  absence  of  words  implying  power  to  ne- 
gotiate does  not  make  an  indorsement  restrictive. 

A  restrictive  indorsement  confers  upon  the  indorsee 
the  right— 

(1)  To  receive  payment  of  the  instrument; 

(2)  To  bring  any  action  thereon  that  the  indorser 
could  bring; 

(3)  To  transfer  his  rights  as  such  indorsee,  where  the 
form  of  the  indorsement  authorizes  him  to  do  so. 

But  all  subsequent  indorsees  acquire  only  the  title  of 
the  first  indorsee  under  the  restrictive  indorsement. 

(b)  Qualified  Indorsement. — A  qualified  indorsement 
constitutes  the  indorser  a  mere  assignor  of  the  title  to 
the  instrument.    It  may  be  made  by  adding  to  the  indors- 
er's  signature  the  words  " without  recourse,"  or  any 
words  of  similar  import.    Such  an  indorsement  does  not 
impair  the  negotiable  character  of  the  instrument. 

(c)  Conditional  Indorsement. — Where  an  indorsement 
is  conditional,  a  party  required  to  pay  the  instrument  may 
disregard  the  condition,  and  make  payment  to  the  in- 
dorsee or  his  transferee,  whether  the  condition  has  been 
fulfilled  or  not.    But  any  person  to  whom  an  instrument 
so  indorsed  is  negotiated,  will  hold  the  same,  or  the  pro- 
ceeds thereof,  subject  to  the  rights  of  the  person  indors- 
ing conditionally. 

(d)  Payable  to  Bearer. — Where  an  instrument,  pay- 
able to  bearer,  is  indorsed  specially  it  may  nevertheless 
be  further  negotiated  by  delivery ;  but  the  person  indors- 
ing specially  is  liable  as  indorser  to  only  such  holders  as 
made  title  through  his  indorsement. 


BUSINESS  CONTKACTS  AND  LEGAL  OBLIGATIONS.  619 

(e)  Payable  to  Two  or  More  Persons. — Where  an  in- 
strument is  payable  to  the  order  of  two  or  more  payees 
or  indorsees  who  are  not  partners,  all  must  indorse,  un- 
less the  one  indorsing  has  authority  to  indorse  for  the 
others. 

(f)  Indorsed  to  Person  as  "Cashier."  —Where  an  in- 
strument is  drawn  or  indorsed  to  a  person  as  "cashier" 
or  other  fiscal  officer  of  a  bank  or  corporation,  it  is 
deemed  prima  facie  to  be  payable  to  the  bank  or  corpora- 
tion of  which  he  is  such  officer;  and  may  be  negotiated 
by  either  the  indorsement  of  the  bank  or  corporation,  or 
the  indorsement  of  the  officer. 

(g)  Name  Misspelled. — Where  the  name  of  a  payee  or 
indorsee  is  wrongly  designated  or  misspelled,  he  may  in- 
dorse the  instrument  as  therein  described,  adding,  if  he 
think  fit,  his  proper  signature. 

(h)  In  Representative  Capacity. — Where  any  person 
is  under  obligation  to  indorse  in  a  representative  capac- 
ity, he  may  indorse  in  such  terms  as  to  negative  personal 
liability. 

(i)  Time  of  Indorsement. — Except  where  an  indorse- 
ment bears  date  after  the  maturity  of  the  instrument, 
every  negotiation  is  deemed  prima  facie  to  have  been 
effected  before  the  instrument  was  overdue. 

(j)  Place  of  Indorsement. — Except  where  the  con- 
trary appears,  every  indorsement  is  presumed  prima 
facie  to  have  been  made  at  the  place  where  the  instrument 
is  dated. 

(k)  Continuation. — An  instrument  negotiable  in  its 
origin  continues  to  be  negotiable  until  it  has  been  restric- 
tively  indorsed  or  discharged  by  payment  or  otherwise. 
(1)  Striking  Out  Indorsement. — The  holder  may  at 
any  time  strike  out  any  indorsement  which  is  not  neces- 
sary to  his  title.  The  indorser  whose  indorsement  is 
struck  out,  and  all  indorsers  subsequent  to  him,  are 
thereby  relieved  from  liability  on  the  instrument. 

(m)  Transfer  Without  Indorsement.  —  Where  the 
holder  of  an  instrument  payable  to  his  order  transfers  it 


620  BUSINESS  LAW  FOR  BUSINESS  MEN. 

for  value  without  indorsing  it,  the  transfer  vests  in  the 
transferee  such  title  as  the  transferor  had  therein,  and 
the  transferee  acquires,  in  addition,  the  right  to  have  the 
indorsement  of  the  transferor.  But  for  the  purpose  of 
determining  whether  the  transferee  is  a  holder  in  due 
course,  the  negotiation  takes  effect  as  of  the  time  when 
the  indorsement  is  actually  made. 

(n)  Prior  Party  May  Negotiate. — Where  an  instru- 
ment is  negotiated  back  to  a  prior  party  such  party  may, 
subject  to  the  provisions  of  this  title,  reissue  and  further 
negotiate  the  same.  But  he  is  not  entitled  to  enforce  pay- 
ment thereof  against  any  intervening  party  to  whom  he 
was  personally  liable. 

Act  of  the  Legislature,  approved  June  1,  1917; 
in  effect  July  31,  1917. 

Section  784. — ASSIGNMENT  OP  NON-NEGOTIABLE  NOTE.—- 
The  difference  between  a  note  which  is  negotiable,  and  a 
note  which  is  not  negotiable,  has  been  explained.  A  note 
which  is  not  negotiable,  for  any  reason,  may  nevertheless 
be  transferred,  by  assignment.  There  is  no  particular, 
form  of  assignment.  The  following  words  written  on  the 
back  of  a  non-negotiable  note  are  sufficient  to  assign  the 
note  from  the  holder  to  another  person: 

"I  hereby  assign  the  within  note  to  John  Smith. 

"James  Green." 

It  has  also  been  held  by  the  courts  that  a  non- 
negotiable  note  may  be  legally  assigned  by  the  mere  en- 
dorsement of  the  name  of  the  holder  and  a  delivery  of 
the  note  to  another  person. 

Section  785. — LIABILITY  OF  INDORSEES.  —  Every  in- 
dorser  of  a  negotiable  note,  unless  his  indorsement  is 
qualified  in  some  way,  by  his  indorsement  warrants  to 
every  subsequent  holder  thereof  that  the  note  is  in  all 
respects  what  it  purports  to  be ;  that  he  has  a  good  title 
to  it ;  that  the  signatures  of  all  prior  parties  are  genuine ; 
and  that  if  the  note  is  dishonored  the  indorser,  upon 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  621 

notice  of  the  dishonor  being  given  him,  will  pay  the 
amount  due  on  the  note,  with  interest,  to  the  indorsee  or 
other  holder.  Any  number  of  indorsements  may  be  made 
of  a  promissory  note,  and  the  last  indorsee  may  look  to 
all  of  the  indorsers  for  his  money,  and  he  will  have  the 
same  rights  against  every  one  of  the  indorsers  as  he  has 
against  the  particular  holder  who  indorsed  the  note  to 
him.  Sometimes  a  note,  which  has  been  indorsed  by  a 
prior  indorser,  comes  back  again  to  him  by  re-indorse- 
ment in  the  course  of  business,  when  he  will  thereby  be- 
come reinstated  in  his  original  rights  in  the  note ;  but  he 
will  have  no  claim  upon  any  of  the  indorsers  whose  names 
appear  on  the  note  subsequent  to  his  own.  The  indorse- 
ment of  a  note  amounts  to  a  contract  on  the  part  of  the 
indorser,  unless  he  qualifies  his  indorsement,  that  he  will 
pay  the  indorsee,  or  other  holder,  the  amount  due,  upon 
receiving  notice  of  the  dishonor  of  the  note. 
Civil  Code,  Sections  3116,  3120. 

Section  786. — INDORSEMENT  "WITHOUT  RECOURSE." 
An  indorsement  may  be  so  qualified  that  the  liability  of 
the  indorser  will  be  greatly  limited.  Thus,  if  the  indorser 
writes  his  name  on  the  back  of  the  note,  and  adds  the 
words,  " without  recourse,"  he  thus  notifies  the  person  to 
whom  he  transfers  the  note  that  he  will  not  be  responsible 
as  an  indorser,  and  cannot  be  held  liable  in  case  the  maker 
does  not  pay.  But  there  are  circumstances  under  which 
the  indorser  "without  recourse"  will  nevertheless  be 
liable.  By  the  act  of  transferring  and  delivering  the  note 
to  another,  although  indorsed  "without  recourse,"  the 
indorser  impliedly  warrants  that  the  note  is  valid,  that 
the  signatures  of  prior  parties  whose  names  appear 
thereon  are  genuine,  that  the  note  has  not  been  paid,  and 
that  he  himself  has  practiced  no  fraud  in  the  transfer. 

Section  787. — RIGHTS  OF  INDORSEE  IN  DUE  COURSE  OF 
BUSINESS. — An  indorsee  in  due  course  of  business,  who 
acquires  for  value  a  promissory  note  duly  indorsed, 


622  BUSINESS  LAW  FOB  BUSINESS  MEN. 

before  its  apparent  maturity,  and  without  knowledge  of 
its  actual  dishonor,  gets  an  absolute  title  to  the  note.  It 
is  thereafter  valid  in  his  hands,  notwithstanding  any 
defect  in  the  title  of  the  person  from  whom  he  acquired 
it.  It  has  been  said  that  the  law  of  California  cuts  off  all 
defenses  on  the  part  of  the  maker  of  a  note,  as  against  a 
holder  in  due  course  of  business. 

Civil  Code,  Sections  3123,  3124. 

Section  788. — WHEN  NOTE  MUST  BE  PRESENTED  FOR 
PAYMENT. — Many  vexatious  questions  constantly  arise 
about  the  presentation  of  a  note  for  payment,  and  these 
usually  refer  to  the  indorsers.  The  maker  is  bound 
whether  the  note  is  presented  to  him  or  not,  for  he  agrees 
to  pay  it  at  all  events.  But  the  indorser  occupies  a  dif- 
ferent position.  He  agrees  to  pay  if  the  note  is  dis- 
honored. The  indorser  is  only  a  surety.  So,  before  the 
indorser  can  be  called  upon  for  the  money,  the  holder, 
whoever  he  is,  must  try  to  collect  the  money  from  the 
maker  of  the  note.  The  Legislature  of  California  has 
prescribed  by  law  when  a  note  must  be  presented  for 
payment.  The  law  provides,  that  a  note  payable  on  de- 
mand may  be  presented  to  the  maker  for  payment  upon 
any  day;  but  a  note  made  payable  at  a  certain  specified 
time  must  be  presented  for  payment  upon  the  day  it  is 
due.  It  must  be  presented  within  reasonable  hours ;  and 
if  it  be  payable  at  a  bank,  within  the  usual  banking  hours 
of  the  vicinity,  unless  the  person  to  whom  it  should  be 
presented  consents  to  its  being  presented  at  any  hour  of 
the  day.  What  are  reasonable  hours,  within  which  the 
note  must  be  presented,  will  depend  upon  circumstances. 
If  the  maker  has  a  place  of  business,  it  must  be  presented 
within  the  usual  business  hours  of  the  place  or  town;  if 
presented  at  the  maker's  residence,  it  may  be  presented 
during  the  whole  day  until  the  hours  of  rest  in  the 
evening. 

Civil  Code,  Section  3131. 


BUSINESS  CONTEACTS  AND  LEGAL  OBLIGATIONS.  623 

Section  789. — BY  WHOM  NOTE  MUST  BE  PBESENTED  FOR 
PAYMENT. — The  holder  of  the  note  must  present  it  to  the 
maker.  By  this  is  not  meant  that  the  holder  should  go 
in  person  and  present  the  note.  He  may  go  in  person, 
or  he  may  send  his  agent  or  attorney.  If  the  holder  is 
dead,  at  the  time  the  note  is  due,  then  the  executor  or 
administrator  of  his  estate  can  present  the  note  and 
demand  payment. 

Section  790. — To  WHOM  NOTE  MUST  BE  PRESENTED  FOR 
PAYMENT. — The  note  must  be  presented  to  the  maker,  if 
he  can  be  found  at  the  place  where  presentment  should 
be  made.  If  the  maker  cannot  be  found  there,  then  it  is 
lawful  to  present  the  note  to  his  agent  in  charge  of  his 
place  of  business  or  other  place  specified  in  the  note  as 
the  place  of  payment.  It  may  be  presented  to  a  clerk  of 
the  maker  at  his  place  of  business ;  or  to  one  partner  of 
a  firm,  if  a  firm  note ;  or  to  the  administrator  or  executor 
of  a  deceased  maker ;  or  to  an  employee  of  the  maker  at 
the  place  where  the  note  is  to  be  presented,  if  one  can  be 
found  there,  and  the  maker  cannot  be  found. 

Section  791. — AT  WHAT  PLACE  NOTE  MUST  BE  PRE- 
SENTED FOR  PAYMENT. — A  note  which  specifies  a  place  for 
payment  must  be  presented  there.  It  is  a  common  thing 
for  notes  to  be  made  payable  at  a  certain  bank,  and  in 
such  case  it  will  not  do  to  present  the  note  anywhere 
else,  and  so  as  to  any  particular  place  of  payment  speci- 
fied in  a  note.  If  a  note  does  not  name  any  particular 
place  for  its  payment,  then  it  must  be  presented  at  the 
place  of  residence  or  the  place  of  business  of  the  maker, 
or  wherever  he  may  be  found.  It  is  at  the  option  of  the 
holder,  where  no  place  is  specified  in  the  note,  whether  he 
will  present  it  to  the  maker  at  his  residence,  or  his  place 
of  business,  or  in  the  street,  or  at  any  other  place  which 
may  appear  convenient. 

Section  792. — WHAT  WILL  EXCUSE  PRESENTMENT  FOR 
PAYMENT. — There  are  some  circumstances  which  under 


624  BUSINESS  LAW  FOB  BUSINESS  MEN. 

the  law  of  California  will  excuse  presentment  for  pay- 
ment. If  the  maker  of  the  note  has  no  place  of  business, 
or  if  his  place  of  business  or  residence  cannot,  with 
reasonable  diligence,  be  ascertained,  then  presentment  for 
payment  is  excused  and  the  indorser  is  bound.  If  the 
maker  moves  away,  after  executing  the  note,  and  the 
holder  makes  diligent  inquiry,  and  cannot  learn  his  resi- 
dence or  place  of  business  when  the  note  becomes  due, 
the  failure  to  present  the  note  to  the  maker  for  payment, 
under  such  circumstances,  will  not  relieve  the  indorser 
from  liability.  This  is  upon  the  principle  that  the  holder 
has  done  all  he  can  do,  has  shown  good  faith  and  dili- 
gence, and  there  is  no  reason  why  the  indorser  should 
be  allowed  to  take  advantage  of  a  circumstance  over 
which  the  holder  of  the  note  had  no  control. 

Section  793. — WHAT  Is  REASONABLE  DILIGENCE. — 
Reasonable  diligence  is  a  question  of  circumstances. 
Inevitable  accident  or  overwhelming  calamity  may  pre- 
vent the  holder  of  a  note  from  presenting  it  for  payment 
to  the  maker  on  the  day  it  is  due,  yet  if  he  does  present 
it  at  the  very  earliest  practicable  time  thereafter,  it  will 
be  sufficient.  For  it  may  happen  that  the  holder  had  the 
intention  in  good  faith  to  present  the  note  at  the  proper 
time,  yet  all  intercourse  is  stopped  between  the  places 
where  the  holder  and  the  maker  live,  by  freshets,  or  by 
violent  storms,  or  earthquakes,  or  other  unforeseen  con- 
ditions of  natural  objects  rendering  travel  or  communica- 
tion impossible;  or  the  presence  of  some  dread  and  con- 
tagious disease  in  one  or  the  other  neighborhood,  such  as 
the  yellow  fever,  or  cholera,  or  smallpox,  renders  com- 
mercial intercourse  impossible;  or  a  political  revolution 
may  exist  in  the  place  where  the  holder  or  the  maker 
lives,  and  by  a  blockade,  or  a  battle,  prevent  the  holder1 
from  presenting  the  note  on  the  day  when  it  is  due;  or 
war  may  be  going  on  between  the  country  where  the 
maker  lives  and  the  country  where  the  holder  resides. 
In  all  cases  above  supposed,  if  the  note  is  presented  within 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  625 

a  reasonable  time  after  the  prohibitive  obstacle  is  re- 
moved, it  will  be  held  sufficient  under  the  law. 

Section  794. — WHEN  A  NOTE  Is  DISHONORED. — A  note 
is  dishonored  when  it  is  not  paid,  on  presentment  to  the 
maker  for  that  purpose;  and  it  is  also  dishonored  when 
it  is  not  paid  without  presentment,  when  presentment  is 
excused. 

Civil  Code,  Section  3141. 

Section  795. — NOTICE  OF  DISHONOR. — If  the  holder 
wishes  to  make  the  indorser  pay  the  note,  after  vainly 
attempting  to  collect  it  from  the  maker,  he  must  give  the 
indorser  notice  of  the  dishonor  of  the  note.  He  may  give 
the  notice  in  person,  or  through  his  agent.  A  Notary, 
attorney,  or  bank,  or  other  agent  for  collection,  may  give 
the  notice  as  the  agent  of  the  holder.  If  there  are  several 
indorsers  on  a  note,  and  notice  of  dishonor  is  given  by 
the  holder  to  the  last  indorser,  he  in  turn  must  give  no- 
tice of  the  dishonor  to  the  indorser  immediately  before 
him,  otherwise  he  cannot  reimburse  himself  for  the 
amount  he  is  compelled  to  pay  the  holder. 
Civil  Code,  Section  3142. 

Section  796. — How  NOTICE  OF  DISHONOR  MAY  BE  GIVEN. 
A  notice  of  dishonor  may  be  given  by  delivering  it  to  the 
indorser,  personally,  at  any  place;  or,  by  delivering  it 
to  some  person  of  discretion,  at  the  place  of  residence  or 
business  of  the  indorser,  apparently  acting  for  him;  or, 
by  getting  the  best  information  obtainable  of  the  place  of 
residence  of  the  indorser,  and  depositing  the  notice  in  the 
mail  directed  to  the  indorser  at  that  place,  postage  paid. 
In  case  of  the  death  of  the  indorser,  the  notice  must  be 
given  to  his  executor  or  administrator,  or  if  there  is  no 
executor  or  administrator,  then  to  any  member  of  his 
family  who  resided  with  him  at  his  death,  or  if  he  had 
no  family,  then  it  must  be  mailed  to  his  last  place  of 
residence.  A  notice  of  dishonor  sent  to  an  indorser  after 


626  BUSINESS  LAW  FOB  BUSINESS  MEN. 

his  death  is  nevertheless  valid,  if  the  person  sending  it 
was  ignorant  of  his  death,  and  could  not  by  ordinary 
diligence  have  ascertained  the  fact. 

Civil  Code,  Section  3144,  3145,  3146. 

Section  797. — WHEN  NOTICE  OF  DISHONOR  MUST  BE 
GIVEN. — If  the  notice  of  dishonor  of  a  note  is  not  given 
by  mail,  then  it  must  be  given  either  on  the  same  day 
the  maker  fails  to  pay  it,  or  on  the  next  business  day 
thereafter.  When  notice  of  dishonor  is  given  by  mail,  it 
must  be  deposited  in  the  post-office  in  time  for  the  first 
mail  which  closes  after  noon  of  the  first  business  day 
succeeding  the  dishonor,  and  which  leaves  the  place  where 
the  note  was  dishonored  for  the  place  to  which  the  notice 
should  be  sent.  The  holder  has  at  least  the  whole  fore- 
noon of  the  first  business  day  after  the  dishonor  to  send 
off  the  notice.  One  of  several  indorsers,  who  receives 
notice  of  dishonor  from  the  holder  of  the  note,  has  the 
same  time  to  give  notice  to  another  indorser ;  that  is,  he 
must  give  notice  to  a  prior  indorser  either  on  the  same 
day  he  receives  his  notice  from  the  holder,  or  on  the  next 
business  day,  unless  he  gives  notice  by  mail,  which  must 
be  in  the  same  manner  as  the  holder  is  required  to  give 
notice  by  mail. 

Civil  Code,  Sections  3147,  3148,  3150. 

Section  798. — FORM  OF  NOTICE  OF  DISHONOR. — No  par- 
ticular form  of  notice  is  necessary.  It  may  be  given  in 
any  form  which  describes  the  note  with  reasonable  cer- 
tainty, and  substantially  informs  the  party  receiving  it 
that  the  note  has  been  dishonored.  The  following  is  a 
form  of  notice  in  writing,  to  be  served  on  the  indorser: 

,  Cal., ,19 

JOHN  GREEN:- 

Dear  Sir:  You  are  hereby  notified  that  the  certain 
note  made  and  delivered  by  John  Smith  to  Samuel 
Stokes,  dated  April  1st,  1911,  for  $500,  and  interest  at 
8  per  cent  per  annum,  and  indorsed  April  1st,  1912,  by 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  627 

you,  is  now  held  by  me;  that  on  the  day  when  said  note 
was  due  I  presented  it  for  payment  to  the  said  John 
Smith  and  demanded  payment,  but  he  failed  and  refused 
to  pay  the  same ;  and  I  hereby  notify  you  that  I  will  hold 
you  for  the  amount  due  on  said  note. 

JAMES  BROWN. 

Section  799. — WHEN  NOTICE  OF  DISHONOR  Is  EXCUSED. 
Notice  of  the  dishonor  of  a  note  is  excused,  when  the 
holder  cannot,  with  reasonable  diligence,  ascertain  either 
the  place  of  residence  or  business  of  the  indorser  to  be 
charged ;  or,  when  there  is  no  mail  communication  be- 
tween the  town  of  the  holder  and  the  town  in  which  the 
place  of  residence  or  business  of  the  party  to  be  charged 
is  situated;  or,  when  the  notice  is  waived  by  the  party 
himself  upon  whom  it  was  to  be  served.  If,  before  or 
after  a  note  becomes  due,  an  indorser  has  received  full 
security,  or  the  maker  has  assigned  all  his  estate  to  him 
as  such  security,  presentment  and  notice  to  him  are 
excused.  Delay  in  giving  notice  of  dishonor  is  also  ex- 
cused, when  caused  by  circumstances  which  the  holder 
could  not  have  avoided  by  the  exercise  of  reasonable  care 
and  diligence — as,  by  an  epidemic,  or  riot,  or  war,  or 
flood,  or  storm. 

Civil  Code,  Sections  3156,  3157,  3158. 

Section  800. — PROTEST  OF  FOREIGN  NOTE. — What  has 
been  said  of  notice  of  dishonor  applies  only  to  a  note 
made  and  payable  in  California.  A  note  made  in  a 
foreign  country,  or  in  another  State,  and  sent  to  this 
State  for  collection  and  dishonored,  must  be  protested  by 
a  Notary  Public. 

Section  801. — WHEN  SUIT  TO  COLLECT  NOTE  CAN  BE 
BROUGHT. — In  California  a  suit  to  collect  a  note  can  be 
brought  at  any  time  within  four  years  after  it  is  due, 
provided  the  note  was  made  in  this  State.  If  the  note 
was  made  out  of  the  State,  a  suit  can  be  brought  in  this 


628  BUSINESS  LAW  FOR  BUSINESS  MEN. 

State  to  collect  it  at  any  time  within  two  years  after  it 
is  due. 

Code  of  Civil  Procedure,  Sections  337,  338. 

Section  802. — IN  WHAT  COUET  SUIT  TO  COLLECT  NOTE 
MUST  BE  BROUGHT. — In  all  cases  where  the  sum  sued  for 
amounts  to  $300,  exclusive  of  interest,  the  suit  must  be 
brought  in  the  Superior  Court.  In  cases  where  the  sum 
sued  for,  exclusive  of  interest,  amounts  to  less  than  $300, 
the  suit  must  be  brought  in  the  Justice  Court. 

Code  of  Civil  Procedure,  Sections  76,  112. 

Section  803. — INSTALLMENT  NOTE. — A  note  is  valid 
which  provides  for  payment  in  stated  installments.  This 
note  may  also  lawfully  provide  that  upon  default  in  the 
payment  of  any  installment  or  of  interest  the  whole  sum 
shall  immediately  become  due  and  payable. 

Section  804. — FORM  OF  INSTALLMENT  NOTE. — The  fol- 
lowing is  a  form  of  installment  note : 

,  California, ,  19 

For  value  received,  I  promise  to  pay 

or  order,  at ,  California,  the  sum 

of Dollars,  lawful  money  of  the 

United  States,  with  interest  thereon  in  like  lawful  money 

at  the  rate  of per  cent  per  annum  from  date  until 

paid.    Said  sum  of Dollars  to  be 

paid  by  installments  as  follows,  to-wit:     The  sum  of 

Dollars  on  the day 

of ,  19 ,  and  the  remainder  in 

equal  monthly  payments  of Dollars  on  the 

first  day  of  each  and  every  month  thereafter  until  the 
whole  principal  sum  and  the  interest  thereon  shall  have 
been  paid.  If  default  shall  be  made  in  the  payment  of 
any  installment,  as  above  provided,  then  the  whole 
amount  of  this  note  and  the  interest  thereon  shall  become 
immediately  due  and  payable. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  629 

Section  805. — AGENT'S  NOTICE  OF  DISHONOR. — Where 
the  instrument  has  been  dishonored  in  the  hands  of  an 
agent,  he  may  either  himself  give  notice  to  the  parties 
liable  thereon,  or  he  may  give  notice  to  his  principal. 
Tf  he  give  notice  to  his  principal,  he  must  do  so  within 
the  same  time  as  if  he  were  the  holder,  and  the  principal 
upon  the  receipt  of  such  notice  has  himself  the  same  time 
for  giving  notice  as  if  the  agent  had  been  an  independent 
holder.  The  agent  may  give  the  notice  in  his  own  name. 
Act  of  the  Legislature,  approved  June  1,  1917; 
in  effect  July  31,  1917. 

Section  806. — TIME  OF  MATURITY. — Every  negotiable 
instrument  is  payable  at  the  time  fixed  therein  without 
grace.  When  the  day  of  maturity  falls  upon  Sunday,  or 
a  holiday,  the  instrument  is  payable  on  the  next  succeed- 
ing business  day.  Instruments  falling  due  or  becoming 
payable  on  Saturday  are  to  be  presented  for  payment  on 
the  next  succeeding  business  day,  except  that  instruments 
payable  on  demand  may,  at  the  option  of  the  holder,  be 
presented  for  payment  before  twelve  o'clock  noon  on 
Saturday  when  that  entire  day  is  not  a  holiday. 

Where  the  instrument  is  payable  at  a  fixed  period 
after  date,  after  sight,  or  after  the  happening  of  a 
specified  event,  the  time  of  payment  is  determined  by 
excluding  the  day  from  which  the  time  is  to  begin  to  run, 
and  by  including  the  date  of  payment. 

Act  of  the  Legislature,  approved  June  1,  1917; 
in  effect  July  31,  1917. 

Section  807. — NOTE  PAYABLE  AT  A  BANK  Is  AN  ORDER 
TO  THE  BANK. — Where  the  instrument  is  made  payable  at 
a  bank  it  is  equivalent  to  an  order  to  the  bank  to  pay  the 
same  for  the  account  of  the  principal  debtor  thereon. 

Act  of  the  Legislature,  approved  June  1,  1917 ; 
in  effect  July  31,  1917. 

Section  808. — INSTRUMENT  UNDATED. — Where  an  in- 
strument expressed  to  be  payable  at  a  fixed  period  after 


630  BUSINESS  LAW  FOR  BUSINESS  MEN. 

date  is  issued  undated,  or  where  the  acceptance  of  an 
instrument  payable  at  a  fixed  period  after  sight  is  un- 
dated, any  holder  may  insert  therein  the  true  date  of 
issue  or  acceptance,  and  the  instrument  shall  be  payable 
accordingly.  The  insertion  of  a  wrong  date  does  not 
avoid  the  instrument  in  the  hands  of  a  subsequent  holder 
in  due  course;  but  as  to  him,  the  date  so  inserted  is  to 
be  regarded  as  the  true  date. 

Section  809. — FILLING  UP  BLANKS. — Where  the  instru- 
ment is  wanting  in  any  material  particular,  the  person  in 
possession  thereof  has  a  prima  facie  authority  to  com- 
plete it  by  filling  up  the  blanks  therein.  And  a  signature 
on  a  blank  paper  delivered  by  the  person  making  the 
signature  in  order  that  the  paper  may  be  converted 
into  a  negotiable  instrument  operates  as  a  prima  facie 
authority  to  fill  it  up  as  such  for  any  amount.  In  order, 
however,  that  any  such  instrument  when  completed  may 
be  enforced  against  any  person  who  became  a  party 
thereto  prior  to  its  completion,  it  must  be  filled  up  strictly 
in  accordance  with  the  authority  given  and  within  a 
reasonable  time.  But  if  any  such  instrument,  after  com- 
pletion, is  negotiated  to  a  holder  in  due  course,  it  is  valid 
and  effectual  for  all  purposes  in  his  hands,  and  he  may 
enforce  it  as  if  it  had  been  filled  up  strictly  in  accordance 
with  the  authority  given  and  within  a  reasonable  time. 

Where  an  incomplete  instrument  has  not  been  deliv- 
ered it  will  not,  if  completed  and  negotiated,  without 
authority,  be  a  valid  contract  in  the  hands  of  any  holder, 
as  against  any  person  whose  signature  was  placed  thereon 
before  delivery. 

Act  of  the  Legislature,  approved  June  1,  1917; 
in  effect  July  31,  1917. 

Section  810. — CONDITIONAL  DELIVERY. — Every  Contract 
on  a  negotiable  instrument  is  incomplete  and  revocable 
until  delivery  of  the  instrument  for  the  purpose  of  giving 
effect  thereto.  As  between  immediate  parties,  and  as 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  631 

regards  a  remote  party  other  than  a  holder  in  due  course, 
the  delivery,  in  order  to  be  effectual,  must  be  made  either 
by  or  under  the  authority  of  the  party  making,  drawing, 
accepting  or  indorsing,  as  the  case  may  be;  and  in  such 
case  the  delivery  may  be  shown  to  have  been  conditional, 
or  for  a  special  purpose  only,  and  not  for  the  purpose  of 
transferring  the  property  in  the  instrument.  But  where 
the  instrument  is  in  the  hands  of  a  holder  in  due  course, 
a  valid  delivery  thereof  by  all  parties  prior  to  him  so  as 
to  make  them  liable  to  him  is  conclusively  presumed. 
And  where  the  instrument  appears  thereon,  a  valid  and 
intentional  delivery  by  him  is  presumed  until  the  contrary 
is  proved. 

Act  of  the  Legislature,  approved  June  1,  1917; 
in  effect  July  31,  1917. 

Section  811. — EULES  OF  CONSTRUCTION. — Where  the 
language  of  the  instrument  is  ambiguous  or  there  are 
omissions  therein,  the  following  rules  of  construction 
apply: 

(1)  Where  the  sum  payable  is  expressed  in  words  and 
also  in  figures  and  there  is  a  discrepancy  between  the  two, 
the  sum  denoted  by  the  words  is  the  sum  payable ;  but  if 
the  words  are  ambiguous  or  uncertain,  reference  may  be 
had  to  the  figures  to  fix  the  amount ; 

(2)  Where  the  instrument  provides  for  the  payment 
of  interest,  without  specifying  the  date  from  which  in- 
terest is  to  run,  the  interest  runs  from  the  date  of  the 
instrument,  and  if  the  instrument  is  undated,  from  the 
issue  thereof; 

(3)  Where  the  instrument  is  not  dated,  it  will  be  con- 
sidered to  be  dated  as  of  the  time  it  was  issued; 

(4)  Where  there  is  a  conflict  between  the  written  and 
printed  provisions  of  the  instrument,  the  written  pro- 
visions prevail; 

(5)  Where  the  instrument  is  so  ambiguous  that  there 
is  doubt  whether  it  is  a  bill  or  note,  the  holder  may  treat 
it  as  either  at  his  election ; 


632  BUSINESS  LAW  FOB  BUSINESS  MEN. 

(6)  Where  a  signature  is  so  placed  upon  the  instru- 
ment that  it  is  not  clear  in  what  capacity  the  person 
making  the  same  intended  to  sign,  he  is  to  be  deemed  an 
indorser ; 

(7)  Where  an  instrument  containing  the  words  "I 
promise  to  pay"  is  signed  by  two  or  more  persons,  they 
are  deemed  to  be  jointly  and  severally  liable  thereon. 

Act  of  the  Legislature,  approved  June  1,  1917; 
in  effect  July  31,  1917. 

Section  812. — TRADE-  OB  ASSUMED  NAME. — One  who 
signs  in  a  trade  or  assumed  name  will  be  liable  to  the 
same  extent  as  if  he  had-  signed  in  his  own  name. 

Section  813. — SIGNATURE  BY  AGENT. — The  signature  of 
any  party  may  be  made  by  a  duly  authorized  agent.  No 
particular  form  of  appointment  is  necessary  for  this 
purpose;  and  the  authority  of  the  agent  may  be  estab- 
lished as  in  other  cases  of  agency. 

Where  the  instrument  contains  or  a  person  adds  to 
his  signature  words  indicating  that  he  signs  for  or  on 
behalf  of  a  principal,  or  in  a  representative  capacity,  he 
is  not  liable  on  the  instrument  if  he  was  duly  authorized ; 
but  the  mere  addition  of  words  describing  him  as  an 
agent,  or  as  filling  a  representative  character,  without  dis- 
closing his  principal,  does  not  exempt  him  from  personal 
liability. 

Act  of  the  Legislature,  approved  June  1,  1917; 
in  effect  July  1, 1917. 

Section  814. — PROCURATION. — A  signature  by  "  pro- 
curation" operates  as  notice  that  the  agent  has  but  a 
limited  authority  to  sign,  and  the  principal  is  bound 
only  in  case  the  agent  in  so  signing  acted  within  the  actual 
limits  of  his  authority. 

Section  815. — INDORSEMENT  BY  CORPORATION  OR  IN- 
FANT.— The  indorsement  or  assignment  of  the  instrument 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  633 

by  a  corporation  or  by  an  infant  passes  the  property 
therein,  notwithstanding  that  from  want  of  capacity  the 
corporation  or  infant  may  incur  no  liability  thereon. 

MORTGAGES 

Section  816. — MORTGAGE  SECURITY. — The  ordinary  se- 
curity for  the  payment  of  a  promissory  note  is  a  mort- 
gage of  either  personal  or  real  property.  By  a  mortgage 
the  debtor  secures  his  creditor  without  the  necessity  of 
changing  the  possession  of  the  property. 

Section  817. — WHAT  INTEREST  IN  REAL  PROPERTY  MAY 
BE  MORTGAGED. — Any  interest  in  real  property  which  is 
capable  of  being  transferred  may  be  mortgaged.  Interest 
in  real  property  covering  the  absolute  title  in  fee  simple 
may,  of  course,  be  mortgaged.  But  the  right  to  mortgage 
does  not  stop  here.  The  interest  of  an  heir  or  devisee 
under  a  will,  being  a  vested  right,  may  be  mortgaged. 
One  in  possession  of  the  land  under  a  verbal  agreement 
to  purchase  may  mortgage  the  interest  that  he  has.  Any 
interest  in  the  reversion  of  lands,  or  any  interest  in  lands 
which  will  surely  come  to  a  person  upon  the  happening 
of  some  event,  may  be  mortgaged. 
Civil  Code,  Section  2947. 

Section  818. — WHAT  PERSONAL  PROPERTY  MAY  BE 
MORTGAGED. — Mortgages  may  be  made  upon  all  growing 
crops,  including  grapes  and  fruit,  and  upon  any  and  all 
kinds  of  personal  property,  except  the  following : 

1.  Personal  property  not  capable  of  manual  delivery ; 

2.  Articles  of  wearing  apparel  and  personal  adorn- 
ment; 

3.  The  stock  in  trade  of  a  merchant. 

Act  of  the  Legislature,  approved  February  20, 
1909. 

Section  819. — How  MORTGAGE  Is  EXECUTED  AND  AC- 
KNOWLEDGED.— A  mortgage  must  be  in  writing,  and 


634  BUSINESS  LAW  FOR  BUSINESS  MEN. 

signed  by  the  mortgagor.  It  should  be  recorded,  and 
therefore  must  be  acknowledged  before  an  officer  author- 
ized to  administer  oaths.  It  is  usual  in  California  to  have 
a  mortgage  acknowledged  before  a  Notary  Public,  but  an 
acknowledgment  before  a  Justice  of  the  Peace,  or  County 
Clerk,  or  County  Recorder,  is  equally  good.  If  the  per- 
son executing  the  mortgage  cannot  write,  he  may  sign 
the  mortgage  by  an  X  or  mark,  with  two  witnesses  to 
his  signature. 

Section  820. — MORTGAGE  OF  MARRIED  WOMAN. — A  mar- 
ried woman  may  mortgage  her  own  property,  without 
the  consent  of  her  husband,  and  without  his  joining  her 
in  the  mortgage  in  any  way.  A  married  woman's  ac- 
knowledgment to  a  mortgage  is  made  in  the  same  manner 
as  that  of  any  other  person. 

Section  821. — MORTGAGE  OF  MINOR. — A  minor  in  Cali- 
fornia cannot  under  the  age  of  18  make  a  contract  re- 
lating to  real  property.  Over  the  age  of  18  he  may 
execute  a  mortgage  of  his  real  property,  but  it  is  void- 
able at  his  election  when  he  comes  of  age.  He  may  mort- 
gage his  personal  property,  whether  under  or  over  18 
years  of  age,  provided  the  property  is  in  his  own  pos- 
session or  control;  but  this  mortgage  is  also  subject  to 
be  disaffirmed  by  him  when  he  comes  of  age. 

Section  822. — MORTGAGE  OF  PARTNERSHIP  PROPERTY.— 
Partners  may  make  a  mortgage  of  partnership  property, 
but  they  must  sign  their  own  names.  Thus,  if  Samuel 
Jones  and  James  Smith  are  partners,  doing  business 
under  the  firm  name  of  Jones  &  Smith,  their  mortgage  of 
partnership  property  should  not  be  signed  with  the  firm 
name,  "Jones  &  Smith,"  but  should  be  signed  with  their 
individual  names,  "Samuel  Jones.  James  Smith." 

Section  823. — RECORDING  MORTGAGES. — The  law  of 
California  provides  for  the  acknowledgment  and  record- 


Section  826,  page  635— REMOVAL  OF  MORTGAGED  PERSONAL 
PROPERTY — Every  person  who,  during  the  existence  of  the  mortgage,  with 
intent  to  defraud  the  mortgagee,  his  representatives  or  assigns,  takes,  drives, 
carries  away,  or  otherwise  removes  or  permits  the  taking,  driving,  or  carry- 
ing away,  or  other  removal  of  the  mortgaged  property,  or  any  part  there- 
of, from  the  county  where  it  was  situate  when  mortgaged,  without 
the  written  consent  of  the  mortgagee,  or  who  sells,  transfers,  or  in 
any  manner  further  encumbers  the  said  mortgaged  property,  or  any  part 
thereof,  or  causes  the  same  to  be  sold,  transferred,  or  further  encumbered,  is 
guilty  of  larceny,  and  is  punishable  accordingly;  unless  at  or  before  the  time 
of  making  such  sale,  transfer  or  encumbrance,  such  mortgagor  informs  the 
person  to  whom  such  sale,  transfer,  or  encumbrance  is  made,  of  the  exist- 
ence of  the  prior  mortgage,  and  also  informs  the  prior  mortgagee  of  the  in- 
tended sale,  transfer,  or  encumbrance,  in  writing,  by  giving  the  name  and 
place  of  residence  of  the  party  to  whom  the  sale,  transfer  or  encumbrance  is 
to  be  made. 

Act  of  the  Legislature  of  California,  approved  May  13,  1921;  in  effect 
July  13,  1921. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  635 

ing  of  mortgages,  real  or  personal.  The  mortgage  is 
recorded  in  the  office  of  the  County  Recorder  of  the  county 
where  the  property  is  situated. 

Section  824. — PROOF  OF  EXECUTION  OF  MORTGAGE.— 
It  sometimes  happens  that  a  mortgage  is  made,  but  not 
acknowledged  by  the  mortgagor;  and  the  holder  of  the 
mortgage  afterwards  desires  to  record  it.  Not  having 
been  acknowledged  when  made,  it  is  not  entitled  to  be 
recorded.  But  the  law  provides  that  proof  of  the  execu- 
tion of  the  mortgage,  when  not  acknowledged,  may  after- 
wards be  made  by  either  the  mortgagor  or  the  mortgagee. 
Proof  is  made  by  going  before  a  Notary  Public,  or  other 
officer  authorized  to  take  acknowledgments,  who  upon 
the  evidence  presented  to  him  certifies  to  the  fact  of  the 
execution  of  the  mortgage.  When  there  is  a  defect  in  the 
Notary's  certificate,  any  party  interested  may  sue  in  the 
Superior  Court  and  obtain  a  judgment  correcting  the 
certificate. 

Section  825. — EFFECT  OF  RECORDING  MORTGAGES  OF 
REAL  PROPERTY. — The  effect  of  recording  a  mortgage  of 
real  property  is  to  give  notice  to  the  world  of  the  encum- 
brance upon  it,  and  to  give  the  mortgage  precedence  over 
every  other  lien  which  subsequently  attaches  to  the  prop- 
erty. A  recorded  mortgage  has  precedence  over  one  of 
earlier  date  which  was  not  recorded,  and  of  which  the 
holder  of  the  recorded  mortgage  had  no  notice.  A  re- 
corded mortgage  is  good  against  an  attachment  or  home- 
stead subsequently  put  on  the  property,  or  any  other  lien 
subsequent  to  the  mortgage. 

Section  826. — EFFECT  OF  RECORDING  A  CHATTEL  MORT- 
GAGE.— A  mortgage  of  personal  property  must  be  re- 
corded in  the  office  of  the  County  Recorder  of  the  county 
in  which  the  mortgagor  resides.  But  if  the  mortgagor 
resides  in  one  county,  and  the  property  is  situated  in 
another  county,  then  the  mortgage  must  be  recorded  in 
both  counties.  If  the  property  is  removed  to  another 


636  BUSINESS  LAW  FOR  BUSINESS  MEN. 

county  by  the  mortgagor,  the  mortgagee  must,  within 
thirty  days,  cause  the  mortgage  to  be  recorded  in  the 
county  to  which  the  property  has  been  removed.  If  these 
provisions  are  complied  with  a  chattel  mortgage,  prop- 
erly executed,  gives  the  same  prior  lien  to  the  mortgagee 
of  personal  property  which  he  would  acquire  under  a 
recorded  real  estate  mortgage.  A  certified  copy  of  a 
mortgage  of  personal  property  once  recorded  may  be 
recorded  in  any  other  county. 

Civil  Code,  Sections  2959,  2964,  2965. 

Section  827. — MORTGAGE  NOT  RECORDED  GOOD  BETWEEN 
PARTIES. — Even  though  a  mortgage  is  not  recorded,  it  is 
good  between  the  parties  to  it,  if  the  mortgage  was  exe- 
cuted and  signed  in  the  manner  provided  by  law. 

Section  828. — MORTGAGE  ON  HOMESTEAD. — A  mortgage 
on  a  homestead  is  void  unless  it  is  signed  and  acknowl- 
edged by  both  husband  and  wife.  A  mortgage  on  com- 
munity real  estate  must  be  signed  by  both  husband  and 
wife,  whether  the  property  is  or  is  not  a  homestead.  A 
mortgage  made  after  a  homestead  has  been  filed,  signed 
by  the  husband  alone,  is  absolutely  void.  The  hosestead 
may  be  mortgaged,  but  it  must  be  by  the  joint  act  of  the 
husband  and  wife.  They  must  both  sign  the  mortgage  at 
the  time  it  is  made,  and  they  must  both  know  that  it 
covers  the  homestead  property.  So,  if  the  husband  signs 
a  mortgage  on  the  homestead,  and  his  wife  is  induced  to 
sign  it  also,  but  under  the  belief  that  the  mortgage  covers 
other  property  alone,  it  will  not  be  good  against  the  home- 
stead. A  mortgage  of  the  homestead,  to  be  valid,  must 
be  the  united  act  of  the  husband  and  wife. 

Civil  Code,  Section  1242. 

Act  of  the  Legislature,  approved  May  23,  1917 ; 
in  effect  July  27,  1917. 

Section  829. — DECLARATION  OF  HOMESTEAD.  —  Some- 
times a  question  will  arise  as  to  whether  there  is  a  legal 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  637 

homestead  on  file,  sufficient  to  protect  the  property 
against  creditors.  This  question  will  be  easily  answered, 
by  getting  from  the  County  Kecorder  a  copy  of  the 
declaration  of  homestead.  The  law  provides  what  must 
be  stated  in  the  declaration  of  homestead  filed  with  the 
County  Kecorder,  and  from  what  property  the  homestead 
may  be  taken.  If  the  claimant  be  married,  the  homestead 
may  be  selected  from  the  community  property,  or  the 
separate  property  of  the  husband,  or,  with  the  consent  of 
the  wife,  from  her  separate  property.  When  the  claimant 
is  not  married,  but  is  the  head  of  a  family,  the  homestead 
can  be  selected  from  any  of  his  or  her  property.  In  order 
to  select  a  homestead,  the  claimant  must  sign  and  ac- 
knowledge a  declaration  and  file  it  for  record  in  the  office 
of  the  County  Kecorder.  The  declaration  of  homestead 
must  contain:  (1)  A  statement,  showing  that  the  person 
making  it  is  the  head  of  a  family ;  or  when  the  declaration 
is  made  by  the  wife,  showing  that  her  husband  has  not 
made  such  declaration,  and  that  she  therefore  makes  the 
declaration  for  their  joint  benefit;  (2)  a  statement  that 
the  person  making  it  is  residing  on  the  premises,  and 
claims  them  as  a  homestead;  (3)  a  description  of  the 
premises ;  (4)  an  estimate  of  their  actual  cash  value. 
Civil  Code,  Sections  1237,  1238,  1261,  1263. 

Section  830. — FORM  or  DECLARATION  OF  HOMESTEAD  BY 
HUSBAND  AND  WIFE. — The  following  is  a  good  form  of 
Declaration  of  Homestead  by  husband  and  wife,  which 
must  be  recorded  in  the  office  of  the  County  Recorder  of 
the  county  where  the  land  is  situated  :— 

DECLARATION  OF  HOMESTEAD :— Know  all 
men  by  these  presents,  that  we  do  hereby  certify  and 
declare  that  we  are  husband  and  wife,  and  that  we  do 
now  at  the  time  of  making  this  declaration  actually  reside 
together  on  the  land  and  premises  herein  described ;  that 
the  land  and  premises  on  which  we  reside  are  situate, 
bounded,  and  described  as  follows,  to-wit: 


638  BUSINESS  LAW  FOR  BUSINESS  MEN. 


(Here  insert  description  of  land.) 

That  it  is  our  intention  to  use  and  claim  the  said  lot 
of  land  and  premises  above  described,  together  with  the 
dwelling  house  thereon,  and  its  appurtenances,  as  a  home- 
stead, and  we  do  hereby  select  and  claim  the  same  as  a 
homestead;  that  we  make  this  declaration  for  our  joint 
benefit,  and  we  declare  that  we  have  not  heretofore  made 
a  declaration  of  homestead ;  that  the  actual  cash  value  of 
said  property  we  estimate  to  be  $ 

In  witness  whereof,  we  have  hereto  set  our  hands  and 

seals  this day  of ,  19 

( Seal. ) 

( Seal. ) 

STATE  OF  CALIFORNIA,  } 

/-i  f   SS. 

COUNTY  OF } 

On  this day  of ,  19 ,  before  me, 

a  Notary  Public  in  and  for  said  County  and  State,  per- 
sonally appeared  and 

personally  known  to  me  to  be  the  persons  described  in  and 
who  executed  the  foregoing  Declaration  of  Homestead, 
and  they  acknowledged  to  me  that  they  executed  the  same. 

In  witness  whereof  I  have  hereunto  set  my  hand  and 

affixed  my  official  seal,  at  my  office,  on  this day 

of ,  19 


Notary  Public  in  and  for  the  County  of 

State  of  California. 
Commission  expires ,  19 

Section  831. — FORM  OF  DECLARATION  OF  HOMESTEAD  BY 
HUSBAND. — The  following  is  a  good  form  of  Declaration 
of  Homestead  by  the  husband  alone,  and  must  be  re- 
corded in  the  office  of  the  County  Recorder  of  the  county 
in  which  the  land  it  situated:— 

DECLARATION  OF  HOMESTEAD :- 
Know  all  men  by  these  presents,  that  I  do  hereby  cer- 
tify and  declare,  that  I  am  the  head  of  a  family;  that  I 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  639 

do  now  at  the  time  of  making  this  declaration  actually 
reside  with  my  family  on  the  land  and  premises  herein- 
after described;  that  the  land  and  premises  on  which  I 
reside  are  situate,  bounded,  and  described  as  follows, 
to-wit : 

(Here  insert  description  of  land.) 

That  my  wife's  name  is 

That  it  is  my  intention  to  use  and  claim  the  said  lot  of 
land  and  premises  above  described,  together  with  the 
dwelling  house  thereon,  and  its  appurtenances,  as  a  home- 
stead, and  I  do  hereby  select  and  claim  the  same  as  a 
homestead;  that  I  make  this  declaration  for  the  joint 
benefit  of  myself  and  wife,  and  I  declare  that  my  wife  has 
not  made  a  declaration  of  homestead ;  that  the  actual  cash 
value  of  said  property  I  estimate  to  be  $ 

In  witness  whereof,  I  have  hereto  set  my  hand  and 

seal  this day  of ,  19 

(Seal.) 

STATE  OF  CALIFORNIA,  j  c 
COUNTY  OF } 

On  this day  of ,  19 ,  before  me, 

a  Notary  Public  in  and  for  the  said  County  and  State, 

personally  appeared ,  personally  known 

to  me  to  be  the  person  described  in  and  who  executed  the 
foregoing  Declaration  of  Homestead,  and  he  acknowl- 
edged to  me  that  he  executed  the  same. 

In  witness  whereof  I  have  hereunto  set  my  hand  and 

affixed  my  official  seal,  at  my  office,  on  this day 

of ,  19 


Notary  Public  in  and  for  the  County  of 

State  of  California. 
Commission  expires ,  19 

Section  832. — FORM  OF  DECLARATION  OF  HOMESTEAD  BY 
WIFE. — The  following  is  a  good  form  of  Declaration  of 
Homestead  by  the  wife  alone,  and  must  be  recorded  in 


640  BUSINESS  LAW  FOR  BUSINESS  MEN. 

the  office  of  the  County  Recorder  of  the  county  in  which 
the  land  is  situated : — 

DECLARATION  OF  HOMESTEAD  :- 
Know  all  men  by  these  presents,  that  I  do  hereby  cer- 
tify and  declare,  that  I  do  now  at  the  time  of  making  this 
declaration  actually  reside  with  my  family  on  the  land 
and  premises  hereinafter  described;  that  the  land  and 
premises  on  which  I  reside  are  situate,  bounded,  and 
described  as  follows,  to-wit : 

(Here  insert  description  of  land.) 

That  my  husband's  name  is 

That  it  is  my  intention  to  use  and  claim  the  said  lot  of 
land  and  premises  above  described,  together  with  the 
dwelling  house  thereon,  and  its  appurtenances,  as  a  home- 
stead, and  I  do  hereby  select  and  claim  the  same  as  a 
homestead;  that  I  make  this  declaration  for  the  joint 
benefit  of  myself  and  husband  and  I  declare  that  my  hus- 
band has  not  made  a  declaration  of  homestead ;  that  the 
actual  cash  value  of  said  property  I  estimate  to  be 

$ 

In  witness  whereof  I  have  hereunto  set  my  hand  and 

seal  this day  of ,  19 

(Seal.) 

STATE  OF  CALIFORNIA,  1  gg 
COUNTY  OF j 

On  this day  of ,  19 ,  before  me, 

a  Notary  Public  in  and  for  the  said  County  and  State, 

personally  appeared ,  personally 

known  to  me  to  be  the  person  described  in  and  who  exe- 
cuted the  foregoing  Declaration  of  Homestead,  and  she 
acknowledged  to  me  that  she  executed  the  same. 

In  witness  whereof  I  have  hereunto  set  my  hand  and 

affixed  my  official  seal,  at  my  office,  on  this day 

of ,  19 

Notary  Public  in  and  for  the  County  of 

State  of  California. 
Commission  expires ,  19 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  641 

Section  833. — VALUE  OF  HOMESTEAD. — The  homestead 
of  husband  and  wife  must  not  exceed  in  value  the  sum 
of  $5,000.  The  value  of  the  homestead  selected  by  the 
head  of  a  family  other  than  the  husband  or  wife  must  not 
exceed  in  value  the  sum  of  $1,000.  Besides  the  husband 
or  wife,  any  other  person  may  take  a  State  homestead, 
as  the  head  of  a  family,  who  has  residing  on  the  premises 
and  is  caring  for  and  maintaining,  his  or  her  minor  child, 
or  minor  grandchild,  or  the  minor  child  of  his  or  her  de- 
ceased wife  or  husband,  a  minor  brother  or  sister  or  the 
minor  child  of  a  deceased  brother  or  sister,  a  father, 
mother,  grandmother,  or  grandfather  of  a  deceased  hus- 
band or  wife,  or  an  unmarried  sister. 
Civil  Code,  Section  1261. 

Section  834. — FOKM  OF  EEAL  ESTATE  MORTGAGE. — 
A  good  form  of  mortgage  on  real  estate  is  as  follows,  the 
blank  spaces  to  be  filled  in  with  the  proper  names,  dates, 
amounts,  and  descriptions : — 

This  mortgage  made  the day  of ,  in 

the  year  19 ,  by 

Mortgagor to Mortgagee 

Witnesseth 

That  the  Mortgagor mortgages  to  the  Mortgagee 

those  certain  lots,  or  tracts  of  land  situated  in 

County,  State  of  California,  particularly 

described  as  follows,  to-wit: 

(Here  insert  description  of  property.) 


as  security  for  the  payment  of  a  certain  obligation  in 
writing,  of  which  the  following  is  a  copy : — 

,  Cal., ,19 

after  date 

for  value  received, promise  to  pay 

,  or  order,  at 


642  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Dollars,  with  interest 

from at  the  rate 

of per  cent  per  annum,  payable  semi- 

annually,  principal  and  interest  payable  in  United  States 
Gold  Coin.  Interest  if  not  paid  when  due,  to  be  added  to 
the  principal  and  bear  interest  at  the  same  rate  until  paid. 


$ 

But  in  case  default  be  made  in  the  payment  of  either 
the  principal  or  any  installment  of  interest  provided  for 
in  said  obligation  when  due,  then  the  whole  shall  be  due 
at  the  option  of  the  holder  of  the  said  obligation,  and 
action  may  be  immediately  commenced,  without  notice,  to 
foreclose  this  mortgage. 

And  the  plaintiff,  in  action  to  foreclose  this  mortgage 
shall,  upon  filing  the  complaint  in  foreclosure,  be  entitled 
to per  cent  on  the  amount  due  on  said  obliga- 
tion as  counsel  fees. 

And  the  holder  of  said  obligation  may  pay  all  taxes  or 
other  encumbrances  now  subsisting  or  hereafter  to  be  laid 
upon  said  land,  and  may  at  his  option  keep  fully  insured 
against  all  risks  by  fire  the  buildings  which  are  now  and 
may  be  hereafter  erected  thereon,  and  such  payment  shall 
be  allowed  with  interest  thereon  at  the  rate  of  one  per 
cent  per  month. 

And  the  cost  of  foreclosure  and  sale,  counsel  fees,  and 
all  payments  herein  provided  for,  are  and  shall  be  a 
charge  upon  the  property  described  herein,  and  repayable 
on  demand,  and  payable  out  of  the  proceeds  of  the  sale 
thereof. 

IN    WITNESS    WHEREOF,    the    said    Mortgagor, 

,  has  hereunto  set hand 

and  seal ,  the  day  and  year  first  above  written. 

(Seal.) 

(Seal.) 

....(Seal.) 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  643 

STATE  OF  CALIFORNIA, 


COUNTY  OF j 

On  this day  of ,  A.  D.  one  thousand 

nine  hundred  and ,  before  me , 

a  Notary  Public  in  and  for  said  County  and  State,  re- 
siding therein,  duly  commissioned  and  sworn,  personally 
appeared  


known  to  me  to  be  the  person  whose  name  is  subscribed 
to  and  who  executed  the  within  instrument,  and  he  ac- 
knowledged to  me  that  he  executed  the  same. 

In  witness  whereof,  I  have  hereunto  set  my  hand  and 

affixed  my  official  seal  at  my  office  in  the 

County  of ,  the  day  and  year  in  this 

certificate  first  above  written. 

Notary  Public  in  and  for  the  County  of , 

State  of  California. 
Commission  expires ,  19 

Section  835. — RULES  WHICH  APPLY  TO  CHATTEL  MORT- 
GAGES.— The  law  provides  how  a  mortgage  of  personal 
property  must  be  made,  and  because  this  kind  of  mort- 
gage is  on  movable  property,  subject  to  transportation 
from  one  place  to  another,  the  law  makes  certain  strict 
rules  which  must  be  applied  to  the  making  of  every  chattel 
mortgage  in  this  State.  A  mortgage  of  personal  prop- 
erty is  void  as  against  creditors  of  the  mortgagor,  unless 
it  is  accompanied  by  the  affidavit  of  all  the  parties  thereto 
that  it  is  made  in  good  faith  and  without  any  design  to 
hinder,  delay,  or  defraud  creditors ;  and  a  mortgage  with- 
out this  affidavit  is  also  void  as  against  subsequent  pur- 
chasers and  encumbrancers  of  the  property  who  become 
such  in  good  faith  and  for  value.  The  law  also  provides 
that  a  mortgage  of  personal  property,  to  be  valid  against 
creditors  of  the  mortgagor,  or  against  subsequent  pur- 
chasers or  encumbrancers"  in  good  faith  and  for  value, 


644  BUSINESS  LAW  FOR  BUSINESS  MEN. 

must  be  acknowledged,  or  proved,  certified,  and  recorded 
in  like  manner  as  deeds  of  real  property. 
Civil  Code,  Section  2957. 

The  husband  may  mortgage  the  community  personal 
property ;  provided  the  husband  cannot  mortgage  the  fur- 
niture, furnishings,  or  fittings  of  the  home,  or  the  clothing 
or  wearing  apparel  of  the  wife  or  minor  children,  with- 
out the  written  consent  of  the  wife. 

Act  of  the  Legislature,  approved  May  23,  1917 ; 
in  effect  July  27,  1917. 

Section  836. — FORM  OP  CHATTEL  MORTGAGE. — A  good 
form  of  mortgage  on  personal  property  is  as  follows,  the 
blank  spaces  to  be  filled  in  with  the  proper  dates,  names, 
amounts,  and  descriptions : — 

THIS  MORTGAGE  made  the day  of..... , 

in  the  year  19 ,  by , 

by  occupation  a ,  Mortgagor, 

to ,  by  occupation  a 

,  Mortgagee. 

WITNESSETH:  That  the  Mortgagor  mortgages  to 
the  Mortgagee  all  that  certain  personal  property,  with 

the  increase  thereof,  situated  in County, 

State  of  California,  and  more  particularly  described  as 
follows,  to-wit:— 

(Here  insert  description  of  property.) 


as  security  for  the  payment  to  the  said  Mortgagee  of  the 

sum  of Dollars,  Gold  Coin  of 

the  United  States,  on  the day  of : ,  19 , 

with  interest  thereon  at  the  rate  of. per  cent  per 

annum,  payable  semi-annually,  according  to  the  terms 
and  conditions  of  a  certain  promissory  note  of  which  the 
following  is  a  copy :— 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  645 

,  Cal., ,  19 

after  date , 

for  value  received, promise  to  pay _.. 

,or  order,  at 

Dollars,  with  interest 

from ,  at  the  rate  of 

per  cent  per  annum,  payable  semi-annually,  principal  and 
interest  payable  in  United  States  Gold  Coin.  Interest,  if 
not  paid  when  due,  to  be  added  to  the  principal  and  bear 
interest  at  the  same  rate  until  paid. 


$ 

This  mortgage  is  also  made  as  security  for  all  other 
sums  now  due  or  that  may  hereafter  become  due  on  ac- 
count or  otherwise  from  the  mortgagor  to  the  mortgagee. 
It  is  also  agreed  that  in  case  the  mortgagee  should  bring 
suit  to  foreclose  this  mortgage,  upon  filing  the  complaint 
he  shall  be  allowed  a  reasonable  attorney  fee,  the  same  to 
be  secured  by  this  mortgage. 

It  is  also  agreed  that  if  the  mortgagor  shall  fail  to 
make  any  payment  as  in  said  promissory  note  or  in  this 
mortgage  provided,  or  if  the  mortgagor  shall  sell  the  said 
property  herein  mortgaged  without  the  written  consent 
of  the  mortgagee,  or  remove  the  same  from  the  County 
of ,  or,  if  the  mortgagee  shall  herein- 
after deem  himself  insecure,  then  in  either  of  the  above 
events  the  mortgagee  may  take  possession  of  the  said 
personal  property,  using  all  necessary  force  so  to  do,  and 
immediately  proceed  to  sell  the  same  in  the  manner  pro- 
vided by  law,  and  without  foreclosure,  and  from  the  pro- 
ceeds may  pay  the  whole  amount  due  the  said  mortgagee, 
as  specified  in  said  note  and  mortgage. 

Signed  and  executed  in  the  presence  of 


.(Seal.) 
.(Seal.) 
.(Seal.) 


646  BUSINESS  LAW  FOR  BUSINESS  MEN. 

STATE  OF  CALIFORNIA, 


ss. 


,  the  mortgagor in  the  foregoing 

mortgage  named,  and , 

the  mortgagee  in  said  mortgage  named,  being  duly  sworn, 
each  for  himself  doth  depose  and  say  that  the  aforesaid 
mortgage  is  made  in  good  faith  and  without  any  design  to 
hinder,  delay,  or  defraud  any  creditor  or  creditors. 

( Seal. ) 

( Seal. ) 

( Seal. ) 

Subscribed  and  sworn  to  before  me  this day 

of ,  19 


Notary  Public  in  and  for County,  California. 

STATE  OF  CALIFORNIA,  \  gg 
COUNTY  OF f 

On  this day  of ."...,  19 ,  before 

me,  a  Notary  Public  in  and  for  the  County  of , 

residing  therein,  duly  commissioned  and  sworn,  person- 
ally appeared ,  known  to  me 

to  be  the  person  described  in,  whose  name  is  subscribed 
to,  and  who  executed  the  within  instrument,  and  he  ac- 
knowledged to  me  that  he  executed  the  same. 

IN  WITNESS  WHEREOF,  I  have  hereunto  set  my 
hand  and  affixed  my  official  seal  at  my  office  in  the  said 

County  of ,  the  day  and  year  in  this 

certificate  first  above  written. 

Notary  Public  in  and  for  the  County  of , 

State  of  California. 
Commission  expires ,  19 

Section  837. — DEED  AS  SECURITY  AND  AGREEMENT  TO 
DEED  BACK. — When  a  deed  of  property  is  given  as  se- 
curity for  a  note,  and  a  written  agreement  is  given  to  the 
maker  that  the  property  will  be  deeded  back  to  him  when 
the  note  is  paid,  the  transaction  constitutes  a  mortgage, 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  647 

and  nothing  more.  Many  lawsuits  have  occurred,  where 
the  holder  of  such  a  deed  has  claimed  to  be  the  absolute 
owner  of  the  property,  but  the  courts  have  invariably 
held  that  it  is  nothing  more  than  a  mortgage,  and  that 
the  holder  must  bring  a  foreclosure  suit  upon  it,  just  the 
same  as  if  it  were  a  mortgage  in  the  ordinary  terms. 

Section  838. — LAWFUL  INTEREST. — There  is  no  law 
against  usury  in  California.  A  note  may  specify  any 
rate  of  interest,  and  it  will  be  allowed,  according  to  the 
terms  of  the  note,  until  the  entry  of  judgment  in  a  suit  to 
collect  the  note. 

Civil  Code,  Section  1918. 

Section  839. — LEGAL  RATE  WHERE  No  INTEREST  SPECI- 
FIED.— If  a  note  does  not  specify  any  rate,  interest  is 
payable  on  it  at  the  rate  of  seven  per  cent  per  annum 
after  the  money  becomes  due.  Thus,  if  a  note  is  made 
payable  in  sixty  days,  which  does  not  specify  any  rate  of 
interest,  the  legal  rate  of  seven  per  cent  is  payable  on  it, 
beginning  with  the  termination  of  the  sixty  days.  If  part 
of  the  note  is  paid  in  sixty  days,  no  interest  is  payable 
except  on  so  much  of  it  as  remains  unpaid.  In  the  com- 
putation of  interest  for  a  period  less  than  a  year,  360 
days  are  deemed  to  constitute  a  year. 
Civil  Code,  Section  1917. 

Section  840. — COMPOUND  INTEREST. — The  maker  of  a 
note  may  lawfully  agree,  and  may  insert  in  the  note,  that 
if  the  interest  is  not  punctually  paid  it  shall  become  a 
part  of  the  principal,  and  thereafter  bear  the  same  rate 
of  interest  as  the  principal  debt. 
Civil  Code,  Section  1919. 

Section   841. — INTEREST    ON    JUDGMENT. — Interest    is 
payable  on  judgments  recovered  in  the  courts  of  this 
State  at  the  rate  of  seven  per  cent  per  annum,  but  such 
interest  cannot  be  compounded  in  any  manner. 
Civil  Code,  Section  1920. 


648  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Section  842.— WHO  MUST  PAY  TAXES  ON  MORTGAGE. — 
The  mortgagee  and  mortgagor  may  make  any  agreement 
they  please  about  the  payment  of  the  taxes,  and  it  is 
lawful  to  provide  in  the  mortgage  that  the  mortgagor 
shall  pay  the  taxes  on  the  mortgage. 

Section  843. — INSURANCE  ON  MORTGAGED  BUILDINGS. — 
Either  the  mortgagor  or  mortgagee  may  keep  the  build- 
ings on  the  land  insured.  A  mortgage  generally  provides 
that  the  mortgagee  may  insure  the  buildings,  and  the 
mortgagor  must  repay  the  amount  paid  as  premiums  with 
interest. 

Section  844. — ATTORNEY  FEES. — There  is  no  lien  on 
mortgaged  property  for  attorney  fees,  unless  the  mort- 
gage expressly  so  provides. 

Section  845. — MORTGAGE  FOR  FUTURE  ADVANCES. — A 
mortgage  may  be  made  which  will  cover  and  secure  not 
only  a  sum  of  money  paid  in  hand,  but  also  future  ad- 
vances of  the  mortgagee  to  the  mortgagor.  Such  a  mort- 
gage is  good,  and  avoids  the  necessity  of  a  number  of 
mortgages  where  money  is  advanced  at  different  times  to 
the  same  person. 

Section  846. — FIRST  AND  SECOND  MORTGAGES. — A  mort- 
gage properly  executed  and  recorded  takes  precedence  of 
other  mortgages  subsequently  placed  on  the  same  prop- 
erty. If  the  property  is  sold  under  foreclosure,  the  first 
mortgage  must  be  first  paid. 

Section  847. — IN  WHAT  COURT  SUIT  MUST  BE  BROUGHT 
TO  FORECLOSE  MORTGAGE. — A  suit  to  foreclose  a  mortgage 
on  personal  property  can  be  brought  in  either  the  Justice 
Court  or  the  Superior  Court,  if  neither  the  amount  of 
the  lien  nor  the  value  of  the  property  is  as  much  as  $300. 
If  the  mortgage  lien  is  as  much  as  $300,  or  if  the  value 
of  the  property  mortgaged  is  $300  or  over,  the  suit  to 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  649 

foreclose  the  mortgage  must  be  brought  in  the  Superior 
Court.  All  suits  to  foreclose  mortgages  on  real  property 
must  be  brought  in  the  Superior  Court. 

Section  848. — WHEN  MOKTGAGE  is  OUTLAWED. — A  mort- 
gage is  outlawed  four  years  after  it  becomes  due.  A  suit 
to  foreclose  a  mortgage  must  be  commenced  within  four 
years  after  it  is  due,  otherwise  the  suit  cannot  be 
maintained. 

Code  of  Civil  Procedure,  Section  337. 

Section  849. — EENEWAL  OF  NOTE  DOES  NOT  EENEW 
MORTGAGE. — When  a  note  secured  by  a  mortgage  becomes 
barred  by  the  statute  of  limitations,  the  lien  created  by 
the  latter  is  extinguished,  and  a  subsequent  renewal  of 
the  note,  while  creating  the  debt  anew,  does  not  revive  or 
continue  the  mortgage.  (Decided  by  the  Supreme  Court 
of  California,  in  the  case  of  Kern  Valley  Bank  vs.  Koehn, 
which  decision  is  printed  in  Volume  XXXIX  of  California 
Decisions,  page  138.) 

Section  850. — WHAT  PROPERTY  CAN  BE  SOLD  TO  SATISFY 
MORTGAGE. — Only  so  much  of  the  mortgaged  property  can 
be  sold  as  will  bring  enough  to  pay  the  debt  and  the 
costs  and  expenses  of  foreclosure.  Therefore,  neither 
real  estate  nor  personal  property  will  be  sold  in  one  lot, 
to  satisfy  a  mortgage  debt,  if  it  appears  that  a  sale  of 
a  part  only  will  bring  enough  to  pay  the  debt  and  costs 
and  expenses. 

Section  851. — ORDER  IN  WHICH  PROPERTY  MUST  BE 
SOLD. — As  a  general  rule,  in  the  sale  of  mortgaged  prop- 
erty under  foreclosure,  where  the  mortgage  covers  both 
real  and  personal  property,  the  court  in  its  decree  of  fore- 
closure will  direct  that  the  personal  property  be  sold 
first.  When  the  sale  is  of  real  property,  consisting  of 
several  known  lots  or  parcels,  they  must  be  sold  sep- 


650  BUSINESS  LAW  FOR  BUSINESS  MEN. 

arately.  The  judgment  debtor,  if  present  at  the  sale,  may 
also  direct  the  order  in  which  property,  real  or  personal, 
shall  be  sold,  when  such  property  consists  of  several 
known  lots  or  parcels,  or  of  articles  which  can  be  sold  to 
advantage  separately,  and  the  Sheriff  must  follow  such 
directions. 

Code  of  Civil  Procedure,  Section  694. 

Section  852. — COSTS  or  FORECLOSURE. — The  costs  of 
foreclosure,  including  reasonable  attorney  fees,  when  pro- 
vided for  in  the  mortgage,  are  taxed  to  the  mortgagor, 
and  must  be  paid  out  of  the  proceeds  of  the  sale  of  the 
mortgaged  premises. 

Section  853. — WHO  MAY  BUY  AT  FORECLOSURE  SALE.— 
Any  person  may  buy  in  the  property  at  a  foreclosure 
sale,  except  the  officer  making  the  sale,  or  his  deputy. 
The  mortgagee  may  buy  in  the  property,  if  he  will  bid 
higher  than  other  bidders,  or  if  no  one  else  appears  to  bid. 

Section  854. — CERTIFICATE  OF  SALE. — The  officer  mak- 
ing the  sale  gives  to  the  purchaser  a  certificate  of  sale, 
containing  a  particular  description  of  the  real  property 
sold,  the  price  bid  for  each  distinct  lot  or  parcel,  the 
whole  price  paid,  and  when  the  property  is  subject  to 
redemption  the  certificate  must  so  state.  And  when  the 
judgment  under  which  the  sale  has  been  made  is  payable 
in  a  specified  kind  of  money  or  currency,  the  certificate 
must  specify  the  same  as  the  money  or  currency  in  which 
redemption  may  be  made.  Besides  giving  to  the  pur- 
chaser the  certificate  of  sale,  a  duplicate  of  such  certifi- 
cate must  be  filed  by  the  officer  in  the  office  of  the  Re- 
corder of  the  county.  If  the  property  sold  is  personal 
property,  capable  of  manual  delivery,  the  officer  must 
actually  deliver  the  property  to  the  purchaser  upon  pay- 
ment of  the  purchase  price. 

Code  of  Civil  Procedure,  Sections  698,  700. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  651 

Section  855. — ASSIGNMENT  OP  CERTIFICATE  OF  SALE. — 
The  certificate  of  sale  received  by  the  purchaser  can  be 
sold  and  assigned  by  him,  and  such  assignment  passes 
his  right  and  title.  The  assignment  should  be  recorded, 
and  a  notice  of  the  assignment  should  be  served  on  the 
officer  who  made  the  sale. 

Section  856. — WHAT  PROPERTY  CAN  BE  REDEEMED.— 
There  is  no  redemption  from  sales  of  personal  property. 
The  purchaser  acquires  an  absolute  title  to  personal  prop- 
erty. When  a  leasehold  interest  in  real  property  is  sold, 
and  the  lease  has  less  than  two  years  to  run,  there  is  no 
redemption  from  the  sale.  In  all  other  cases  the  property 
is  subject  to  redemption. 

Code  of  Civil  Procedure,  Section  700. 

Section  857. — TIME  FOE  REDEMPTION. — The  property 
sold  may  be  redeemed  from  the  purchaser  at  any  time 
within  twelve  months  after  the  sale.  The  judgment  debtor 
has  the  whole  of  the  last  day  in  which  to  redeem. 
Code  of  Civil  Procedure,  Section  702. 

Section  858. — WHO  MAY  REDEEM. — The  persons  who 
may  redeem  in  this  state  are,  the  judgment  debtor,  or  his 
successor  in  interest,  in  the  whole  or  any  part  of  the  prop- 
erty ;  and  a  creditor  having  a  lien  by  judgment  or  mort- 
gage on  the  property  sold,  or  on  some  share  or  part  there- 
of, subsequent  to  the  lien  on  which  the  property  was  sold. 
Code  of  Civil  Procedure,  Section  701. 

Section  859. — How  TO  REDEEM. — The  law  provides, 
that  the  judgment  debtor,  or  other  redemptioner,  who 
wishes  to  redeem,  must  pay  the  purchaser  the  amount  of 
his  purchase,  with  one  per  cent  per  month  thereon  up  to 
the  time  of  redemption,  together  with  the  amount  of  any 
assessment  or  taxes  which  the  purchaser  may  have  paid  on 
the  property  after  purchase,  and  interest  on  such  amount. 
The  purchaser  from  whom  redemption  is  made  may  also 


652  BUSINESS  LAW  FOR  BUSINESS  MEN. 

be  a  creditor  having  a  lien  other  than  the  judgment  under 
which  he  purchased,  and  if  this  lien  was  prior  to  the  lien 
of  the  person  who  seeks  to  redeem  from  him,  he  must  be 
paid  the  amount  of  his  lien,  with  interest,  in  addition  to 
the  amount  of  his  purchase.  When  property  has  been  once 
redeemed,  it  may  be  again  redeemed  by  another  person 
within  sixty  days  after  the  last  redemption,  by  paying  the 
amount  paid  on  the  last  redemption,  with  two  per  cent 
additional,  and  any  assessment  or  taxes  on  the  property 
which  the  last  redemptioner  may  have  paid,  and  interest, 
and  other  redemptioners  may  in  like  manner  redeem  again 
and  again,  by  making  similar  payments.  Written  notice 
of  redemption  must  be  given  to  the  officer  making  the  sale 
and  a  duplicate  filed  with  the  Eecorder  of  the  county.  No 
form  of  written  notice  is  here  given,  for  the  reason  that  it 
is  not  safe  for  a  redemptioner  to  attempt  to  fill  out  a  blank 
notice  and  use  it  himself,  without  the  services  of  a  lawyer. 
Knowing  his  rights,  the  redemptioner  should  seek  the 
services  of  a  competent  lawyer,  to  prepare  and  serve  the 
necessary  notice  and  make  the  proper  tenders  of  money 
in  a  lawful  manner. 

Code  of  Civil  Procedure,  Sections  702,  703. 

Section  860. — THE  SHERIFF'S  DEED. — If  no  redemp- 
tion is  made  within  twelve  months  after  sale,  the  pur- 
chaser or  his  assignee  is  entitled  to  a  Sheriff's  deed.  If 
redeemed,  whenever  sixty  days  have  elapsed,  and  no  other 
redemption  has  been  made,  and  the  time  for  redemption 
has  expired,  the  last  redemptioner  or  his  assignee  is  enti- 
tled to  a  Sheriff's  deed.  But  in  all  cases  the  judgment 
debtor  has  the  entire  period  of  twelve  months  from  the 
date  of  the  sale  to  redeem  the  property.  If  the  debtor  re- 
deems, the  effect  of  the  sale  is  terminated,  and  he  is  re- 
stored to  his  estate. 

Code  of  Civil  Procedure,  Section  703. 

Section  861. — DEFICIENCY  JUDGMENT. — If  after  the 
sale  of  mortgaged  property  the  proceeds  are  insufficient 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  653 

to  pay  the  debt,  and  a  balance  still  remains  due,  a  judg- 
ment is  docketed  by  the  clerk  of  the  court  for  such  balance 
against  the  defendants  personally  liable  for  the  debt.  Such 
deficiency  judgment  then  becomes  a  lien  against  the  real 
estate  of  the  judgment  debtor. 

Code  of  Civil  Procedure,  Section  726. 

Section  862. — POSSESSION  OF  PROPERTY  DURING  FORE- 
CLOSURE PROCEEDINGS. — Generally  the  mortgagor  remains 
in  possession  of  the  mortgaged  property  during  foreclos- 
ure proceedings,  and  it  is  only  under  peculiar  circum- 
stances that  the  court  will  disturb  his  possession.  Where 
it  appears  that  the  mortgaged  property  is  in  danger  of 
being  lost,  removed,  or  materially  injured,  or  where  it  ap- 
pears that  the  conditions  of  the  mortgage  have  not  been 
performed,  and  that  the  property  is  probably  insufficient 
to  discharge  the  mortgage  debt,  the  Superior  Court  has 
the  power  to  appoint  a  Eeceiver,  into  whose  hands  the 
property  is  placed  while  the  suit  is  going  on. 

Act  of  the  legislature  approved  May  3,  1919;  in 
effect  July  22, 1919. 

Section  863. — POSSESSION  or  EEAL  PROPERTY  DURING 
TIME  FOR  EEDEMPTION. — It  has  been  shown  that  there  is 
no  redemption  of  personal  property  sold  under  foreclos- 
ure, but  that  a  redemption  of  real  property  is  allowed,  and 
that  the  time  within  which  redemption  may  be  made  is 
twelve  months.  During  this  period  of  twelve  months  al- 
lowed for  redemption  the  mortgagor  has  the  right  to  re- 
main in  possession  of  the  mortgaged  premises,  and  dur- 
ing this  time  he  is  entitled  to  use  the  same  and  take  the 
proceeds  thereof. 

Section  864. — BIGHT  TO  RENTS  AND  PROFITS. — Where 
the  mortgaged  property  is  occupied  by  a  tenant,  the  pur- 
chaser, from  the  time  of  the  sale  until  redemption,  is  en- 
titled to  receive  the  rents  or  the  value  of  the  use  and  oc- 
cupation of  the  property.  Where  a  person  other  than  the 


654  BUSINESS  LAW  FOR  BUSINESS  MEN. 

judgment  debtor  redeems,  he  is  entitled  to  receive  the 
rents  until  another  redemption  takes  place.  But  all  rents 
or  profits  collected  by  the  judgment  creditor  or  by  a  pur- 
chaser must  be  credited  upon  and  deducted  from  the 
redemption  money  to  be  paid. 

Code  of  Civil  Procedure,  Section  707. 

Section  865. — WHO  MUST  PAY  FOE  IMPROVEMENTS  MADE 
DURING  FORECLOSURE  PROCEEDINGS. — Sometimes  the  mort- 
gagee gets  possession  of  the  premises,  either  by  consent 
or  by  force,  and  succeeds  in  retaining  such  possession 
during  foreclosure  proceedings.  Then  the  question  arises, 
Who  is  to  pay  for  improvements  to  the  property  made 
by  the  mortgagee  in  possession?  In  California  the  law 
is,  that  where  a  mortgagee  is  in  possession,  and  makes 
improvements  without  the  consent  of  the  mortgagor,  he 
will  not  be  allowed  anything  for  them  further  than  is 
proper  to  keep  the  premises  in  necessary  repair;  there- 
fore, if  a  mortgagee  in  possession  should  build  a  new 
house  on  the  land,  or  clear  uncultivated  land  and  put  it 
into  a  state  of  cultivation,  or  make  any  other  improve- 
ments not  necessary  to  keep  the  premises  in  repair,  he 
must  stand  the  expense  himself,  and  cannot  recover  from 
the  mortgagor  or  any  redemptioner  the  cost  of  such  im- 
provements. The  reason  for  this  rule  is,  that  while  un- 
reasonable improvements  may  be  of  benefit  to  the  estate, 
yet  the  mortgagee  has  no  right  to  impose  them  upon  the 
owner  and  thus  increase  the  burden  of  redeeming. 

Section  866. — How  TO  COLLECT  A  NOTE  WHEN  MAKER 
Is  DEAD. — If  the  maker  of  a  note  dies  before  it  becomes 
due,  the  holder  may  collect  it  from  the  maker's  estate.  A 
claim  for  the  amount  due  on  the  note  must  be  presented 
to  the  executor  or  administrator. 

If  the  executor  or  administrator  allows  the  claim,  it 
is  then  presented  to  the  Judge  of  the  Probate  Court  for 
his  allowance,  and  when  allowed  it  is  filed  in  the  Clerk's 
office,  and  becomes  an  acknowledged  debt  of  the  estate, 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  655 

which  the  executor  or  administrator  will  be  bound  to  pay 
in  the  course  of  the  administration  of  the  estate.  When 
a  claim  is  rejected,  either  by  the  executor  or  administra- 
tor, or  by  the  Judge  of  the  court,  the  holder  must  bring 
suit  against  the  executor  or  administrator  within  three 
months  after  service  of  written  notice  by  the  executor  or 
administrator  of  its  rejection,  if  it  be  then  due,  or  within 
two  months  after  it  becomes  due,  otherwise  the  claim  will 
be  forever  barred. 

Act  of  the  legislature  approved  May  3,  1919;  in 
effect  July  22,  1919. 

Section  867. — EXCUSE  FOR  NOT  PRESENTING  CLAIM  IN 
TIME. — When  the  claimant  was  out  of  the  State  during  the 
publication  of  notice  to  creditors,  and  makes  affidavit  to 
the  fact,  and  that  he  had  no  notice,  this  will  be  an  excuse 
for  not  presenting  his  claim  against  an  estate  in  time, 
and  he  will  be  allowed  to  present  the  claim  to  the  executor 
or  administrator  at  any  time  before  a  decree  of  distribu- 
tion of  the  estate  is  entered. 

Code  of  Civil  Procedure,  Section  1493. 

Section  868. — FORECLOSURE  OP  MORTGAGE  WHEN  THE 
MAKER  Is  DEAD. — A  mortgage  may  be  foreclosed,  even 
though  the  maker  is  dead,  by  a  suit  against  the  executor 
or  administrator  of  his  estate.  But  a  claim  against  the 
estate  must  be  presented  to  the  executor  or  administrator 
if  the  mortgagee  wishes  to  recover  attorney  fees.  If  he 
does  not  present  his  claim  for  the  amount  due,  he  may 
still  foreclose  his  mortgage,  but  he  cannot  recover  fees 
paid  to  his  attorney  unless  he  expressly  waives  all  re- 
course against  any  other  property  of  the  estate  except 
the  property  mortgaged. 

Section  869. — FORECLOSURE  OF  MORTGAGE  PAYABLE  IN 
INSTALLMENTS. — If  the  debt  for  which  the  mortgage  is 
held  is  not  all  due,  as  where  a  note  is  payable  in  install- 
ments, and  foreclosure  is  had  for  failure  to  pay  an  install- 


656  BUSINESS  LAW  FOE  BUSINESS  MEN. 

ment  due,  so  soon  as  sufficient  of  the  property  has  been 
sold  to  pay  the  amount  due,  with  costs,  the  sale  must 
cease ;  and  afterwards,  as  often  as  more  becomes  due,  for 
principal  or  interest,  the  court  may,  on  motion,  order 
more  to  be  sold.  But  if  the  property  cannot  be  sold  in 
portions,  without  injury  to  the  parties,  the  whole  may  be 
ordered  to  be  sold  in  the  first  instance,  and  the  entire 
debt  and  costs  paid;  but  where  this  is  done  there  will  be 
a  rebate  of  interest  on  installments  not  yet  due. 
Code  of  Civil  Procedure,  Section  728. 

Section  870. — COLLECTION  OF  LOST  OB  DESTBOYED  NOTE. 
The  amount  due  on  a  note  may  be  collected,  notwith- 
standing the  note  may  have  been  lost  or  destroyed.  If 
the  note  is  lost  or  destroyed,  then  the  holder  must  give  a 
bond,  executed  by  himself  and  two  sufficient  sureties,  to 
indemnify  the  party  paying  the  note  against  any  lawful 
claim  which  any  other  person  may  make  upon  it. 
Civil  Code,  Section  3137. 

Section  871. — NOTE  MADE  BY  PABTNEBS. — A  note  may 
be  made  by  partners  for  the  debts  of  the  firm,  or  in  the 
usual  course  of  business  of  the  firm,  for  goods,  or  ad- 
vancements, or  as  security  for  a  loan  to  the  firm.  One 
partner  may  execute  the  note  in  the  firm  name,  and  all  the 
partners  will  be  bound  by  it,  for  each  partner  has  an 
equal  right,  so  far  as  third  parties  are  concerned,  to  bind 
the  firm  by  acts  and  conduct  in  the  usual  course  of  its 
business. 

Section  872. — LIABILITY  OF  PABTNEBS  ON  PABTNEBSHIP 
NOTE. — Every  general  partner  is  liable  to  third  persons 
for  all  the  obligations  of  the  partnership,  jointly  with  his 
co-partners.  Therefore,  a  promissory  note,  executed  for 
the  firm,  makes  each  partner  liable  to  pay  the  note.  The 
partnership  property  may  be  taken  for  the  payment  of 
the  debt,  and  the  property  of  each  partner  may  also  be 
taken,  if  the  property  of  the  firm  is  not  sufficient. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  657 

Section  873. — ASSIGNMENT  OF  MORTGAGE. — A  mortgage 
may  be  assigned,  and  the  assignee  will  then  have  the 
same  rights  as  the  original  mortgagee.  The  assignment 
must  be  in  writing,  and  must  be  signed  and  acknowledged 
by  the  person  making  the  assignment.  The  following  is 
a  good  form  of  assignment  of  mortgage,  which  must  be 
acknowledged  in  the  same  manner  as  a  mortgage  is  ac- 
knowledged : 

ASSIGNMENT  OP  MORTGAGE. 

Know  All  Men  by  These  Presents : — That 

of  the  County  of ,  State  of  California,  the 

party  of  the  first  part,  for  and  in  consideration  of  the  sum 

of Dollars,  Gold  Coin  of  the  United  States  of 

America,  to  him  in  hand  paid  by , 

of  the  County  of ,  State  of  California, 

the  party  of  the  second  part,  the  receipt  whereof  is  hereby 
acknowledged,  does  by  these  presents,  grant,  bargain,  sell, 
assign,  transfer,  and  set  over,  unto  the  said  party  of  the 
second  part,  a  certain  indenture  of  mortgage  bearing  date 

the day  of ,  19 ,  made  and  executed  by 

to  the  said  party  of  the  first  part, 

and  recorded  in  the  office  of  the  County  Recorder  of  the 

County  of ,  State  of  California,  in  book ... 

of  mortgages,  page on  the day  of 

19 at minutes  past o'clock M. 

Together  with  the  promissory  note  therein  described, 
and  the  money  due  and  to  grow  due  thereon,  with  the  in- 
terest. 

And  the  said  party  of  the  first  part  does  hereby  make, 
constitute,  and  appoint  the  said  party  of  the  second  part 
his  true  and  lawful  attorney,  irrevocable,  in  his  name  or 
otherwise,  but  at  the  proper  costs  and  charges  of  the  said 
party  of  the  second  part,  to  have,  use,  and  take  all  lawful 
ways  and  means  for  the  recovery  of  the  said  money  and 
interest ;  and  in  case  of  payment  to  discharge  the  same  as 
fully  as  the  said  party  of  the  first  part  might  or  could  do 
if  these  presents  were  not  made. 


658  BUSINESS  LAW  FOB  BUSINESS  MEN. 

In  witness  whereof  the  said  party  of  the  first  part  has 

hereunto  set  his  hand  and  seal  this day  of 

19 

(Seal.) 

(Acknowledgment  in  usual  form.) 

Section  874. — RELEASE  AND  SATISFACTION  OF  MORTGAGE. 
A  mortgage  may  be  released  and  satisfied,  by  an  entry 
in  the  record  book  signed  by  the  mortgagee ;  and  a  mort- 
gage may  also  be  satisfied  and  released  by  a  written  in- 
strument, acknowledged  in  the  same  manner  as  a  deed, 
and  filed  for  record  in  the  office  where  the  mortgage  it- 
self is  recorded. 

Section  875  — FORM  OF  RELEASE  OF  MORTGAGE. — The 
following  is  a  form  of  release  of  mortgage : 

Know  All  Men  by  These  Presents :  That  I, 

of  the  County  of ,  State  of 

California,  do  hereby  certify  and  declare  that  a  certain 

mortgage  bearing  date  the day  of 

19 ,  made  and  executed  by of  said 

County,  the  party  of  the  first  part  therein,  to 

of  said  County,  the  party  of  the  second  part  therein,  and 
recorded  in  the  office  of  the  Recorder  of  the  said  County 

of ,  State  of  California,  in  Book of 

Mortgages,  on  page ,  on  the day  of 

19 ,  together  with  the  debt  thereby  secured,  is  fully 

paid,  satisfied,  and  discharged. 

In  witness  whereof  I  have  hereunto  set  my  hand  and 

seal,  this day  of 19 

(Seal.) 

(Must  be  acknowledged  in  the  same  form  as  a  deed.) 

Section  876. — POWER  OF  SALE  IN  MORTGAGE  OR  TRUST 
DEED. — See  the  subject,  "Trust  Deeds." 

A.  J.  BLEDSOE,  ATTORNEYXAT-LAW,  Los  Angeles,  Cal.— 
Mortgage  Foreclosures ;  Suits  on  Notes ;  reasonable  fees ; 

MAKES  A  SPECIALTY  OF  THE  LAW  OF  COMMON  LAW  COM- 
PANIES.— The  organization,  first  advice  and  direction,  and 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  659 

starting  in  business,  of  a  Common  Law  Company  in  the 
State  of  California.  A  stockholder  in  a  corporation  in 
California,  if  he  owns  one-tenth  of  the  stock,  is  liable  for 
one-tenth  of  the  corporation  debts  (and  so  as  to  other  pro- 
portions of  stock  owned  by  him),  whether  his  stock  is  all 
paid  for  or  not.  A  partner  in  California  is  individually 
liable  for  all  the  debts  of  the  firm  if  the  debt  cannot  be 
paid  out  of  the  partnership  property.  A  shareholder  in  a 
Common  Law  Company  is  not  individually  liable  for  any 
of  the  debts  of  the  business,  and  the  creditors  must  look 
to  the  property  of  the  company  alone.  Common  Law 
Companies  are  destined  to  take  the  place  of  the  State 
corporations,  to  a  great  extent,  in  the  business  life  of 
California.  (See  the  subject,  "Common  Law  Compa- 
nies.") A  uniform  fee  of  $250  will  be  charged  for  legal 
services  in  the  organization  of  a  Common  Law  Company. 
See  the  title  page  of  this  book  for  office  address  of  A.  J. 
Bledsoe. 


PART  VII. 

ATTACHMENTS,  JUDGMENTS,  AND 
EXECUTIONS 

ATTACHMENTS 

Section  877. — ATTACHMENT  or  DEBTOR'S  PROPERTY. — 
A  creditor,  in  a  suit  to  collect  a  bill,  account,  or  promis- 
sory note  not  secured  by  mortgage,  can  attach  the  prop- 
erty of  his  debtor.  The  court  in  which  the  suit  is  brought 
will  issue  the  writ  of  attachment,  to  be  placed  in  the  hands 
of  an  officer  for  service,  at  the  time  the  summons  is  issued 
in  the  suit,  or  at  any  time  afterward  before  judgment  is 
given.  Always,  the  plaintiff  in  the  suit  must  give  bond, 
usually  in  the  sum  of  two  hundred  dollars,  when  the  suit 
is  in  the  Superior  Court,  to  the  effect  that  if  the  defend- 
ant recover  judgment  the  plaintiff  will  pay  all  costs  that 
may  be  awarded  to  the  defendant  and  all  damages 
which  he  may  sustain  by  reason  of  the  attachment,  not 
exceeding  the  sum  specified  in  the  bond.  The  bond  must 
be  signed  by  two  or  more  sureties.  Upon  the  filing  of  the 
bond  the  Clerk  of  the  Superior  Court,  if  the  suit  is  in  that 
court,  or  the  Justice  of  the  Peace,  if  the  suit  is  before  a 
Justice,  will  issue  a  writ  of  attachment.  The  bond  in  a 
Justice  Court  is  usually  in  the  sum  of  fifty  dollars. 

A  writ  to  attach  the  property  of  the  defendant  must 
be  issued  by  the  Justice  at  the  time  of,  or  after  issuing 
summons,  in  actions  in  which  the  sum  claimed  exclusive 
of  interest  exceeds  ten  dollars. 

Code  of  Civil  Procedure,  Sections  538,  539,  867. 

'      S     '-"     &i 

Section  878. — WHAT  PROPERTY  CAN  BE  ATTACHED. — 
Real  estate  belonging  to  the  debtor,  whether  standing  up- 

660 


Section  878,  page  661,  "Business  Law  for  Business  Men" — ATTACH- 
MENT OF  PROPERTY  SOLD  ON  THE  INSTALLMENT  PLAN— 
Personal  property  in  possession  of  the  buyer  under  an  executory  agreement 
for  its  sale  entered  into  after  this  section  goes  into  effect  may  be  taken  under 
attachment  or  execution  issued  at  the  suit  of  a  creditor  of  the  buyer,  notwith- 
standing any  provision  in  the  agreement  for  forfeiture  in  case  of  levy  or  change 
of  possession. 

The  officer  levying  on  such  property  must,  within  five  days  after  being 
served  with  a  verified  written  claim  containing  a  detailed  statement  thereof, 
pay  or  tender  to  the  seller  full  payment  of  all  sums  due  or  to  accrue  to 
him  under  the  agreement,  above  setoffs,  with  interest  to  date  of  tender.  If 
the  tender  is  refused,  the  amount  thereof  must  be  deposited  with  the  county 
treasurer,  payable  to  the  order  of  the  seller.  Until  such  payment  or  deposit  is 
made,  the  property  can  not  be  sold  under  the  levy. 

Act  of  the  Legislature  of  California,  approved  May  25,  1921;  in  effect 
July  25,  1921. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  661 

on  the  records  of  the  county  in  his  name  or  in  the  name 
of  another;  personal  property  of  all  kinds;  corporation 
stocks  or  shares ;  money  owing  to  the  debtor  by  any  per- 
son,— all  these  may  be  attached  as  security  for  the  pay- 
ment of  the  judgment  which  the  creditor  expects  to  obtain 
when  he  sues  the  debtor  to  collect  the  amount  due  from 
him. 

Section  879. — WHAT  PROPERTY  Is  EXEMPT  FROM  AT- 
TACHMENT OR  EXECUTION. — The  law  of  California  singles 
out  certain  property  of  the  debtor,  and  says  that  it  shall 
not  be  taken  for  a  debt.  This  is  done  to  protect  the  unfor- 
tunate and  the  improvident,  and  to  secure  to  the  family 
of  the  debtor  provision  at  least  for  temporary  wants. 
Therefore,  the  law  states  that  certain  property  of  the 
debtor  shall  be  exempt,  no  matter  how  pressing  his  debts 
or  how  eager  his  creditors  may  be.  An  attachment  can- 
not hold,  nor  can  a  sale  on  execution  be  had,  of  any  of  the 
following  property,  if  the  owner  objects:  (1) — Chairs, 
tables,  desks  and  books,  to  the  value  of  $200,  belonging 
to  the  judgment  debtor.  (2) — Necessary  household,  table, 
and  kitchen  furniture,  belonging  to  the  judgment  debtor, 
including  one  sewing  machine,  stove,  stovepipes,  and  fur- 
niture, wearing  apparel,  beds,  bedding,  and  bedsteads, 
hanging  pictures,  oil  paintings  and  drawings,  drawn  or 
painted  by  any  member  of  the  family,  and  family  por- 
traits and  their  necessary  frames,  provisions  and  fuel 
actually  provided  for  individual  or  family  use  sufficient 
for  three  months,  and  three  cows  and  their  sucking  calves, 
four  hogs  with  their  sucking  pigs,  and  food  for  such  cows 
and  hogs  for  one  month ;  also  one  piano,  one  shotgun,  and 
one  rifle.  (3) — The  farming  utensils  or  implements  of 
husbandry  of  the  judgment  debtor,  not  exceeding  in  value 
the  sum  of  one  thousand  dollars ;  also,  two  oxen,  or  two 
horses,  or  two  mules,  and  their  harness,  one  cart  or  buggy 
and  two  wagons,  and  food  for  such  oxen,  horses,  or  mules 
for  one  month ;  also,  all  seed,  grain,  or  vegetables  actually 
provided,  reserved,  or  on  hand  for  the  purpose  of  planting 


662  BUSINESS  LAW  FOE  BUSINESS  MEN. 

or  sowing  at  any  time  within  the  ensuing  six  months  not 
exceeding  in  value  the  sum  of  two  hundred  dollars;  75 
bee-hives;  and  one  horse  and  vehicle  belonging  to  any 
person  who  is  maimed  and  crippled,  if  same  is  necessary 
in  his  business.  (4) — The  tools  or  implements  of  a  me- 
chanic or  artisan,  necessary  to  carry  on  his  trade;  the 
notarial  seal,  records,  and  office  furniture  of  a  Notary 
Public ;  the  instruments  and  chest  of  a  surgeon,  physician, 
surveyor,  or  dentist,  necessary  to  the  exercise  of  his  pro- 
fession, with  his  professional  library,  and  necessary  of- 
fice furniture;  the  professional  librari-es  of  attorneys, 
judges,  ministers  of  the  gospel,  editors,  school  teachers, 
and  music  teachers,  and  their  necessary  office  furniture, 
including  one  safe  and  one  tjrpewriter;  the  musical  in- 
struments of  music  teachers  actually  used  by  them  in  giv- 
ing instructions ;  all  the  indexes,  abstracts,  books,  papers, 
maps,  and  office  furniture  of  a  searcher  of  records,  nec- 
essary to  be  used  in  his  profession;  the  typewriters,  or 
other  mechanical  contrivances  employed  for  writing  in 
type,  actually  used  by  the  owner  thereof  for  making  his 
living;  also  one  bicycle,  when  the  same  is  used  by  its 
owner  for  the  purpose  of  carrying  on  his  regular  business, 
or  when  the  same  is  used  for  the  purpose  of  transporting 
the  owner  to  and  from  his  place  of  business.  (5) — The 
cabin  or  dwelling  of  a  miner,  not  exceeding  in  value  the 
sum  of  five  hundred  dollars;  also  his  sluices,  pipes,  hose, 
windlass,  derrick,  cars,  pumps,  tools,  implements  and  ap- 
pliances, necessary  for  carrying  on  any  mining  opera- 
tions, not  exceeding  in  value  the  aggregate  sum  of  five 
hundred  dollars;  and  two  horses,  mules,  or  oxen,  with 
their  harness,  and  food  for  such  horses,  mules,  or  oxen 
for  one  month,  when  necessary  to  be  used  on  any  whim, 
windlass,  derrick,  car,  pump,  or  hoisting  gear;  and  also 
his  mining  claim,  actually  worked  by  him,  not  exceeding  in 
value  the  sum  of  one  thousand  dollars.  (6) — Two  horses, 
two  oxen,  or  two  mules,  and  their  harness,  and  one  cart 
or  wagon,  one  dray  or  truck,  one  coupe,  one  hack  or  car- 
riage, for  one  or  two  horses,  by  the  use  of  which  a  cart- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  663 

man,  drayman,  truckman,  huckster,  peddler,  hackman, 
teamster,  or  other  laborer  habitually  earns  his  living ;  and 
one  horse,  with  vehicle  and  harness  or  other  equipments, 
used  by  a  physician,  surgeon,  constable,  or  minister  of  the 
gospel,  in  the  legitimate  practice  of  his  profession  or  busi- 
ness; with  food  for  such  oxen,  horses,  or  mules,  for  one 
month.  (7) — One  fishing  boat  and  net,  not  exceeding  the 
total  value  of  five  hundred  dollars,  the  property  of  any 
fisherman,  by  the  lawful  use  of  which  he  earns  his  liveli- 
hood. (8) — Poultry  not  exceeding  in  value  seventy-five 
dollars.  (9) — The  wages  and  earnings  of  all  seamen,  sea- 
going fishermen,  and  sealers,  not  exceeding  three  hundred 
dollars,  regardless  of  where  or  when  earned  «r,/i  in  addi- 
tion to  all  other  exemptions  otherwise  provided  by  any 
law.  (10) — The  earnings  of  the  judgment  debtor  for  his 
personal  services  rendered  at  any  time  within  thirty  days 
next  preceding  the  levy  of  execution  or  attachment,  when 
it  appears  by  the  debtor 's  affidavit  or  otherwise  that  such 
earnings  are  necessary  for  the  use  of  his  family,  residing 
in  this  state,  supported  in  whole  or  in  part  by  his  labor ; 
but  where  debts  are  incurred  by  any  such  person,  or  his 
wife  or  family,  for  the  common  necessaries  of  life,  or  have 
been  incurred  at  a  time  when  the  debtor  had  no  family 
residing  in  this  State  supported  in  whole  or  in  part  by 
his  labor,  the  one-half  of  such  earnings  above  mentioned  is 
nevertheless  subject  to  attachment  or  execution,  to  satisfy 
debts  so  incurred.  (11) — The  shares  held  by  a  member 
of  an  incorporated  homestead  association,  not  exceeding 
in  value  one  thousand  dollars,  if  the  person  holding  the 
shares  is  not  the  owner  of  a  homestead  under  the  laws  of 
this  State.  (12) — All  the  nautical  instruments  and  wear- 
ing apparel  of  any  master,  officer,  or  seaman  of  any 
steamer  or  other  vessel.  (13) — All  fire  engines,  hooks, 
and  ladders,  with  the  carts,  trucks,  and  carriages,  hose, 
buckets,  implements,  and  apparatus  thereunto  appertain- 
ing, and  all  furniture  and  uniforms  of  any  fire  company 
or  department  organized  under  any  law  of  this  State. 
(14) — All  arms,  uniforms,  and  accoutrements  required 


664  BUSINESS  LAW  FOB  BUSINESS  MEN. 

by  law  to  be  kept  by  any  person,  and  also  one  gun,  to  be 
selected  by  the  debtor.  (15) — All  court  houses,  jails, 
public  offices  and  buildings,  lots,  grounds,  and  personal 
property;  the  fixtures,  furniture,  books,  papers,  and  ap- 
purtenances belonging  and  pertaining  to  jails  and  public 
offices  of  any  county  of  this  State;  and  all  cemeteries, 
public  squares,  parks,  and  places,  public  buildings,  town 
halls,  markets,  buildings  for  the  use  of  fire  departments 
and  military  organizations,  and  the  lots  and  grounds 
thereto  belonging,  owned  or  held  by  any  town  or  incorpor- 
ated city,  or  dedicated  by  such  town  or  city  to  health,  or- 
nament, or  public  use,  or  for  the  use  of  any  fire  or  mili- 
tary company  organized  under  the  laws  of  this  State.  (16) 
—All  material  not  exceeding  one  thousand  dollars  in  val- 
ue, purchased  in  good  faith  for  use  in  the  construction, 
alteration,  or  repair  of  any  building,  mining  claim,  or 
other  improvements,  as  long  as  in  good  faith  the  same  is 
about  to  be  applied  to  the  construction,  alteration,  or  re- 
pair of  such  building,  mining  claim,  or  other  improvement. 
(17) — All  machinery,  tools,  and  implements  necessary  in 
and  for  boring,  sinking,  putting  down  and  constructing 
surface  or  artesian  wells,  also,  the  engines  necessary  for 
operating  such  machinery,  implements,  tools,  etc.;  also 
all  trucks  necessary  for  the  transportation  of  such  ma- 
chinery, tools,  implements,  engines,  etc.;  provided,  that 
the  value  of  all  the  articles  exempted  under  this  subdivi- 
sion shall  not  exceed  one  thousand  dollars.  (18) — All 
moneys,  benefits,  privileges,  or  immunities  accruing  or  in 
any  manner  growing  out  of  any  life  insurance,  if  the  an- 
nual premiums  paid  do  not  exceed  five  hundred  dollars, 
and  if  they  exceed  that  sum,  a  like  exemption  exists,  bear- 
ing the  same  proportion  to  the  moneys,  benefits,  privi- 
leges, and  immunities  so  accruing  or  growing  out  of  such 
insurance  that  five  hundred  dollars  bears  to  the  whole 
annual  premiums  paid.  (19) — Shares  of  stock  in  any 
building  and  loan  association  to  the  value  of  one  thousand 
dollars.  No  article,  however,  or  species  of  property  men- 
tioned above,  is  exempt  from  execution  issued  upon  a 


BUSINESS  CONTEACTS  AND  LEGAL  OBLIGATIONS.  665 

judgment  recovered  for  its  price,  or  upon  a  judgment 
of  foreclosure  of  a  mortgage  or  other  lien  thereon.  (20) 
—A  United  States  homestead  cannot  be  attached  or  sold 
under  execution  for  any  debt  contracted  prior  to  proving 
up  and  obtaining  title  to  the  land.  (21) — All  money  re- 
ceived by  any  person,  a  resident  of  the  State,  as  a  pen- 
sion from  the  United  States  government,  whether  the 
same  shall  be  in  the  actual  possession  of  such  pensioner, 
or  deposited,  loaned  or  invested  by  him. 

Act  of  the  legislature,  in  effect  May  22,  1907. 

Section  880. — HOMESTEAD  MONEY  EXEMPT. — The  law 
with  reference  to  State  homesteads  has  already  been 
stated  in  preceding  sections,  and  to  what  extent  such 
homesteads  are  exempt  from  attachment  or  execution. 
It  should  be  added,  that  if  the  homestead  be  held  by  the 
owner,  the  proceeds  arising  from  such  sale,  to  the  extent 
of  the  value  allowed  for  a  homestead  exemption,  as  above 
stated,  will  be  exempt  from  attachment  for  a  period  of 
six  months  from  the  time  of  the  sale.  If,  for  instance, 
the  husband  and  wife  should  sell  their  homestead  for  five 
thousand  dollars,  they  can  take  that  money  at  any  time 
within  six  months  and  put  it  into  another  homestead,  and 
it  will  be  also  exempt  when  another  declaration  of  home- 
stead has  been  filed.  The  money  will  be  exempt  for  six 
months,  so  as  to  give  an  opportunity  to  select  and  pur- 
chase another  homestead  with  it. 

Act  of  the  Legislature,  approved  February  15, 
1911. 

Section  881. — MORTGAGED  PROPERTY  MAY  BE  ATTACHED. 
—Property,  real  or  personal,  which  is  mortgaged  to  an- 
other person,  may  be  attached  in  a  suit  by  a  creditor,  but 
the  lien  of  the  attachment  is  subject  to  the  mortgage. 

Section  882. — CREDITOR  LIABLE  FOR  UNLAWFUL  ATTACH- 
MENT.— A  creditor  who  makes  an  unlawful  attachment,  or 
causes  it  to  be  made,  will  be  liable  in  damages  for  all  in- 


666  BUSINESS  LAW  FOR  BUSINESS  MEN. 

jury  done  to  the  person  whose  property  is  attached.  If  the 
holder  of  an  obligation  sues  upon  it,  and  causes  an  at- 
tachment to  be  issued  and  placed  upon  property  of  the 
debtor,  as  upon  household  furniture,  or  farming  utensils, 
or  horses,  or  cows,  exempt  by  law  from  execution,  he  will 
be  liable  for  all  damages  sustained  by  the  unlawful  seiz- 
ure. His  sureties  on  the  attachment  bond  are  liable  to  the 
extent  of  their  bonds  only,  but  he  is  liable  to  the  full  extent 
of  the  injury.  The  debtor  may  have  the  attachment  re- 
leased upon  the  ground  that  the  property  attached  is  ex- 
empt, and  bring  a  suit  for  damages  against  the  creditor 
and  his  bondsmen. 

Section  883. — CREDITOR  ATTACHING  PERSONAL,  PROPER- 
TY MUST  PAY  MORTGAGE. — It  has  already  been  shown  that 
mortgaged  property  may  be  attached  by  a  creditor  of  the 
owner,  subject  to  the  mortgage.  Personal  property  mort- 
gaged may  be  taken  under  attachment  or  execution  issued 
at  the  suit  of  a  creditor  of  a  mortgagor;  but  before  the 
property  can  be  taken,  the  officer  levying  the  attachment 
or  execution  must  pay  or  tender  to  the  mortgagee  the 
amount  of  the  mortgage  debt  and  interest,  or  must  de- 
posit the  money  with  the  County  Clerk  or  Treasurer,  pay- 
able to  the  order  of  the  mortgagee. 
Civil  Code,  Section  2969. 

Section  884. — GARNISHMENT. — There  are  certain  ef- 
fects of  a  debtor  which  cannot  be  seized  and  taken  into 
the  custody  of  the  officer,  but  which  may  still  be  rendered 
liable  to  the  payment  of  the  debt,  such  as  money  owing 
to  the  debtor  by  a  third  person,  or  property  in  the  hands 
of  a  third  person  belonging  to  the  debtor.  In  a  suit  by 
the  creditor  against  the  debtor,  the  officer  serves  a  notice 
upon  the  person  owing  the  debtor,  or  having  property  of 
the  debtor  in  his  hands,  that  such  property  is  attached; 
and  this  is  called  garnishment.  The  person  upon  whom 
the  notice  is  served  is  called  the  garnishee.  Thereafter, 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  667 

he  cannot  pay  his  debt  to  the  defendant,  nor  deliver  the 
property  to  him,  but  must  hold  it  to  await  the  result  of 
the  suit.  In  this  State,  when  required  by  the  officer  the 
garnishee  must  make  a  statement  of  the  amount  owing 
by  him  to  the  defendant,  or  showing  the  character  and 
description  of  the  property  in  his  hands  belonging  to  the 
defendant. 

Section  885. — FOE  WHAT  PROPERTY  GARNISHEE  LIABLE. 
—The  garnishee  will  be  held  liable  for  all  personal  prop- 
erty in  his  hands  belonging  to  the  defendant  which  is 
capable  of  being  seized  and  sold  upon  execution.  The 
garnishee  will  be  liable  for  money  in  his  hands  belonging 
to  the  defendant,  and  a  garnishment  may  be  levied  upon  a 
bank  or  corporation,  as  well  as  upon  an  individual.  The 
property  must  be  in  the  actual  possession  of  the  garnishee, 
or  within  his  control,  so  that  he  may  be  able  to  turn  it 
over  to  the  officer  on  execution. 

Section  886. — MONEY  DUE  As  SALARY  TO  PUBLIC  OFFI- 
CER.— The  salary  of  a  public  office  can  be  attached  or 
garnisheed.  When  a  judgment  is  obtained  against  a  public 
officer,  a  transcript  of  it  may  be  filed  with  the  State  Con- 
troller or  County  or  City  Auditor,  and  so  much  of  the  of- 
ficers salary  as  is  not  exempt  from  execution,  shall  be  then 
paid  over  to  the  judgment  debtor.  (Statutes  of  1903,  page 
362.) — A  decision  was  made  by  the  Supreme  Court 
in  a  test  case  under  the  statute  of  1903.  A  suit  was 
brought  in  San  Francisco  to  compel  the  Auditor  to  allow 
the  salary  of  a  public  officer,  but  he  refused  on  the  ground 
that  a  part  of  the  money  had  been  attached  under  the  new 
law.  The  Supreme  Court  decided  that  the  law  is  consti- 
tutional, and  that  it  will  stand  good  as  to  all  public  officers 
and  employes  created  or  provided  for  by  the  Legislature. 
Therefore,  when  the  Auditor  pays  the  money  due,  from 
the  State,  or  city,  or  county,  into  court,  so  much  as  is  not 
exempt  from  execution  must  be  paid  to  the  judgment 
creditor.  (Decided  by  the  Supreme  Court  of  California, 


668  BUSINESS  LAW  FOB  BUSINESS  MEN. 

in  the  case  of  Buperich  vs.  Baehr,  which  decision  is  print- 
ed in  Volume  27  of  California  Decisions,  No.  1465,  page 
359.) 

Section  887. — MONEY  IN  THE  HANDS  OF  THE  LAW. — 
Money  in  the  hands  of  the  law,  as  money  in  the  hands  of 
a  sheriff,  or  constable,  or  money  deposited  with  a  clerk 
of  court  to  wait  the  determination  of  a  suit,  or  money  in 
the  hands  of  a  Receiver  appointed  by  the  court,  cannot 
be  taken  by  garnishment  or  attachment,  for  all  such  prop- 
erty is  in  the  custody  of  the  law,  and  until  the  law  has 
done  with  it,  no  interference  from  any  other  source  will 
be  tolerated  or  allowed. 

Section  888. — ATTACHMENT  OF  PAKTNEBSHIP  PROPERTY. 
— Partnership  property  may  always  be  attached  for  part- 
nership debts.  But  a  more  serious  question  arises,  where 
one  partner  owes  debts  and  is  sued  by  his  creditor,  out- 
side of  the  partnership  business.  The  decisions  of  the 
courts  in  different  States  have  not  been  uniform,  but  in 
California  the  law  appears  to  be  settled,  that  a  creditor 
of  one  partner  may  have  an  attachment  levied  upon  the 
partnership  property.  The  sheriff  must  take  the  whole 
property  into  his  possession,  but  he  cannot  sell  on  execu- 
tion the  interests  of  both  partners ;  he  can  only  sell  under 
the  execution  the  interest  of  the  partner  against  whom 
the  judgment  was  obtained. 

Section  889. — DISSOLUTION  OF  ATTACHMENT. — If  an  at- 
tachment has  been  improperly  or  irregularly  issued,  by 
the  court  in  which  the  suit  was  brought,  it  will  be  dis- 
charged on  motion  of  the  defendant.  If  an  attachment  is 
issued  in  a  case  where  the  law  does  not  provide  for  an 
attachment,  or,  if  the  plaintiff's  complaint  does  not  state 
a  cause  of  action,  or  if  other  necessary  papers  essential 
to  obtain  a  Writ  of  Attachment  are  fatally  defective,  the 
attachment  will  be  held  to  be  improperly  or  irregularly 
issued  and  the  defendant  will  have  a  right  to  ask  for  the 
discharge  of  the  attachment. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  669 

Section  890. — BOND  FOR  EELEASE  OF  ATTACHED  PROP- 
ERTY.— The  defendant  in  a  suit,  whose  property  is  at- 
tached, may  have  the  attachment  released  by  giving  a 
bond,  with  at  least  two  sureties,  as  security  that  the 
property  released  will  be  re-delivered  to  the  proper 
officer  if  the  plaintiff  recover  a  judgmnt  in  the  action; 
or  that,  if  the  property  is  not  turned  over  to  the  officer, 
the  sureties  will  pay  to  the  plaintiff  the  full  value  of  the 
property  released. 

Code  of  Civil  Procedure,  Section  555. 

Section  891. — LIEN  OF  ATTACHMENT. — The  attachment 

will  be  a  lien  upon  all  real  property  attached  for  a  period 

of  three  years  after  date  of  levy,  unless  sooner  released 

or  discharged  by  dismissal  of  the  suit  or  by  entry  of 

judgment.    The  time  may  be  extended  by  the  court,  upon 

motion  made  not  less  than  five  nor  more  than  sixty  days 

before  the  expiration  of  the  three  years,  for  a  further 

period  of  two  years,  and  thereafter  similar  extensions. 

Act  of  the  legislature,  approved  April  9,  1919 ; 

in  effect  July  22,  1919. 

JUDGMENTS  AND  EXECUTIONS 

Section  892.— JUDGMENTS. — Whether  any  property  is 
attached  or  not,  a  judgment  may  be  obtained  for  the 
amount  due,  and  costs  of  suit,  and  upon  the  judgment  an 
execution  is  issued  from  the  court  in  which  suit  is  brought, 
directed  to  the  Sheriff,  and  commanding  that  officer  to  sell 
enough  of  the  debtor's  property  to  pay  the  debt.  All 
property  not  exempt  from  execution  may  be  sold  by  the 
Sheriff  and  applied  to  the  payment  of  the  judgment.  All 
sales  of  property  under  execution  are  made  at  public  auc- 
tion to  the  highest  bidder. 

Section  893. — JUDGMENT  A  LIEN  ON  REAL  PROPERTY. — 
When  a  judgment  is  rendered  in  a  suit  in  the  Superior 
Court,  the  Clerk  of  the  Court  enters  the  judgment  in  his 


670  BUSINESS  LAW  FOR  BUSINESS  MEN. 

official  records,  and  makes  up  what  is  called  a  Judgment 
Roll,  attaching  together  and  filing  the  pleadings  and  cer- 
tain other  papers,  for  that  purpose.  Immediately  after 
filing  the  Judgment  Boll,  the.  Clerk  of  the  Court  makes 
the  proper  entry  of  the  judgment  in  the  docket  kept  by 
him;  and  from  the  time  the  judgment  is  docketed  it  be- 
comes a  lien  upon  all  the  real  property  of  the  judgment 
debtor  not  exempt  from  execution  in  the  county,  owned 
by  him  at  the  time  or  which  he  may  afterward  acquire, 
until  the  lien  ceases. 

Code  of  Civil  Procedure,  Sections  670,  671. 

Section  894. — How  LONG  JUDGMENT  LIEN  CONTINUES. 
The  lien  of  a  judgment  docketed  in  the  Superior  Court 
continues  for  five  years,  on  real  property  of  the  judg- 
ment debtor  in  the  county. 

Section  895. — JUDGMENT  LIEN  ON  PROPERTY  IN  AN- 
OTHER COUNTY. — A  transcript  of  the  original  docket  of  the 
judgment,  certified  by  the  Clerk,  may  be  filed  with  the 
Recorder  of  any  other  county,  and  from  the  time  of  the 
filing  the  judgment  becomes  a  lien  upon  all  the  real  prop- 
erty of  the  judgment  debtor  not  exempt  from  execution 
in  such  other  county,  and  this  lien,  unless  the  judgment  be 
previously  satisfied,  continues  for  two  years. 
Code  of  Civil  Procedure,  Section  674. 

Section  896. — How  JUSTICE  COURT  JUDGMENT  Is  MADE 
LIEN  ON  REAL  PROPERTY. — Reference  has  been  made  in  the 
preceding  Sections  to  the  lien  of  judgments  obtained  in 
the  Superior  Court.  But  a  lien  upon  the  real  property  of 
the  debtor  may  also  be  secured  on  a  Justice  Court  judg- 
ment, by  following  certain  requirements  of  the  law  of 
California.  A  person  obtaining  a  judgment  in  the  Justice 
Court,  if  he  wishes  to  make  it  a  lien  upon  the  real  prop- 
erty of  his  debtor,  must  ask  the  Justice  to  give  him  an  ab- 
stract of  the  judgment,  which  it  is  the  duty  of  the  Justice 
to  furnish  on  demand.  This  abstract  of  the  judgment 


BUSINESS  CONTRACTS  AND  LEG AI>  OBLIGATIONS.  671 

must  be  filed  in  the  office  of  the  Recorder  of  the  county  in 
which  the  land  of  the  debtor  is  situated,  and  when  so  filed, 
and  from  the  time  of  filing,  the  judgment  becomes  a  lien 
on  such  property. 

A  judgment  rendered  in  a  Justice's  court  creates  no 
lien  upon  any  lands  of  the  defendant,  unless  such  an  ab- 
stract is  filed  in  the  office  of  the  Recorder  of  the  county 
in  which  the  lands  are  situated.  When  so  filed,  and  from 
the  time  of  filing,  the  judgment  becomes  a  lien  upon  all 
the  real  property  of  the  judgment  debtor,  not  exempt 
from  execution,  in  such  county,  owned  by  him  at  the  time, 
or  which  he  may  afterwards,  and  before  the  lien  expires, 
acquire.  The  lien  continues  for  two  years,  unless  the  judg- 
ment be  previously  satisfied. 

At  any  time  before  the  expiration  of  two  years  from 
the  time  of  filing  such  abstract  of  judgment,  and  while  the 
judgment  is  yet  in  force  or  unsatisfied,  a  successive  ab- 
stract of  such  judgment  may  be  likewise  filed,  and  it 
shall  have  the  effect  of  continuing  such  lien  for  a  further 
period  of  two  years  from  the  time  of  filing  the  subsequent 
abstract  of  judgment;  provided,  however,  that  no  such 
lien  shall  continue  or  be  in  force  after  five  years  from  the 
time  of  the  rendition  of  such  judgment. 

Code  of  Civil  Procedure,  Sections  897,  900. 
Act  of  the  Legislature,  approved  March  20, 1911. 

Section  897. — TIME  WITHIN  WHICH  EXECUTION  MAY 
ISSUE. — The  party  in  whose  favor  judgment  is  given  may, 
at  any  time  within  five  years  after  the  judgment  is 
entered,  have  a  writ  of  execution  issued  for  its  enforce- 
ment. 

Section  898. — EXEMPTION  MUST  BE  CLAIMED  BY  DEBTOR. 
While  the  law  exempts  certain  property  of  a  judgment 
debtor  from  execution  and  forced  sale,  such  exemption 
is  a  personal  privilege,  which  may  be  waived  by  the 
debtor;  and  a  failure  to  claim  the  property  as  exempt, 
when  levied  on  to  satisfy  a  judgment  against  him,  within 


672  BUSINESS  LAW  FOR  BUSINESS  MEN. 

a  reasonable  time  thereafter,  is  a  waiver  of  the  exemption 
right ;  and  the  officer  selling  exempt  property  without  such 
claim  of  exemption  is  not  liable  for  its  value. 

A.  J.  BLEDSOE,  Attorney-at-Law,  Los  Angeles,  Cal.— 
General  practice  in  all  courts.  Letters  from  clients  in  any 
part  of  the  State  promptly  answered.  Written  opinions 
sent  by  mail.  Special  attention  given  to  organizing  Com- 
mon Law  Companies.  See  title  page  of  this  book  for  of- 
fice address  of  A.  J.  Bledsoe. 


PAET  VIII 
WILLS 

Section  899. — MAKING  A  WILL. — The  law  of  California 
designs  to  encourage  the  making  of  wills,  and  whenever 
the  last  will  and  testament  of  a  deceased  person — who  in 
his  lifetime  thus  endeavored  to  direct  the  disposition  of 
his  property  when  he  should  have  done  with  the  business 
of  this  world — whenever  such  an  instrument  has  come  be- 
fore the  Supreme  Court  of  this  State,  and  has  become  the 
subject  of  attack  by  dissatisfied  relatives,  the  law  relative 
to  the  making  of  wills  has  always  been  liberally  construed, 
with  a  sincere  desire  to  carry  out  the  intentions  of  the 
testator.  The  courts  of  late  years  have  come  to  look  with 
more  or  less  suspicion  upon  the  many  attempts  to  break 
wills  made  in  this  State.  Disgraceful  scandals  have  been 
the  aftermath  of  so  many  will  contests,  and  bribery  and 
perjury  of  witnesses  such  frequent  circumstances,  that 
the  Supreme  Court  alone  has  been  able  to  stem  the  tide  of 
corruption  which  has  followed  many  of  California's  rich 
men  to  the  grave.  Now,  the  frequent  decisions  of  the 
Supreme  Court  in  favor  of  the  validity  of  wills,  and  the 
fearless  rulings  of  some  Judges  of  the  Superior  Court, 
setting  aside  verdicts  of  juries  when  evidently  induced  by 
passion  and  prejudice,  are  having  a  good  effect.  The  num- 
ber of  will  contests  may  not  be  decreased,  as  long  as 
credulous  clients  have  money  to  pay  eager  lawyers;  but 
the  people  of  California  may  at  all  events  feel  greater 
security  in  the  irrevocable  character  of  last  wills  and  tes- 
taments. And  whether  a  person  be  rich  or  poor,  wheth- 
er the  estate  disposed  of  by  will  be  large  or  small,  it  is 
the  intention  of  the  law  of  California  that  the  solemn  act 
thus  expressed  shall  be  protected  and  enforced. 

673 


674  BUSINESS  LAW  FOE  BUSINESS  MEN. 

Section  900. — WHO  MAY  MAKE  A  WILL. — Every  person 
in  California  over  the  age  of  18  years,  and  of  sound  mind, 
may  make  a  last  will,  and  thus  dispose  of  all  his  estate, 
real  and  personal. 

Section  901. — WILL  OF  MARRIED  WOMAN. — A  married 
woman  may  dispose  of  all  her  separate  property  by  will, 
without  the  consent  of  her  husband,  and  may  alter  or  re- 
voke the  will  in  like  manner  as  if  she  were  single.  The 
will  of  a  married  woman  must  be  executed  and  proved  in 
the  same  manner  as  other  wills. 
Civil  Code,  Section  1273. 

Section  902. — ONE-HALF  OF  COMMUNITY  SUBJECT  TO 
TESTAMENTARY  DISPOSITION  OF  WIFE. — Upon  the  death  of 
the  wife,  one-half  of  the  community  property  belongs  to 
the  surviving  husband,  and  the  other  half  is  subject  to  the 
testamentary  disposition  of  the  wife,  and  in  the  absence 
of  such  testamentary  disposition,  the  entire  community 
property  goes  to  the  surviving  husband  without  adminis- 
tration, except  such  portion  thereof  as  may  have  been 
set  apart  to  the  wife  by  judicial  decree  for  her  support 
and  maintenance,  which  portion  is  subject  to  her  testa- 
mentary disposition,  and  in  the  absence  of  such  disposi- 
tion goes  to  her  descendants  or  heirs,  exclusive  of  her 
husband.  When  the  wife  makes  testamentary  disposition 
of  her  interest  in  the  community  property,  the  entire  com- 
munity property  is  subject  to  the  community  debts,  and 
the  charges  and  expenses  of  administration.  Prior  to 
admission  of  any  such  will  to  probate,  the  husband  shall 
continue  in  the  management  and  control  of  the  communi- 
ty property;  after  the  admission  of  the  will  to  probate, 
the  court  may,  and  so  far  as  the  proper  and  advantageous 
administration  of  the  estate  will  permit,  must  continue 
the  management  and  control  of  the  community  property 
in  the  husband,  who  from  time  to  time  shall  account  to 
the  estate  for  such  management  and  control. 

Act  of  the  Legislature,  approved  May  27,  1919 ;  in 
effect  July  27,  1919. 


9904,  has  been  repea.ed  by  vote  of  the 
people. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  675 

Section  903. — ONE-HALF  SUBJECT  TO  TESTAMENTAEY 
DISPOSITION  OF  HUSBAND. — Upon  the  death  of  the  husband, 
one-half  of  the  community  property  belongs  to  the  sur- 
viving wife,  and  the  other  half  is  subject  to  the  testa- 
mentary disposition  of  the  husband,  and  in  absence  of 
such  testamentary  disposition,  it  all  goes  to  the  surviving 
wife  upon  administration.  In  case  of  the  dissolution  of 
the  community  by  the  death  of  the  husband,  the  entire 
community  property  is  equally  subject  to  his  debts,  the 
family  allowance  and  the  charges  and  expenses  of  admin- 
istration. 

The  one-half  of  the  community  property  which  be- 
longs to  the  surviving  spouse  shall  not  be  subject  to  in- 
heritance tax  or  be  reckoned  as  part  of  the  estate  of  the 
deceased  spouse  for  the  purpose  of  fixing  the  compensa- 
tion of  executors  or  administrators  or  fixing  attorneys 
fees. 

Act  of  the  Legislature,  appproved  May  27,  1919, 
in  effect  July  27,  1919. 


,1 


t 
Section     904. — CONSENT  TO  DISPOSE  OF  PROPERTY  BY 

WILL. — Either  husband  or  wife  may,  by  will,  dispose  of 
his  or  her  half  of  the  community  property  by  and  with 
the  consent  of  the  other,  which  consent  must  be  in  writing 
upon  or  attached  to  the  will ;  but  either  spouse  may,  with- 
out the  consent  of  the  other,  make  such  testamentary 
disposition  in  favor  of  the  other  spouse  or  of  the  lineal 
descendants  of  the  testator. 

Act  of  the  Legislature,  approved  May  27,  1919 ;  in 
in  effect  July  27,  1919. 

Section  905.— WHO  MAY  TAKE  BY  WILL. — Any  natural 
person  may  take  property  by  will  in  this  State. 

(a)  Restriction  on  devise  for  charitable  uses. — No  es- 
tate, real  or  personal,  shall  be  bequeathed  or  devised  to 
any  charitable  or  benevolent  society  or  corporation,  or  to 
any  person  or  persons  in  trust  for  charitable  uses,  except 


676  BUSINESS  LAW  FOB  BUSINESS  MEN. 

the  same  be  done  by  will  duly  executed  at  least  thirty  days 
before  the  decease  of  the  testator ;  and  if  so  made  at  least 
thirty  days  prior  to  such  death,  such  devise  or  legacy  and 
each  them  shall  be  valid ;  provided,  that  no  such  devise  or 
bequest  shall  collectively  exceed  one-third  of  the  estate  of 
the  testator,  leaving  legal  heirs,  and  in  such  case  a  pro 
rata  deduction  from  such  devises  or  bequests  shall  be 
made  so  as  to  reduce  the  aggregate  thereof  to  one-third 
of  such  estate ;  and  all  dispositions  of  property  made  con- 
trary hereto  shall  be  void,  and  go  to  the  residuary  lega- 
tee or  devisee,  next  of  kin,  or  heirs,  according  to  law ;  and 
provided  further,  that  bequests  and  devises  to  the  state, 
or  to  any  state  institution,  or  for  the  use  or  benefit  of  the 
state  or  any  state  institution,  or  to  any  educational  insti- 
tution which  is  exempt  from  taxation  or  for  the  use  or 
benefit  of  any  such  educational  institution,  are  excepted 
from  the  restrictions  of  this  section;  provided,  hoivever, 
that  nothing  in  this  section  contained  shall  apply  to  be- 
quests or  devises  made  by  will  executed  at  least  six 
months  prior  to  the  death  of  a  testator  who  leaves  no 
parent,  husband,  wife,  child  or  grandchild,  or  when  all 
of  such  heirs  shall  have  by  writing,  executed  at  least  six 
months  prior  to  his  death,  waived  the  restriction  con- 
tained herein. 

Act  of  the  Legislature,  approved  May  5,  1919,  in 
effect  July  22,  1919. 

Section  906. — KINDS  OF  WILLS. — There  are  three  kinds 
of  will  recognized  by  the  law  of  California — a  nun- 
cupative will;  an  olographic  will;  and  a  will  signed  by 
the  testator  and  by  attesting  witnesses. 

Section  907. — NUNCAPATIVE  WELLS. — The  kind  of  will 
called  "nuncupative"  is  only  made  under  peculiar  and 
extraordinary  circumstances.  A  person  in  actual  mili- 
tary service  in  the  field,  or  doing  duty  on  a  ship  at  sea, 
and  in  actual  contemplation,  fear,  or  peril  of  death,  or  in 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  677 

expectation  of  immediate  death  from  an  injury  received 
the  same  day,  may  make  a  nuncupative  will.  A  nuncupa- 
tive will  is  not  required  to  be  in  writing,  nor  to  be  de- 
clared or  attested  with  any  formalities.  To  make  a  nun- 
cupative will  valid,  and  to  entitle  it  to  be  admitted  to  pro- 
bate, it  must  further  appear  that  the  estate  bequeathed 
does  not  exceed  in  value  the  sum  of  one  thousand  dollars ; 
and  two  witnesses  who  were  present  at  the  making  of  the 
will  must  prove  it,  and  one  of  the  witnesses  must  have 
been  asked  by  the  testator  at  the  time  to  be  a  witness  that 
such  was  his  will. 

Section  908. — OLOGRAPHIC  WILLS. — An  olographic  will 
is  one  that  is  entirely  written,  dated,  and  signed  by  the 
hand  of  the  testator  himself.  It  is  subject  to  no  other 
form,  and  may  be  made  in  or  out  of  the  State,  and  need 
not  be  witnessed.  The  law  must  be  strictly  followed  in 
making  such  a  will.  It  may  be  written  on  any  kind  of 
paper,  and  it  is  not  required  to  be  in  any  particular  form ; 
but  it  must  be  entirely  in  the  testator's  handwriting.  If 
a  person,  intending  to  make  an  olographic  will,  dictates  to 
some  one  who  writes  the  body  of  it  for  him  and  then  signs 
it  himself,  it  is  not  a  valid  will,  for  the  law  expressly  de- 
clares that  he  must  write  it  all  himself.  So,  if  a  person 
uses  a  blank  form  and  fills  out  the  blanks  in  his  own  hand- 
writing and  signs  his  name,  yet  the  law  has  not  been  com- 
plied with,  and  the  instrument  is  void  as  a  will.  Every 
word  and  every  figure  in  it,  to  be  a  valid  olographic  will, 
must  be  in  the  handwriting  of  the  person  making  it.  If 
any  part  of  it  is  in  the  handwriting  of  any  other  person, 
or  if  any  part  of  it  is  printed,  it  will  be  illegal  and  invalid. 
In  one  case  in  California  it  was  decided  that  nothing  more 
than  the  figures  "1880"  in  print,  after  "  April  1"  in  the 
testator's  handwriting,  made  the  document  illegal  as  an 
olographic  will.  Not  only  must  the  document  be  entirely 
in  the  handwriting  of  the  person  making  an  olographic 
will,  but  it  must  always  be  dated.  If  otherwise  lawfully 
made,  that  is,  written  and  signed  by  the  testator  himself, 


678  BUSINESS  LAW  FOR  BUSINESS  MEN. 

but  with  the  date  omitted,  the  paper  is  invalid  as  a  will. 
As  before  stated,  a  will  of  this  kind  need  not  be  in  any 
particular  form.  It  may  even  be  in  the  form  of  a  letter, 
and  if  it  appears  that  the  writer  intended  to  thus  make  a 
testamentary  disposition  of  his  property,  it  will  be  con- 
sidered as  his  last  will  and  testament.  When  a  will  is  thus 
lawfully  made,  entirely  written,  dated,  and  signed  by  the 
hand  of  the  testator  himself,  it  constitutes  the  most  satis- 
factory manner  in  which  a  will  can  be  made,  and  is  less 
liable  to  the  attacks  of  will-breaking  lawyers  than  is  a  for- 
mal will,  written  and  executed  under  the  supervision  of  a 
legal  adviser.  For  olographic  wills  are  usually  brief, 
whereas  a  will  in  the  handwriting  of  a  lawyer  is  apt  to 
have  its  length  gauged  by  the  size  of  the  estate  or  the 
amount  of  the  fee ;  and,  too,  an  olographic  will  is  free  from 
the  technical  terms  and  legal  phrases  which  never  cease 
to  stir  up  controversies  in  the  courts.  For  these  reasons, 
an  olographic  will,  when  made  by  a  person  of  ordinary 
intelligence,  is  the  kind  to  be  preferred. 
Civil  Code,  Section  1277. 

Section  909. — FORM  OF  OLOGRAPHIC  WILL. — The  fol- 
lowing is  a  form  of  olographic  will,  which  meets  the  re- 
quirements of  the  law.  The  date,  names,  amounts,  and 
.the  signature  must  be  filled  in,  and  the  whole  written  by 
the  maker  of  the  will  alone : 

,  Cal., ,19 

I  declare  this  to  be  my  last  will  and  testament.    I  give 

and  bequeath  to  the   sum  of 

Dollars ;  I  give  and  bequeath  to 

the  sum  of  

Dollars;  I  give  and  bequeath  to  

and all  the  residue  of  my 

property,  of  whatever  kind  and  wherever  situated,  share 
and  share  alike. 

The  foregoing  form  will  be  as  good  as  any  other ;  and, 
indeed,  any  form  is  good  as  an  olographic  will,  if  the  in- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  679 

tention  of  the  writer  to  make  it  his  will  appears  in  it,  and 
the  disposition  which  he  desires  to  make  of  his  property. 

Section  910. — WILL  ATTESTED  BY  WITNESSES. — A  will 
which  is  not  in  the  handwriting  of  the  maker  must  be  ex- 
ecuted and  attested  as  follows:  (1)  It  must  be  subscribed 
at  the  end  by  the  testator  himself,  or  some  person  in  his 
presence  and  by  his  direction  must  subscribe  his  name 
to  it;  (2)  The  subscription  must  be  made  in  the  presence 
of  the  attesting  witnesses,  or  be  acknowledged  by  the 
ma.ker  to  them  to  have  been  made  by  him  or  by  his  au- 
thority; (3)  The  maker  must,  at  the  time  of  subscribing 
or  acknowledging  the  will,  declare  to  the  attesting  wit- 
nesses that  the  instrument  is  his  will;  (4)  There  must  be 
two  attesting  witnesses  to  a  will,  and  each  of  them  must 
sign  the  will  as  a  witness,  at  the  end  of  it,  at  the  testator's 
request  and  in  his  presence.  The  testator  must  either  sign 
his  name  at  the  end  of  the  will,  or  have  it  signed  by  some 
one  in  his  presence  and  at  his  direction. 
Civil  Code,  Section  1276. 

Section  911. — GIFTS  TO  SUBSCRIBING  WITNESSES. — All 
legacies  and  gifts  of  any  kind,  made  or  given  in  any 
will  to  a  subscribing  witness,  are  void,  unless  there  are 
two  other  competent  subscribing  witnesses  to  the  will. 
Civil  Code,  Section  1282. 

Section  912. — How  A  WILL  Is  REVOKED. — The  law  de- 
clares what  acts  work  the  revocation  of  a  will  in  this  State. 

A  will  is  revoked  by  a  later  will,  declaring  the  revoca- 
tion of  the  prior  one. 

A  will  is  revoked  by  being  burned,  torn,  canceled,  ob- 
literated, or  destroyed,  with  the  intent  and  purpose  of  re- 
voking it,  by  the  testator  himself,  or  by  some  person  in 
his  presence  and  by  his  direction. 

When  a  will  is  canceled  or  destroyed  by  any  other 
person  than  the  testator,  the  direction  of  the  testator,  and 


680  BUSINESS  LAW  FOB  BUSINESS  MEN. 

the  fact  of  such  cancellation    or    destruction,    must    be 
proved  by  two  witnesses. 

A  prior  will  is  not  revoked  by  a  subsequent  will,  unless 
the  latter  contains  an  express  revocation,  or  provisions 
wholly  inconsistent  with  the  terms  of  the  former  will ;  but 
in  other  cases  the  prior  will  remains  effectual  so  far  as 
consistent  with  the  provisions  of  the  subsequent  will. 
Civil  Code,  Sections  1292,  1293,  1296. 

Section  913. — REVOCATION  BY  MABKIAGE. — If,  after 
making  a  will,  the  testatrix  marries,  and  the  husband 
survives  the  testatrix,  the  will  is  revoked,  unless  pro- 
vision has  been  made  for  him  by  marriage  contract,  or 
unless  he  is  provided  for  in  the  will,  or  in  such  way  men- 
tioned therein  as  to  show  an  intention  not  to  make  such 
provision;  and  no  other  evidence  to  rebut  the  presump- 
tion of  revocation  can  be  received. 

Act  of  the  Legislature,  approved  May  27,  1919 ; 
in  effect  July  27,  1919. 

Section  914. — REVOCATION  BY  MARRIAGE  AND  BIRTH  OF 
ISSUE. — If,  after  making  a  will,  the  testatrix  marries,  and 
has  issue  of  said  marriage,  born  either  in  her  life  time 
or  after  her  death,  and  the  husband  or  issue  survives  her, 
the  will  is  revoked,  unless  provision  has  been  made  for 
such  issue  by  some  settlement,  or  unless  such  issue  are 
provided  for  in  the  will,  or  in  such  way  mentioned  therein 
as  to  show  an  intention  not  to  make  such  provision ;  and 
no  other  evidence  to  rebut  the  presumption  of  such  revo- 
cation can  be  received. 

Act  of  the  Legislature,  approved  May  27,  1919 ; 
in  effect  July  27,  1919. 

Section  915. — SHARE  OF  CHILD  BORN  AFTER  THE  WILL. 
Whenever  a  testator  has  a  child  born  after  the  making  of 
his  will,  either  in  his  lifetime  or  after  his  death,  and  dies 
leaving  such  child  unprovided  for  by  any  settlement,  and 
neither  provided  for  nor  in  any  way  mentioned  in  his  will, 


BUSINESS  CONTKACTS  AND  LEGAL  OBLIGATIONS.  681 

the  child  succeeds  to  the  same  portion  of  the  testator's 
real  and  personal  property  that  he  would  have  succeeded 
to  if  the  testator  had  died  intestate. 
Civil  Code,  Section  1306. 

Section  916. — OMISSION  TO  PROVIDE  FOE  CHILDREN.— 
When  any  testator  omits  to  provide  in  his  will  for  any 
of  his  children,  or  for  the  issue  of  any  deceased  child, 
unless  it  appears  that  such  omission  was  intentional,  the 
law  declares  that  such  child  or  the  issue  of  such  child 
must  have  the  same  share  in  the  estate  of  the  testator  as 
if  he  had  died  intestate.  But  the  law  also  provides  that  a 
child  who  has  had  his  share  of  the  estate  advanced  to  him 
during  the  lifetime  of  the  testator,  even  though  not  men- 
tioned in  the  will,  is  not  entitled  to  any  more. 
Civil  Code,  Sections  1307,  1309. 

Section  917. — CHILDREN  or  DEVISEE. — When  any 
estate  is  devised  to  any  child,  or  other  relation  of  the  tes- 
tator, and  the  devisee  dies  before  the  testator,  leaving 
lineal  descendants,  such  descendants  take  the  estate  so 
given  by  the  will  in  the  same  manner  as  the  devisee  would 
have  done  had  he  survived  the  testator. 
Civil  Code,  Section  1310. 

Section  918. — WHEN  WILL  TAKES  EFFECT. — A  will 
takes  effect  at  the  testator 's  death.  It  can  have  no  effect 
to  pass  any  title  before  his  death. 

Section  919. — WHEN  LEGACIES  ARE  DUE. — Legacies  are 
due  to  those  entitled  to  them  at  the  expiration  of  one  year 
after  the  testator's  death. 

Section  920. — INTEREST  ON  LEGACIES.— Ordinary  lega- 
cies bear  interest  from  the  time  when  they  become  due. 
A  legacy  to  the  testator's  widow  bears  interest  from  the 
date  of  his  death. 


682  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Section  921. — GROUNDS  FOR  CONTEST  OF  WILL. — The 
law  specifies,  as  the  grounds  for  the  contest  of  a  will, 
duress,  menace,  fraud,  or  undue  influence;  and,  also,  it  is 
a  common  ground  for  the  contest  of  a  will,  that  the  tes- 
tator was  not  of  sound  mind.  If  advantage  is  taken  of 
an  old  and  feeble  person,  and  the  facts  are  misrepresent- 
ed or  concealed,  or  threats  or  fraudulent  persuasions  re- 
sorted to,  by  which  a  testator  is  fraudulently  induced  to 
exclude  from  his  will  the  natural  object  of  his  bounty, 
whom  he  would  otherwise  have  remembered  and  provided 
for,  the  law  will  interfere  on  behalf  of  the  injured  party 
and  set  the  will  aside.  Yet  it  will  require  clear  and  con- 
vincing proof  to  set  aside  a  will  upon  these  grounds. 

By  far  the  larger  number  of  will  contests  are  made 
upon  the  ground  that  the  testator  was  not  of  sound  and 
disposing  mind,  but  on  the  contrary  was  afflicted  with  in- 
sanity. On  this  subject  it  may  be  said,  that  if  there  had 
not  been  so  many  expert  witnesses  the  world  would 
never  have  heard  of  so  many  forms  of  insanity.  Expert 
witnesses  on  insanity  are  ever  ready  to  swear  on  either 
side  of  a  will  contest,  as  they  happen  to  be  first  employed, 
and  to  frame  their  theories  according  to  their  interests. 
The  Supreme  Court  of  California  has  announced,  time 
and  again,  its  own  distrust  of  expert  testimony,  and  has 
endeavored  to  be  guided  by  the  rules  of  reason  and  com- 
mon sense  in  its  disposition  of  will  cases.  The  facts  must 
be  recognized,  that  there  is  no  satisfactory  definition  of 
insanity,  either  in  or  out  of  the  medical  profession ;  that 
no  man  can  truly  mark  the  dividing  line  between  sanity 
and  insanity ;  that  a  person  may  be  exceedingly  eccentric, 
and  yet  not  be  at  all  insane;  that  by  a  "sound  mind"  is 
meant  only  that  a  person,  in  order  to  make  a  valid  will, 
must  be  of  sufficient  understanding  to  know  the  character 
and  extent  of  his  property,  to  know  and  recollect  the  nat- 
ural objects  of  his  bounty,  to  know  to  whom  he  wishes 
to  leave  his  property,  and  to  appreciate  and  know  the 
character  of  his  act  when  he  makes  his  will.  If  this  is  the 
state  of  his  mind,  no  eccentricity  of  speech  or  conduct, 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  683 

and  no  impairment  of  mental  power,  will  have  any  effect 
to  invalidate  the  solemn  act  of  disposing  of  his  estate  by 
last  will  and  testament. 

A.  J.  BLEDSOE,  ATTORNEY-AT-LAW,  Los  Angeles,  Cal.— 
Careful  attention  to  Probate  of  Wills  and  Settlement  of 
Estates.  See  title  page  of  this  book  for  office  address  of 
A.  J.  Bledsoe. 


PAET  IX. 
CORPORATIONS  IN  CALIFORNIA 

Section  922. — NATURE  OF  CORPORATIONS. — The  defini- 
tion of  corporations  given  by  the  law  of  California  is,  "  A 
corporation  is  a  creature  of  the  law,  having  certain  pow- 
ers and  duties  of  a  natural  person. ' '  Unlike  a  natural  per- 
son, who  may  act  in  business  affairs  as  his  individual  will 
may  dictate,  a  corporation  can  only  act  through  its  officers 
in  the  manner  prescribed  by  the  law  creating  it.  The 
nature  of  a  corporation  is  peculiar  in  another  respect. 
While  the  rights  and  privileges  of  a  natural  person,  con- 
sidered as  such,  will  terminate  by  his  death,  the  rights  and 
privileges  of  the  corporation  do  not  end,  or  vary,  upon  the 
death  or  change  of  any  of  the  individual  members.  Judge 
Kent,  the  eminent  lecturer  on  law,  has  said  that  the  object 
of  a  corporation  is  "  to  enable  the  members  to  act  by  one 
united  will,  and  to  continue  their  joint  powers  and  prop- 
erty in  the  same  body,  undisturbed  by  the  change  of  mem- 
bers, and  without  the  necessity  of  perpetual  conveyances, 
as  the  rights  of  members  pass  from  one  individual  to  an- 
other. All  the  individuals  composing  a  corporation,  and 
their  successors,  are  considered  in  law  but  as  one  moral 
person,  capable,  under  an  artificial  form,  of  taking  and 
conveying  property,  contracting  debts  and  duties,  and  of 
enjoying  a  variety  of  civil  and  political  rights." 
Civil  Code,  Section  283. 

Section  923. — FOR  WHAT  PURPOSE  CORPORATIONS  MAY 
BE  FORMED. — In  California,  corporations  may  be  formed 
for  any  purpose  for  which  individuals  may  lawfully  asso- 
ciate themselves.  And  as  individuals  may  enter  into  any 

684 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  685 

business  transactions  not  prohibited  by  law,  so  a  corpora- 
tion may  be  formed  for  the  purpose  of  carrying  on  any 
lawful  business,  of  any  kind  whatever. 
Civil  Code,  Section  286. 

Section  924. — WHO  MAY  FORM  A  CORPORATION. — The 
law  places  but  two  restrictions  upon  the  formation  of  cor- 
porations, respecting  the  persons  who  may  organize  them. 
At  least  three  persons  must  join  in  the  formation  of  a 
corporation,  or  as  many  more  as  may  be  desired;  and, 
whether  a  corporation  be  formed  by  three  persons,  or  a 
number  more  than  three,  a  majority  of  such  persons 
must  be  residents  of  the  State  of  California.  Foreign 
corporations  may  do  business  in  the  State,  but  a  corpora- 
tion cannot  be  formed  here  unless  a  majority  of  the  per- 
sons forming  it  are  residents  of  the  State. 
Civil  Code,  Section  285. 

Section  925. — ARTICLES  OF  INCORPORATION. — The  in- 
strument by  which  a  corporation  is  formed  is  called 
" Articles  of  Incorporation."  Articles  of  Incorporation 
must  be  prepared,  setting  forth:  (1)  The  name  of  the 
corporation;  (2)  the  purpose  for  which  it  is  formed;  (3) 
the  place  where  its  principal  business  is  to  be  transacted ; 
(4)  the  term  for  which  the  corporation  is  to  exist;  (5)  the 
number  of  its  directors;  (6)  the  amount  of  its  capital 
stock,  if  any,  and  the  number  of  shares  into  which  it  is 
divided;  (7)  the  amount  actually  subscribed,  and  by 
whom. 

Civil  Code,  Sections  289,  290. 

Section  926. — FORM  OF  ARTICLES  OF  INCORPORATION.— 
The  following  is  a  form  of  Articles  of  Incorporation, 
which  meets  the  requirements  of  the  law : 

ARTICLES  OF  INCORPORATION. 

KNOW  ALL  MEN  BY  THESE  PRESENTS :  That 
we,  the  undersigned,  have  this  day  voluntarily  associated 
ourselves  together  for  the  purpose  of  forming  a  corpora- 


686  BUSINESS  LAW  FOR  BUSINESS  MEN. 

don,  under  the  laws  of  the  State  of  California;  and  we 
hereby  certify, 

First — That  the  name  of  said  corporation  is 

(Here  insert  the  name  selected  for  the  corporation.) 

Second — That  the  purposes  for  which  it  is  formed  are 
to  carry  on  the  business  of 

(Here  insert  the  purposes  of  the  corporation.) 

Third — That  the  place  where  its  principal  business  is 
to  be  transacted  is  the  city  of 

(Here  insert  the  name  of  the  place.) 

Fourth — That  the  term  for  which  said  corporation  is 
to  exist  is 

(Here  insert  number  of  years.) 

years  from  and  after  the  date  of  its  incorporation. 

Fifth — That  the  number  of  Directors  of  said  corpora- 
tion shall  be 

(Here  insert  number  of  Directors  agreed  upon.) 

and  that  the  names  and  residence  of  the  Directors  who 
are  appointed  for  the  first  year  are : 

Names.  Residence. 

(Here  insert  names  and  residence  of  Directors.) 


Sixth — That  the  amount  of  the  capital  stock  of  said 

corporation  shall  be Dollars,  divided 

into thousand  shares,  of  the  par 

value  of ....Dollars  each. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  687 

Seventh — That  the  amount  of  said  capital  stock  which 

has  been  actually  subscribed  is Dollars, 

and  the  following  are  the  names  of  the  persons  by  whom 
the  same  has  been  subscribed,  to-wit : 

Subscriber.  Number  of  Shares.  Amount. 


(Here  insert  names  of  subscribers,  number  of  shares  sub- 
scribed for,  and  amount  of  each  subscription.) 


In  witness  whereof,  we  have  hereunto  set  our  hands 
and  seals,  this day  of ,  19 


STATE  OF  CALIFORNIA,  J  gg 

COUNTY  or j 

On  this day  of ,  in  the  year  one 

thousand  nine  hundred  and ,  before  me, 

,  a  Notary  Public  in 

and  for  said  county,  residing  therein,  duly  commissioned 
and  sworn,  personally  appeared 


and ,  personally 

known  to  me  to  be  the  persons  whose  names  are  sub- 
scribed to  the  within  instrument,  and  they  each  duly 
acknowledged  to  me  that  they  executed  the  same. 

In  witness  whereof,  I  have  hereunto  set  my  hand  and 
affixed  my  official  seal,  at  my  office  in  the  County  of 

,  State  of  California,  the  day  and  year  in 

this  certificate  first  above  written. 

Notary  Public  in  and  for  the  County 

of ,  State  of  California. 

Commission  expires ,  19 


688  BUSINESS  LAW  FOB  BUSINESS  MEN. 

Section  927. — NUMBER  OF  SIGNERS. — The  Articles  of 
Incorporation  must  be  signed  by  at  least  three  persons, 
a  majority  of  whom  must  be  residents  of  California,  and 
each  of  whom  must  make  an  acknowledgment  before  a 
notary  or  other  officer  authorized  to  take  acknowledg- 
ments. If  there  are  more  than  three  Directors,  all  must 
sign  and  acknowledge  the  Articles  of  Incorporation. 
Civil  Code,  Section  292. 

Section  928. — FILING  OF  ARTICLES  OF  INCORPORATION. — 
The  Articles  of  Incorporation,  when  prepared  and  signed 
and  acknowledged,  must  be  filed  in  the  office  of  the  County 
Clerk  of  the  county  in  which  the  principal  place  of  busi- 
ness is  located ;  and  a  copy,  certified  by  the  County  Clerk, 
must  be  filed  in  the  office  of  the  Secretary  of  State  at 
Sacramento. 

Section  929. — CERTIFICATE  OF  SECRETARY  OF  STATE.— 
Upon  receiving  and  filing  in  his  office  the  certified  copy  of 
the  Articles  of  Corporation  filed  with  the  County  Clerk, 
the  Secretary  of  State  issues  to  the  corporation,  over  the 
great  seal  of  the  State  of  California,  a  certificate  that  a 
copy  of  the  Articles  containing  the  required  statement  of 
facts  has  been  filed  in  his  office ;  and  from  the  time  when 
this  certificate  is  issued  the  persons  signing  the  Articles 
of  Incorporation,  and  their  associates  and  successors,  be- 
come and  are  created  a  corporation,  under  the  name 
chosen  by  them. 

Civil  Code,  Section  296. 

Section  930. — NAME  OF  CORPORATION  MUST  BE  NEW.— 
The  name  selected  by  the  incorporators  must  be  new ;  that 
is,  it  must  not  have  the  same  name  as  any  other  corpora- 
tion before  organized  in  this  State ;  nor  can  the  name  se- 
lected so  closely  resemble  the  name  of  any  other  existing 
corporation  that  it  will  tend  to  deceive ;  and  if  Articles  of 
Incorporation  are  sent  to  the  Secretary  of  State  which 
contain  the  same  name  as  an  existing  corporation,  or  a 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  t)89 

name  so  closely  resembling  it  as  tends  to  deceive  the  pub- 
lic, it  will  be  his  duty  under  the  law  to  refuse  to  file  the 
Articles  or  issue  his  certificate. 
Civil  Code,  Section  296. 

Section  931. — COST  OF  INCORPORATING. — The  fees  for 
forming  a  corporation,  to  be  paid  the  Secretary  of  State, 
are  as  follows:  (1)  For  filing  Articles  of  Incorporation, 
if  the  capital  stock  amounts  to  twenty-five  thousand  dol- 
lars or  less,  fifteen  dollars ;  if  the  capital  stock  amounts  to 
over  twenty-five  thousand  dollars,  and  not  over  seventy- 
five  thousand  dollars,  twenty-five  dollars;  if  the  capital 
stock  amounts  to  over  seventy-five  thousand  dollars,  and 
not  over  two  hundred  thousand  dollars,  fifty  dollars;  if 
the  capital  stock  amounts  to  over  two  hundred  thousand 
dollars,  and  not  over  five  hundred  thousand  dollars,  sev- 
enty-five dollars ;  if  the  capital  stock  is  over  five  hundred 
thousand  dollars,  and  not  over  one  million  dollars,  one 
hundred  dollars ;  if  the  capital  stock  is  over  one  million 
dollars,  fifty  dollars  additional  for  every  five  hundred 
thousand  dollars  or  fraction  thereof  of  capital  stock  over 
and  above  one  million  dollars.  (2)  For  filing  Articles  of 
Incorporation  without  capital  stock,  except  co-operative 
associations,  five  dollars.  (3)  For  filing  Articles  of  In- 
corporation of  co-operative  associations,  fifteen  dollars. 
(4)  For  recording  Articles  of  Incorporation,  twenty  cents 
per  folio.  (5)  For  issuing  certificate  of  incorporation, 
three  dollars. 

Political  Code,  Section  409. 

Section  932. — LIMIT  OF  CORPORATE  EXISTENCE. — A  cor- 
poration, being  a  creature  of  the  law,  can  only  continue 
for  the  length  of  time  which  the  law  prescribes.  The  law 
of  California  provides  that  the  limit  of  time  for  which  a 
corporation  can  be  formed  in  this  State  is  fifty  years. 
The  Articles  of  Incorporation  may  fix  a  period  of  exist- 
ence less  than  fifty  years,  but  cannot  provide  for  a  longer 
period. 

Civil  Code,  Section  296. 


690  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Section  933. — EXTENDING  CORPORATE  EXISTENCE.— 
Every  corporation  formed  for  a  period  less  than  fifty 
years  may,  at  any  time  prior  to  the  expiration  of  the  term 
of  its  corporate  existence,  extend  such  term  to  a  period 
not  exceeding  fifty  years  from  its  formation.  Such  ex- 
tension may  be  made  at  a  meeting  of  the  stockholders  or 
members,  called  by  the  directors  expressly  for  consider- 
ing the  subject,  if  voted  by  stockholders  representing 
two-thirds  of  the  capital  stock ;  or  may  be  made  upon  the 
written  assent  of  that  number  of  stockholders  or  mem- 
bers. A  certificate  of  the  proceedings  of  the  meeting  must 
be  signed  by  the  chairman  and  the  secretary  of  the  meet- 
ing, and  be  filed  in  the  office  of  the  county  clerk,  and  a 
certified  copy  must  be  filed  in  the  office  of  the  Secretary 
of  State.  The  fee  to  be  paid  the  Secretary  of  State,  for 
filing  certificate  of  continuance  of  existence,  is  $5;  and 
for  issuing  certificate  of  continuance  by  the  Secretary  of 
State,  $3. 

Section  934. — AMENDMENT  OF  ARTICLES  OF  INCORPORA- 
TION.— Any  corporation  organized  under  the  laws  of  this 
state  may  amend  its  articles  of  incorporation  for  any  or 
all  the  following  purposes : 

(1)  To  set  forth  a  new  name. 

(2)  To  alter  or  repeal  any  provision  appearing  in  its 
original  or  amended  articles  of  incorporation  relative  to 
the  purposes  for  which  the  corporation  is  formed,  or  to 
set  forth  additional  powers  or  purposes. 

(3)  To  designate  a  principal  place  of  business  other 
than  the  place  designated  in  its  original  or  amended  arti- 
cles of  incorporation. 

(4)  To  state -the  date  to  which  its  existence  has  been 
extended. 

(5)  To  state  the  number  of  its  directors,  as  increased 
or  diminished. 

(6)  To    state   the    amount   of   its    capital    stock   as 
increased  or  diminished  and  the  number  of  shares  and 
the  par  value  thereof,  or  to  change  the  number  of  shares 


Section  933,  page  690,  "Business  Law  for  Business  Men" — EXTENDING 
CORPORATE  EXISTENCE— Substitute  the  following  for  the  first  sentence 
in  section  933:  Every  corporation  heretofore  or  hereafter  formed,  and  ex- 
isting under  the  laws  of  this  state,  may  at  any  time  prior  to  the  expiration  of 
the  term  of  its  corporate  existence  extend  such  term  to  a  period  not  exceed- 
ing fifty  years  from  the  date  of  such  extension. 

Act  of  the  Legislature  of  California,  approved  May  16,  1921;  in  effect 
July  16,  1921. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  691 

and  their  par  value  or  to  provide  for  the  classification  of 
its  capital  stock  into  preferred  and  common  shares,  in 
which  event  there  must  be  set  forth  a  statement  of  the 
number  of  shares  of  stock  to  which  preference  is  granted 
and  the  number  of  shares  of  stock  to  which  no  preference 
is  granted,  also  a  clear  and  succinct  statement  of  the 
nature  and  extent  of  the  preference  granted,  and  except 
as  to  the  matters  and  things  so  stated,  no  distinction  shall 
exist  between  said  classes  of  stock  or  the  owners  thereof ; 
provided,  however,  that  no  preference  shall  be  granted 
nor  shall  any  distinction  be  made  between  the  classes  of 
stock  either  as  to  voting  power  or  as  to  the  statutory  or 
constitutional  liability  of  the  holders  thereof  to  the  cred- 
itors of  the  corporation;  and  provided,  further,  that  both 
the  preferred  and  common  shares  shall  be  of  the  same 
par  value. 

(7)  To  change  the  statement  appearing  in  its  original 
or  amended  articles  of  incorporation  of  the  nature  and 
extent  of  such  preference,  subject  to  the  above  limita- 
tions. 

(8)  And  generally  to  provide  for  any  other  amend- 
ment not  contrary  to  law. 

(a)  Majority  Vote  of  Directors. — The  articles  of  in- 
corporation may  be  amended  as  aforesaid  by  a  majority 
vote  of  the  board  of  directors  of  the  corporation  and  by 
the  vote  or  written  assent  of  the  holders  of  at  least  two- 
thirds  of  the  subscribed  capital  stock  of  such  corporation, 
or  if  the  corporation  has  no  capital  stock,  then  by  a 
majority  vote  of  its  board  of  directors  and  by  the  vote  or 
written  assent  of  a  majority  of  the  members.  Upon  the 
adoption  of  amended  articles  of  incorporation,  a  copy  of 
the  articles  as  thus.amended  shall  be  certified  to  as  cor- 
rect by  the  president  and  secretary  and  a  majority  of  the 
directors  of  the  corporation  and  the  corporate  seal  of  such 
corporation  shall  be  affixed  to  the  certificate.  Such  cer- 
tificate shall  also  set  forth  the  proceedings  by  virtue  of 
which  the  amended  articles  were  adopted,  which  proceed- 


692  BUSINESS  LAW  FOR  BUSINESS  MEN. 

ings  must  be  in  accordance  with  the  provisions  of  this 
section  above  set  forth. 

(b)  Amended  Articles  Filed. — The  copy  of  amended 
articles  of  incorporation,  thus  certified,  shall  be  filed  in 
the  office  of  the  county  clerk  of  the  county  in  which  the 
original  articles  of  incorporation  of  such  corporation 
were  filed,  and  a  copy  thereof,  certified  by  such  county 
clerk,  shall  be  filed  in  the  office  of  the  secretary  of  state, 
whereupon  such  corporation  shall  have  the  same  powers, 
and  the  stockholders  thereof  shall  thereafter  be  subject 
to  the  same  liabilities,  as  if  such  amendment  had  been 
embraced  in  the  original  articles  of  incorporation.     A 
copy  of  such  copy,  certified  by  the  secretary  of  state,  shall 
be  filed  in  the  office  of  the  county  clerk  of  every  county  in 
which  such  corporation  has  or  holds  real  property,  except 
only  the  county  in  which  the  original  articles  of  incorpora- 
tion were  filed.    Any  corporation  which  shall  amend  its 
articles  of  incorporation  and  shall  fail  to  file  copies  of  its 
amended  articles,  as  required  by  the  preceding  sentence, 
shall  be  subject  to  the  penalties  and  liabilities  provided 
for  a  failue  of  corporations  to  file  copies  of  their  articles 
of  incorporation  in  the  office  of  the  county  clerks  of  the 
counties  in  which  they  shall  purchase,  hold,  or  locate 
property. 

(c)  Changes  Not  Permitted. — Nothing  contained  in 
this  section  must  be  construed  to  cure  or  amend  any 
defect  existing  in  the  original  articles  of  incorporation, 
where  such  defect  is  of  such  character  as  to  render  such 
original  articles  invalid.    And  it  is  hereby  expressly  pro- 
vided that  no  corporation  shall  amend  its  articles  of 
incorporation  to  alter  the  statements  which  appear  in  the 
original  articles,  of  the  names  and  residences  of  the  first 
directors  or  the  statements  which  appear  in  such  orig- 
inals, of  the  amount  of  capital  stock  subscribed  and  by 
whom.    Nothing  appearing  herein  shall  be  construed  as 
permitting  a  corporation  to  change  its  name  or  its  prin- 
cipal place  of  business,  extend  or  reduce  its  term  of  exist- 
ence, or  increase  or  diminish  its  number  of  directors  or 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  693 

its  capital  stock,  by  amending  its  articles  of  incorpo- 
ration. 

Statutes  of  1915,  Chapter  739. 

Section  935. — CHANGE  OF  NAME. — A  corporation  may 
change  its  name.  If  a  corporation  desires  to  change  its 
name,  a  petition  asking  for  the  change  of  name  may  be 
filed  in  the  Superior  Court  of  the  county  in  which  its  Arti- 
cles of  Incorporation  were  originally  filed,  or  in  which  its 
property  is  situated.  A  copy  of  the  petition  must  be  pub- 
lished for  four  weeks.  The  court  will  then  hear  the  peti- 
tion, and  any  objections  which  any  person  may  have  to 
make  against  the  change  of  name ;  and  if  satisfied  that  the 
application  is  made  for  a  good  reason,  the  court  may 
make  an  order  changing  the  name  of  the  corporation.  A 
certified  copy  of  the  decree  of  the  court  must  be  filed  in 
the  office  of  the  Secretary  of  State  and  in  the  office  of  the 
County  Clerk. 

Civil  Code,  Sections  1276,  1277,  1278. 

Section  936. — CHANGE  OF  PLACE  OF  BUSINESS. — A  cor- 
poration may  change  its  place  of  business  from  one  place 
to  another  in  the  same  county,  or  from  one  city  or  county 
to  another  city  or  county  in  the  State.  Before  such 
change  can  be  made,  the  consent,  in  writing,  of  the  hold- 
ers of  two-thirds  of  the  capital  stock  or  two-thirds  of  the 
members,  if  there  is  no  capital  stock,  must  be  obtained  and 
filed  in  the  office  of  the  corporation;  then  notice  of  the 
intended  removal  must  be  published  at  least  once  a  week 
for  three  weeks,  in  a  newspaper  in  the  county ;  the  Board 
of  Directors  must  then  meet  and  authorize  the  change; 
and  a  copy  of  the  resolution  adopted  by  the  Board,  to- 
gether with  an  affidavit  of  the  publication  of  the  notice 
(certified  by  the  President  and  Secretary,  with  the  cor- 
porate seal  affixed),  must  be  filed  in  each  office  where  the 
original  Articles  of  Incorporation  were  filed.  After  these 
requirements  are  complied  with,  a  corporation  may  law- 
fully change  its  place  of  business. 

Statutes  of  1917,  Chapter  167. 


694  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Section  937. — REMOVAL  FROM  ONE  LOCATION  TO  AN- 
OTHER IN  SAME  CITY. — The  law  does  not  require  any  con- 
sent of  stockholders,  or  notice,  or  publication,  where  a 
corporation  desires  to  remove  its  place  of  business  from 
one  location  to  another  in  the  same  city,  town  or  village. 
Such  removal  may  be  made  by  authority  alone  of  a  reso- 
lution of  the  Board  of  Directors. 

Section  938. — FOREIGN  CORPORATIONS. — Every  corpo- 
ration organized  under  the  laws  of  another  state,  terri- 
tory, or  of  a  foreign  country,  which  is  now  doing  inter- 
state or  intrastate  business  in  this  state  or  maintaining 
an  office  herein,  and  which  has  not  filed  with  the  secretary 
of  state  prior  to  the  day  on  which  this  act  takes  effect 
the  document  or  documents  required  by  this  section,  or 
which  shall  hereafter  do  such  business  in  this  state  or 
maintain  an  office  herein,  or  which  shall  enter  this  state 
for  the  purpose  of  doing  such  business  herein,  must  file 
in  the  office  of  the  secretary  of  state  of  the  State  of  Cali- 
fornia a  certified  copy  of  its  articles  of  incorporation,  or 
of  its  charter,  or  of  the  statute  or  statutes,  or  legislative, 
or  executive,  or  governmental  act  or  acts  creating  it,  in 
cases  where  it  has  been  created  by  charter,  or  statute,  or 
legislative,  or  executive,  or  governmental  act,  duly  certi- 
fied by  the  secretary  of  state  or  other  officer  authorized 
by  the  law  of  the  jurisdiction  under  which  such  corpora- 
tion is  formed  to  certify  such  copy,  and  must  also  file 
a  certified  copy  thereof,  duly  certified  by  the  secretary  of 
state  of  this  state  in  the  office  of  the  county  clerk  of  the 
county  where  its  principal  place  of  business  in  this  state 
is  located,  and  also  where  such  corporation  owns  any 
real  property.  With  such  certified  copy  of  its  articles 
of  incorporation,  charter  or  legislative,  executive  or  gov- 
ernmental act  creating  it,  such  corporation  shall  also  file 
with  the  secretary  of  state  an  affidavit  sworn  to  by  the 
president  or  secretary  of  such  corporation,  which  shall 
state  the  amount  of  such  corporation's  authorized  capital 
stock  at  or  within  fifteen  days  prior  to  such  filing.  Every 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  695 

such  corporation  shall  pay  to  the  secretary  of  state  for 
filing  in  his  office  such  certified  copy  of  its  articles  of 
incorporation,  or  of  its  charter,  or  of  the  statute  or  stat- 
utes,or  legislative,  or  executive,  or  governmental  act  or 
acts  creating  it,  a  fee  of  seventy-five  dollars;  provided, 
that  foreign  corporations  organized  for  educational, 
religious,  scientific  or  charitable  purposes  and  having  no 
capital  stock,  and  foreign  nonprofit  corporations  shall 
pay  a  fee  of  five  dollars  for  filing  the  document  or  docu- 
ments hereinabove  required. 

Foreign  corporations  shall  also  file  any  amendment 
of  or  change  in  any  of  the  provisions  of  its  original  arti- 
cles of  incorporation,  or  charter,  or  of  the  statute  or  leg- 
islative, executive  or  governmental  act  or  acts  creating  it. 

(a)  Affidavit  Showing  Capital  Stock. — Every  foreign 
corporation  subject  to  the  tax  provided  by  law  shall  file 
with  the  secretary  of  state,  at  the  time  it  tenders  payment 
of  said  tax  and  any  penalty  which  has  accrued,  an  affidavit 
sworn  to   by  its   president   or   secretary,   showing  the 
amount  of  its  authorized  capital  stock  on  the  first  day  ot 
January  of  the  year  in  which  said  payment  is  made,  and 
in  the  event  that  such  authorized  capital  stock,  as  shown 
by  such  affidavit,  differs  from  the  amount  of  such  capital 
stock  as  appears  from  the  records  of  the  secretary  of 
state,  then  the  tax  shall  be  measured  by  the  amount  of 
the  capital  stock  shown  in  such  affidavit.     The  license 
required  shall  not  be  issued  nor  shall  the  amount  so 
tendered  be  accepted  until  copies  of  any  documents  relat- 
ing to  such  change  in  authorized  capital  stock,  certified 
as  required  by  law,  shall  have  been  filed  with  the  secre- 
tary of  state. 

(b)  Representative  of  Foreign  Corporation. — Every 
foreign  corporation  shall  file  with  the  secretary  of  state 
a  designation  of  some  person  residing  within  this  state 
upon  whom  process  issued  by  authority  of  law  may  be 
served  as  the  representative,  for  such  purpose,  of  such 
corporation.    A  copy  of  such  designation  certified  by  the 
secretary  of  state  is  sufficient  evidence  of  the  appointment 


696  BUSINESS  LAW  FOE  BUSINESS  MEN. 

of  such  representative.  Such  process  may  be  served  on 
the  person  so  designated,  or,  in  the  event  that  no  such 
representative  is  designated,  then  on  the  secretary  of 
state,  and  such  service  shall  be  a  valid  and  binding  serv- 
ice on  such  corporation. 

(c)  Benefit  of  Laiv. — Every  corporation  which  com- 
plies with  the  provisions  of  this  section  is  thereafter 
entitled  to  the  benefit  of  the  laws  of  this  state  limiting  the 
time  for  the  commencement  of  civil  actions,  but  any  cor- 
poration created  by  or  under  the  laws  of  any  foreign 
state  or  country  and  that  has  not  complied  with  this  sec- 
tion is  not  entitled  to  the  benefit  thereof,  nor  can  any 
such  foreign  corporation  maintain  or  defend  any  action 
or  proceeding  concerning  its  property  in  this  state  or 
any  intrastate  business  or  transaction  in  any  court  of 
this  state,  or  acquire  or  convey  any  legal  title  to  any  real 
property  within  this  state.  In  any  action  or  proceeding 
instituted  against  any  body  styled  as  a  corporation,  but 
not  created  by  nor  under  the  laws  of  this  state,  evidence 
that  such  body  has  acted  as  a  corporation,  or  employed 
methods  usually  employed  by  corporations,  must  be 
received  by  the  court  for  the  purpose  of  proving  the  exist- 
ence of  such  corporation,  the  sufficiency  of  such  evidence 
to  be  determined  by  the  court  with  like  effect  as  in  other 
cases.  Every  corporation  which  has  complied  with  the 
law  requiring  it  to  make  and  file  a  designation  of  the  per- 
son upon  whom  process  against  it  may  be  served,  need 
not  make  or  file  any  further  designation.  Any  designa- 
tion made  may  be  revoked  by  the  filing  by  the  corpora- 
tion with  the  secretary  of  state  of  a  writing  stating  such 
revocation.  Within  forty  days  after  the  death  or  removal 
from  the  state  of  any  person  designated  by  the  corpora- 
tion, or  after  the  revocation  of  the  designation,  the  cor- 
poration must  make  a  new  designation,  or  be  subject  to 
the  provisions  and  penalties  of  this  section;  provided, 
however,  that  any  foreign  corporation  which,  prior  to  the 
eighth  day  of  March,  1901,  shall  have  complied  with  the 


Section  938,  page  697,  "Business  Law  for  Business  Meii" — FOREIGN 
CORPORATIONS— Add  the  following  after  sub-division  (c) :  "Every  cor- 
poration subject  to  the  provisions  of  this  section  and  every  such  corporation 
hereafter  becoming  subject  to  the  provisions  thereof,  which  shall  neglect  or 
fail  to  file  with  the  secretary  of  state  as  herein  provided,  shall  be  subject  to  a 
fine  of  not  less  than  five  hundred  dollars  to  be  recovered  in  any  court  of  com- 
petent jurisdiction. 

Act  of  the  Legislature  of  California,  approved  May  26,  1921;  in  effect 
July  26,  1921. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  697 

provisions  of  the  act  entitled,  "An  act  to  amend  'An  act 
in  relation  to  foreign  corporations,'  approved  April  first, 
1872,"  approved  March  seventeenth,  1899,  shall,  in  lieu 
of  the  provisions  of  this  section  above  set  forth,  file  the 
affidavit  and  designation  of  representative  herein  re- 
quired, and  the  license  tax  due  from  such  corporation 
shall  be  measured  by  the  authorized  capital  stock,  as 
shown  thereby. 

Act  of  the  Legislature,  approved  May  11,  1917; 
in  effect  May  11.  1917. 

Section  939. — ANNUAL  LICENSE  TAX. — Except  those 
corporations  hereinafter  specified,  every  corporation 
incorporated  under  the  laws  of  this  state,  and  every  cor- 
poration incorporated  under  the  laws  of  any  other  state, 
territory,  or  foreign  country  now  doing  intrastate  busi- 
ness within  this  state,  or  which  shall  hereafter  engage 
in  intrastate  business  in  this  state,  shall  procure  annually 
from  the  secretary  of  state  a  license  authorizing  the 
transaction  of  such  business  in  this  state,  and  pay  there- 
for the  license  tax  prescribed  herein. 

For  the  purpose  of  measuring  said  tax  the  secretary 
of  state  shall  examine  all  articles  of  incorporation  and  all 
documents  on  file  in  his  office  relating  to  an  increase  or 
decrease  in  the  authorized  capital  stock  of  corporations 
which  are  subject  to  said  tax,  and  determine  the  amount 
due  from  each  corporation  by  the  following  rule : 

(a)  Determination  of  Tax. — When  the  authorized 
capital  stock  of  the  corporation  does  not  exceed  ten  thou- 
sand dollars,  the  tax  shall  be  ten  dollars ;  when  the  author- 
ized capital  stock  exceeds  ten  thousand  dollars,  but  does 
not  exceed  twenty  thousand  dollars,  the  tax  shall  be  fif- 
teen dollars;  when  the  authorized  capital  stock  exceeds 
twenty  thousand  dollars  but  does  not  exceed  fifty  thou- 
sand dollars,  the  tax  shall  be  twenty  dollars;  when  the 
authorized  capital  stock  exceeds  fifty  thousand  dollars  but 
does  not  exceed  one  hundred  thousand  dollars,  the  tax 
shall  be  twenty-five  dollars ;  when  the  authorized  capital 


698  BUSINESS  LAW  FOB  BUSINESS  MEN. 

stock  exceeds  one  hundred  thousand  dollars  but  does  not 
exceed  two  hundred  fifty  thousand  dollars,  the  tax  shall 
be  fifty  dollars ;  when  the  authorized  capital  stock  exceeds 
two  hundred  fifty  thousand  dollars  but  does  not  exceed 
five  hundred  thousand  dollars,  the  tax  shall  be  seventy- 
five  dollars;  when  the  authorized  capital  stock  exceeds 
five  hundred  thousand  dollars  but  does  not  exceed  one 
million  dollars,  the  tax  shall  be  one  hundred  dollars; 
when  the  authorized  capital  stock  exceeds  one  million  dol- 
lars but  does  not  exceed  three  million  dollars,  the  tax 
shall  be  two  hundred  dollars ;  when  the  authorized  capital 
stock  exceeds  three  million  dollars  but  does  not  exceed 
five  million  dollars,  the  tax  shall  be  three  hundred  fifty 
dollars;  when  the  authorized  capital  stock  exceeds  five 
million  dollars  but  does  not  exceed  seven  million  five  hun- 
dred thousand  dollars,  the  tax  shall  be  five  hundred  fifty 
dollars;  when  the  authorized  capital  stock  exceeds  seven 
million  five  hundred  thousand  dollars  but  does  not  exceed 
ten  million  dollars,  the  tax  shall  be  eight  hundred  dollars ; 
when  the  authorized  capital  stock  exceeds  ten  million  dol- 
lars the  tax  shall  be  one  thousand  dollars ;  when  the  cap- 
ital stock  of  any  corporation  has  no  par  value  the  tax 
shall  be  one  hundred  dollars;  when  part  of  the  capital 
stock  of  any  corporation  has  a  par  value  and  a  part  of 
such  stock  has  no  par  value,  the  tax  shall  be  computed 
upon  such  par  value  stock  in  accordance  with  the  admeas- 
urement schedule  herein*  established,  to  which  sum  shall 
be  added  the  sum  of  fifty  dollars.  Building  and  loan  com- 
panies and  associations  shall  pay  an  annual  license  tax 
of  ten  dollars. 

(b)  Tax  on  Corporations  Having  No  Capital  Stock. 
All  corporations  having  no  capital  stock,  but  organized 
for  profit,  shall  pay  an  annual  tax  of  ten  dollars.  Said 
license  tax  shall  be  due  and  payable  to  the  secretary  of 
state  on  the  first  day  of  January  of  each  and  every  year. 
Such  license  tax  shall  be  paid  on  or  before  the  hour  of  six 
o'clock  p.  m.  of  the  first  Monday  of  February  of  each 
year,  and  if  not  so  paid  shall  at  said  hour  become  delin- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  699 

quent  and  there  shall  thereupon  be  added  thereto  as  a 
penalty  for  such  delinquency  the  sum  of  ten  dollars. 

(c)  Tax  Authorizes  Transaction  of  Business. — The 
license  hereby  provided  authorizes  the  domestic  corpora- 
tions holding  the  same  to  transact  business  in  this  state, 
and  authorizes  foreign  corporations  to  transact  intra- 
state  business  in  this  state,  during  the  year  or  any  frac- 
tional part  of  such  year  for  which  such  license  is  issued. 
1  i  Year, ' '  within  the  meaning  of  this  act,  means  from  and 
including  the  first  day  of  January  to  and  including  the 
thirty-first  day  of  December  next  thereafter. 

(d)  License  Tax  for  Part  of  Year. — At  the  time  any 
corporation  subject  to  the  license  tax  provided  herein 
shall  file  certified  copy  of  articles  of  incorporation,  or 
charter,  or  statute  or  statutes,  or  legislative,  or  execu- 
tive or  governmental  act  or  acts  creating  a  corporation, 
when  filed  between  the  first  day  of  January  and  the  thir- 
ty-first day  of  December,  inclusive,  in  any  year,  there 
shall  be  paid  to  the  secretary  of  state,  in  addition  to  all 
other  fees  required  by  law,  that  proportion  of  the  license 
tax  specified  in  this  act  which  the  unexpired  number  of 
months  of  such  year  bears  to  the  entire  year,  including  the 
month  in  which  such  filing  occurs,  and  thereupon  the  sec- 
retary of  state  shall  issue  a  license  for  such  fractional 
part  of  the  then  current  year. 

(e)  Corporations  Exempt. — Corporations   organized 
and  conducted   solely  and  exclusively  for   educational, 
religious,  scientific  or  charitable  purposes,  corporations 
which  are  not  organized  or  conducted  for  profit,  corpora- 
tions organized  under  the  laws  of  any  other  state,  terri- 
tory or  foreign  country  doing  solely  and  exclusively  an 
interstate  or  foreign  business,  and  those  corporations 
taxed  under  subdivisions  (a),  (b)  and  (c)  of  section  four- 
teen of  article  XIII  of  the  constitution,  are  exempt  from 
payment  of  the  tax  provided  by  this  act. 

(f )  Corporation  License  Tax  Exemption  Board. — The 
secretary  of  state,  state  controller  and  members  of  the 
state  board  of  control  shall  be  and  are  hereby  constituted 


700  BUSINESS  LAW  FOE  BUSINESS  MEN. 

the  "corporation  license  tax  exemption  board."  Except 
in  cases  where  articles  of  incorporation  are  filed  in  the 
month  of  December,  every  corporation  claiming  exemp- 
tion from  the  payment  of  the  annual  license  tax  pre- 
scribed by  this  statute  must  file  with  said  board,  at  least 
thirty  days  before  such  license  tax  becomes  due  and  pay- 
able, a  written  protest  in  which  shall  be  set  forth  all  facts 
and  reasons  upon  which  such  exemption  claim  is  made. 
Such  protest  shall  contain  a  concise  statement  of  the 
nature,  character  and  manner  of  doing  business  by  such 
corporation,  together  with  any  other  data  illustrating  the 
method  of  doing  such  business  and  the  places  in  which 
such  business  is  transacted  within  this  state.  Such  cor- 
poration shall  furnish  to  said  board  such  other  or  addi- 
tional information  as  may  be  required  by  said  board. 
Such  application  shall  be  sworn  to  by  the  president,  sec- 
retary or  general  manager,  or  authorized  agent  of  such 
corporation.  Failure  to  protest  in  the  manner  and  within 
the  time  herein  prescribed  shall  constitute  a  waiver  of  all 
rights  of  exemption  from  said  tax;  provided,  however, 
that  the  corporation  license  tax  exemption  board  shall 
have  the  power,  irrespective  of  such  protests,  to  grant 
such  exemption  in  the  case  of  corporations  mentioned 
in  subdivision  (e). 

The  provisions  of  this  section  with  respect  to  filing 
written  claim  of  exemption,  shall  not  apply  to  educational, 
religious,  scientific  or  charitable  corporations,  nor  to 
corporations  taxed  under  subdivisions  (a),  (b)  and  (c) 
of  section  fourteen,  article  XIII  of  the  constitution  of 
this  state. 

(g)  Tax  Exemption  Determined  Before  Filing  Arti- 
cles of  Incorporation. — Before  filing  a  certified  copy  of 
the  articles  of  incorporation  of  any  domestic  corporation 
in.  the  office  of  the  secretary  of  state,  and  before  any  for- 
eign corporation  files  with  the  secretary  of  state  the  docu- 
ment or  documents  required  by  section  one  of  this  act, 
said  articles  of  incorporation  or  said  documents  shall  be 
submitted  to  said  corporation  license  tax  exemption 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  701 

board,  which  board  shall  determine  the  question  of 
whether  such  corporation  is  exempt,  under  any  of  the 
provisions  of  this  act,  from  the  license  tax  imposed 
hereby. 

All  claims  or  applications  for  exemption,  under  this 
and  the  preceding  section,  together  with  all  evidence  and 
proofs  submitted  therewith,  shall  be  considered  by  such 
license  tax  exemption  board,  which  shall  determine  the 
question  of  such  exemption.  The  determination  of  such 
corporation  license  tax  exemption  board  upon  all  ques- 
tions of  fact,  with  respect  to  such  claims  of  exemption, 
shall  be  final  and  conclusive. 

(h)  Notice  of  Time  When  Tax  Payable. — On  or  be- 
fore the  first  day  of  December  of  each  year  the  secretary 
of  state  shall  mail  a  notice  to  every  corporation  subject 
to  the  tax  imposed  by  this  act,  notifying  such  corpora- 
tions of  the  time  when  such  tax  shall  be  due  and  payable, 
when  delinquent,  and  of  the  penalties  for  delinquency 
and  nonpayment.  Immediately  after  the  first  Monday 
in  February  of  each  year  the  secretary  of  state  shall  mail 
a  notice  to  every  corporation  subject  to  tax  imposed  by 
this  act  and  which  has  failed  to  pay  the  same,  notifying 
such  corporation  of  its  delinquency  and  the  penalties 
therefor. 

(i)  Notice  of  Suspension  or  Forfeiture. — Within  ten 
days  after  the  Saturday  preceding  the  first  Monday  in 
March  of  each  year  the  secretary  of  state  shall,  by  regis- 
tered mail,  notify  every  corporation  subject  to  the  tax 
imposed  by  this  act  and  which  has  failed  to  pay  the  same, 
that  such  corporation  has  been  recorded  by  him  as  a  "sus- 
pended" or  ' 'forfeited"  corporation  in  accordance  with 
the  provisions  of  this  act,  and  that  such  suspension  or  for- 
feiture may  be  removed  by  complying  with  the  provisions 
of  this  act.  Mailing  by  the  secretary  of  state  to  any  cor- 
poration of  any  of  the  notices  required  by  this  section 
shall  not  be  a  jurisdictional  prerequisite  to  the  accrual 
of  any  forfeiture  provided  by  this  act,  or  to  the  suspen- 
sion of  the  corporate  powers  of  any  delinquent  corpora- 


702  BUSINESS  LAW  FOR  BUSINESS  MEN. 

tion  and  the  officers  thereof  hereinafter  provided,  nor  be 
held  to  be  an  essential  prerequisite  to  the  imposition  of 
such  or  any  other  penalties  for  delinquency  and  non- 
payment. 

(j)  License  Tax  Lien. — The  license  tax  due  from  any 
corporation  subject  to  the  provisions  of  this  act  is  a  lien 
upon  the  real  property  of  such  corporation  from  and 
after  the  first  day  of  January  of  each  year  and  until 
paid  or  until  the  property  is  sold  for  the  payment  there- 
of. On  or  before  the  first  Monday  -in  April  of  each  year 
the  secretary  of  state  shall  make  a  list  of  all  corporations 
subject  to  the  tax  imposed  by  or  that  should  have  been 
paid  under  this  act  and  which  have  failed  to  pay  the  same, 
and  transmit  a  certified  copy  thereof  to  each  county  clerk 
and  county  recorder  in  this  state.  Said  county  clerks 
and  county  recorders  shall  file  such  certified  copies  in 
their  respective  offices  in  such  manner  that  the  same  shall 
be  preserved  in  the  form  of  a  permanent  record  of  such 
office  and  easily  identified  by  and  available  to  the  public. 
Said  copies  so  certified  by  the  secretary  of  state  and  filed 
as  herein  provided  shall,  in  the  case  of  each  corporation, 
state  whether  such  corporation  is  a  domestic  or  foreign 
corporation  and  specify  the  tax  and  penalties  which  each 
corporation  has  incurred  for  failure  to  pay  the  tax  im- 
posed by  this  act.  Such  certified  -copies  so  filed  with 
either  of  said  county  officers,  or  any  copy  thereof  certified 
by  the  secretary  of  state,  shall  be  received  in  evidence  in 
any  court  in  lieu  of  the  original  record  on  file  with  the 
secretary  of  state  and  shall  be  prima  facie  evidence  of  the 
truth  of  all  statements  contained  therein. 

(k)  Rights  of  Domestic  Corporations  Suspended.— 
After  six  o'clock  p.  m.  of  the  Saturday  preceding  the  first 
Monday  in  March  in  any  year,  the  corporate  rights,  privi- 
leges and  powers  of  every  domestic  corporation  which 
has  failed  to  pay  the  tax  and  money  penalty  for  non- 
payment thereof  imposed  by  this  act  shall,  from  and  after 
said  hour  of  said  day,  be  suspended,  and  incapable  of  be- 
ing exercised  for  any  purpose  or  in  any  manner,  except 


BUSINESS  CONTEACTS  AND  LEGAL  OBLIGATIONS.  703 

to  execute  and  deliver  deeds  to  real  property  in  pursu- 
ance of  contracts  therefor  made  prior  to  such  time,  and 
to  defend  in  court  any  action  brought  against  such  cor- 
poration, until  said  tax  with  all  accrued  penalties, 
taxes  and  charges  due  to  the  state  under  this  act  and  sub- 
division (d)  of  section  fourteen,  article  XIII  of  the  con- 
stitution, are  paid  as  hereinafter  provided. 

(1)  Right  of  Foreign  Corporations  Forfeited. — The 
right  and  privilege  of  every  foreign  corporation,  subject 
to  the  provisions  of  this  act,  to  transact  intrastate  busi- 
ness in  this  state  shall,  for  failure  to  pay  the  tax  and 
money  penalty  for  nonpayment  thereof  imposed  by  this 
act,  be  forfeited  at  said  hour  of  said  day,  and  the  secre- 
tary of  state  shall  make  a  record  of  such  forfeiture.  In 
the  case  of  foreign  corporations  such  forfeiture  may  be 
relieved  and  the  corporation's  privilege  to  transact  intra- 
state business  in  this  state  restored  in  the  manner  herein- 
after provided.  After  said  hour  of  said  day  and  until 
such  taxes,  penalties  and  charges  are  paid,  every  person 
who  attempts  or  purports  to  exercise  any  of  the  rights, 
privileges  or  powers  of  any  delinquent  domestic  corpora- 
tion except  as  permitted  by  this  act,  or,  who  transacts  or 
attempts  to  transact  any  intrastate  business  in  this  state 
in  behalf  of  any  forfeited  foreign  corporation,  shall  be 
guilty  of  a  misdemeanor  and  upon  conviction  thereof  shall 
be  punished  by  a  fine  of  not  less  than  two  hundred  fifty 
dollars  and  not  exceeding  one  thousand  dollars,  or  by 
imprisonment  in  the  county  jail  not  less  than  fifty  days  or 
more  than  five  hundred  days,  or  by  both  such  fine  and 
imprisonment.  The  jurisdiction  of  such  offense  shall  be 
held  to  be  in  any  county  in  which  any  part  of  such  at- 
tempted exercise  of  such  powers,  or  any  part  of  such 
transaction  of  business  was  had  or  occurred.  Every  con- 
tract made  in  violation  of  this  section  is  hereby  declared 
to  be  void. 

(m)  Application  by  Stockholder  or  Creditor  to  Re- 
store Rights. — All  corporate  powers,  rights  and  privi- 
leges, suspended  or  forfeited  under  the  provisions  of  this 


704  BUSINESS  LAW  FOB  BUSINESS  MEN. 

act  may  be  revived  and  restored  to  full  force  and  effect 
upon  application  therefor  by  any  stockholder  or  creditor 
thereof  and  upon  payment  of  all  accrued  taxes  and  pen- 
alties due  to  the  state  under  this  act  and  subdivision  (d) 
of  section  fourteen,  article  XIII  of  the  constitution.  In 
case  the  application  for  such  revivor  and  restoration  is 
not  made  during  the  year  in  which  such  suspension  or 
forfeiture  occurred,  such  application  shall  not  be  granted 
nor  a  certificate  of  revivor  issued  to  such  corporation 
until  there  is  paid  to  the  secretary  of  state  in  addition  to 
the  tax  and  money  penalty  due  or  that  should  have  been 
paid  the  state  for  the  year  in  which  such  suspension  or 
forfeiture  occurred,  a  sum  of  money,  equal  to  the  tax, 
without  penalty,  imposed  or  that  should  have  been  paid 
under  this  act  during  the  year  in  which  such  suspension 
or  forfeiture  occurred,  for  each  year  succeeding  said  year 
in  which  such  suspension  or  forfeiture  occurred. 

(n)  Controller's  Certificate. — Upon  the  payment  of 
all  such  taxes  and  penalties,  and  upon  payment  of  all 
other  taxes  due  the  state,  the  state  controller  shall  issue 
a  certificate  under  his  seal  evidencing  such  payment  and 
restoration,  which  certificate,  when  recorded  in  the  office 
of  any  county  recorder,  shall  constitute  a  release  of  all 
existing  liens  for  such  taxes  upon  the  property  of  such 
corporation.  Each  county  recorder  shall  keep  an  index 
of  all  such  controller's  certificates  recorded  by  him.  Upon 
presentation  of  such  controller's  certificate  of  revivor  to 
any  county  clerk  said  officer  shall  make  a  record  thereof 
in  his  office  in  a  book  kept  for  such  purpose.  •  The  record 
so  made  by  said  county  clerk  shall  be  prima  facie  evidence 
of  the  restoration  to  such  corporation  of  all  previously 
suspended  or  forfeited  rights,  powers  and  privileges 
unless  it  appears  from  the  records  in  the  office  of  such 
county  clerk  or  of  the  controller  or  secretary  of  state  that 
subsequent  to  the  date  of  such  certificate  of  revivor  the 
powers  of  said  corporation  have  been  again  suspended  or 
its  right  to  do  intrastate  business  again  forfeited. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  705 

(o)  No  Dissolution  Until  Tax  Paid. — No  court  shall 
have  jurisdiction  to  make  or  enter  any  decree  of  dissolu- 
tion of  any  domestic  corporation  until  all  taxes  and  penal- 
ties due  under  this  act  shall  have  been  paid. 

(p)  Restoration  of  Rights  Under  Acts  of  1905  and 
1915. — Any  corporation  which  has  heretofore  failed  to 
pay  any  license  tax  and  penalty  imposed  under  the  pro- 
visions of  the  statutes  1905,  and  amendments  thereof,  or 
under  the  statutes  1915,  and  for  such  nonpayment  suf- 
fered a  forfeiture  of  the  charter  of  such  corporation  or 
of  the  right  to  do  business  in  this  state,  may  be  relieved 
of  such  forfeiture,  or  may  be  restored  to  its  right  to  do 
business  in  this  state,  upon  making  application  therefor 
in  writing  and  paying  the  license  tax  and  penalties  for 
nonpayment  of  which  such  forfeiture  occurred.  Appli- 
cation for  restoration  shall  be  made  in  writing,  shall  be 
signed  by  four-fifths  of  the  surviving  trustees  or  direc- 
tors of  said  corporation,  duly  verified  by  said  trustees  or 
directors,  and  filed  with  the  state  controller.  Upon  pay- 
ment of  the  moneys  due  this  state  under  the  provisions 
of  said  act  for  the  one  year  in  which  such  forfeiture  oc- 
curred, together  with  any  tax  levied  in  such  year  by  the 
state  board  of  equalization,  and  the  license  tax  due  under 
the  provisions  of  this  act,  the  state  controller  shall  issue 
a  certificate  of  revivor  to  such  corporation,  and  thereupon 
such  corporation  is  revived  and  its  powers  restored  to 
full  force  and  effect. 

The  revivor  of  a  corporation  shall  be  without  preju- 
dice to  any  action  or  proceeding,  defense  or  right,  which 
has  occurred  by  reason  of  the  original  forfeiture. 

(q)  Use  of  New  Name. — In  case  the  name  of  any  cor- 
poration which  has  suffered  forfeiture  has  been  adopted 
by  any  other  corporation  since  the  date  of  said  forfeiture, 
or  in  any  case  any  corporation  has  adopted  subsequent  to 
such  forfeiture  any  name  so  closely  resembling  the  name 
of  such  reviving  corporation  as  will  tend  to  deceive,  then 
such  reviving  corporation  shall  be  entitled  to  a  certificate 


706  BUSINESS  LAW  FOB  BUSINESS  MEN. 

of  revivor  only  upon  the  adoption  by  such  corporation 
seeking  revivor  of  a  new  name,  and  in  such  case  nothing 
in  this  law  contained  shall  be  construed  as  permitting 
such  reviving  corporation  to  carry  on  any  business  under 
its  former  name.  Such  reviving  corporation  shall  have  the 
right  to  use  its  former  name  or  take  such  new  name  only 
upon  filing  an  application  therefor  with  the  secretary  of 
state,  and  upon  the  issuing  of  a  certificate  to  such  cor- 
poration by  the  secretary  of  state,  setting  forth  the  right 
of  such  corporation  to  take  such  new  name  or  use  its 
former  name  as  the  case  may  be.  The  secretary  of  state 
shall  not  issue  any  certificate  permitting  any  corporation 
to  take  or  use  the  name  of  any  corporation  heretofore 
organized  in  this  state  and  which  has  not  suffered  a  for- 
feiture under  either  of  the  acts  in  this  section  first  above 
mentioned,  or  to  take  or  use  a  name  so  closely  resembling 
the  name  of  any  corporation  heretofore  organized  in  this 
state  as  will  tend  to  deceive. 

(r)  Surrender  of  Right  to  Engage  in  Intrastate  Busi- 
ness.— Any  foreign  corporation  may  surrender  its  right 
to  engage  in  intrastate  business  in  this  state  by  filing  with 
the  corporation  license  tax  exemption  board  an  affidavit, 
sworn  to  by  the  president  of  such  corporation,  which  shall 
contain  a  concise  statement  of  the  nature,  character  and 
manner  of  doing  any  business  of  any  kind  that  such  cor- 
poration may  thereafter  intend  to  transact  in  this  state. 
Said  corporation  shall  furnish  such  other  or  additional 
information  as  may  be  required  by  said  board.  Said 
board  shall  consider  such  application,  and  the  order  of 
such  board  approving  the  same  shall  terminate  the  right 
of  such  corporation  to  transact  intrastate  business  in  this 
state.  Any  person  transacting  any  intrastate  business  in 
this  state  in  behalf  of  such  corporation  after  approval  of 
such  application  to  surrender  such  privilege  shall  be 
guilty  of  a  misdemeanor  and  punishable  as  provided  in 
this  act. 

(s)  False  Statement. — Any  false  statement  contained 
in  any  of  the  affidavits  herein  required  shall  constitute 


Section  942,  page  707,  "Business  Law  for  Business  Men"— ISSUE  OF 
STOCK  TO  EMPLOYEES — In  all  cases  and  subject  to  the  manner  in  which 
corporations  are  authorized  by  existing  laws  to  issue  or  sell  shares  of  their 
capital  stock  any  corporation  may,  with  the  consent  of  the  stockholders  under 
such  restrictions  as  they  shall  impose,  issue  by  way  of  additional  compensa- 
tion, or  pursuant  to  sale,  shares  of  its  capital  stock,  whether  of  an  original  or 
of  an  increased  issue,  to  employees  of  the  corporation  and  to  persons  actively 
engaged  in  the  conduct  of  its  business,  or  to  trustees  for  such  employees  or 
persons;  and  if  such  issue  be  pursuant  to  sale,  such  corporation  may  provide 
for  payment  for  such  stock  in  installments  or  at  one  time,  and  may  provide 
for  aiding  such  employees  or  such  persons  in  paying  for  such  stock  by  con- 
tributions, compensation  for  services,  or  otherwise,  with  or  without  the  right 
to  vote  thereon,  pending  issue  thereof,  or  payment  thereof  in  full.  Such  con- 
sent may  be  given  by  the  written  assent  or  assents  of  stockholders  holding 
two-thirds  of  the  subscribed  or  issued  capital  stock,  which  assent  or  assents 
must  be  filed  with  the  secretary  of  the  corporation,  or  by  a  vote  of  stock- 
holders holding  two-thirds  of  the  subscribed  or  issued  capital  stock  of  the 
corporation,  at  a  regular  stockholders'  meeting,  or  at  a  special  meeting  for  that 
purpose. 

Any  corporation  may  provide  in  its  articles  of  incorporation  or  by-laws, 
at  the  time  of  organizing  the  corporation,  for  the  issue  of  stock  to  its  em- 
ployees or  persons  actively  engaged  in  the  conduct  of  its  business,  as  herein- 
before provided. 

Act  of  the  Legislature  of  California,  approved  April  2,  1921;  in  effect 
June  2,  1921. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  707 

perjury,  and  shall  be  punishable  as  such. 

Act  of  the  Legislature,  approved  May  11,  1917; 
in  effect  May  11, 1917. 

Section  940. — DUPLICATE  OF  LOST  CERTIFICATE. — When- 
ever a  certificate  of  stock  in  a  California  corporation  is 
lost  or  destroyed,  the  owner  may  bring  an  action  against 
the  corporation,  in  the  Superior  Court  of  the  county  in 
which  its  principal  place  of  business  is  located,  for  the 
purpose  of  obtaining  a  new  or  duplicate  certificate. 
Statutes  of  1905,  page  500. 

Section  941. — CORPORATIONS  TO  LOAN  MONEY  ON  CHAT- 
TEL MORTGAGES. — A  corporation  may  be  organized  for  the 
sole  purpose  of  loaning  money  upon  the  pledge  of  goods 
and  chattels.  Such  corporation  must  have  a  capital  stock 
of  $50,000,  or  over,  and  all  the  capital  stock  must  be 
actually  subscribed,  and  at  least  50  per  cent  actually  paid 
in,  before  any  business  is  transacted. 
Statutes  of  1905,  page  711. 

Section  942.— CAPITAL  STOCK. — The  law  provides  that 
all  corporations  for  profit  in  California  must  issue  cer- 
tificates for  stock  when  fully  paid  up,  signed  by  the  presi- 
dent and  secretary,  and  may  provide  in  their  By-Laws 
for  issuing  certificates  prior  to  the  full  payment,  under 
such  restrictions  and  for  such  purposes  as  their  By-Laws 
may  provide.  The  corporation  must  keep  an  account  of 
its  stock,  by  whom  owned,  and  the  amount  of  subscrip- 
tions unpaid.  It  may  issue  its  stock  and  commence  busi- 
ness before  subscriptions  are  all  paid  up,  and  even  before 
the  stock  is  all  subscribed  for.  The  capital  stock  is  the 
fund  upon  which  the  corporation  does  business,  and  is  the 
sole  basis  of  its  credit.  Therefore,  no  corporation  can 
issue  stock,  except  for  money  paid,  labor  done,  or  prop- 
erty actually  received,  and  all  fictitious  increase  of  stock 
is  declared  by  the  law  to  be  void. 

Constitution  of  California,  Article  12,  Section 
11 ;  Civil  Code,  Section  323. 


708  BUSINESS  LAW  FOE  BUSINESS  MEN. 

Section  943. — AMOUNT  OF  SUBSCRIBED  CAPITAL  TO  BE 
PAID  IN. — It  is  only  in  the  case  of  particular  corporations 
that  the  law  requires  a  certain  amount  of  the  subscribed 
capital  stock  to  be  paid  in  when  the  corporation  is  formed. 
As  a  general  rule  there  is  no  requirement  on  the  subject. 
Any  certificate  issued  prior  to  full  payment  must  show 
on  its  face  what  amount  has  been  paid  thereon. 

Section  944. — STOCKHOLDERS  AND  MEMBERS. — Certain 
corporations  are  not  required  to  have  any  capital  stock, 
and  a  person  associated  with  others  in  such  a  corporation 
is  called  a  member.  The  holder  of  shares  in  a  corpora- 
tion having  a  capital  stock  is  called  a  stockholder. 

Section  945. — SHARES  OF  STOCK. — Whenever  the  capi- 
tal stock  of  a  corporation  is  divided  into  shares,  and  cer- 
tificates have  been  issued,  such  shares  of  stock  are 
personal  property. 

Section  946. — PREFERRED  AND  COMMON  STOCK. — A  cor- 
poration may  issue  two  classes  of  stock — preferred  stock 
and  common  stock.  If  the  two  kinds  are  to  be  issued,  the 
Articles  of  Incorporation  must  provide  for  the  classifica- 
tion, and  must  contain  a  statement  of  the  number  of 
shares  of  preferred  stock,  and  the  number  of  shares  to 
which  no  preference  is  given.  The  Articles  of  Incorpora- 
tion must  also  state,  clearly  and  without  evasion,  the 
nature  and  extent  of  the  preference  granted  to  one  class 
of  the  stock,  and  except  as  so  declared  there  shall  be  no 
preference;  and  there  can  be  no  distinction  between 
owners  of  the  two  classes  of  stock  as  to  voting  power  and 
liability  of  stockholders. 

Section  947. — SUBSCRIPTION  FOR  STOCK. — When  a  cor- 
poration is  formed,  and  a  person  subscribes  for  a  certain 
number  of  shares,  by  such  subscription  he  becomes  the 
owner  of  the  stock;  and  it  is  not  essential  to  create  his 
rights  as  owner  that  the  certificate  should  actually  be 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  709 

issued  to  him.  The  other  incorporators  or  promoters 
cannot,  after  a  person  has  become  a  subscriber  for  stock, 
arbitrarily  say,  "We  will  not  issue  the  stock  to  him,"  and 
thus  avoid  the  binding  force  of  the  subscription ;  nor  can 
the  subscriber  himself  say,  where  the  parties  have  acted 
in  good  faith,  * '  I  have  changed  my  mind ;  I  will  not  take 
the  stock."  By  the  subscription  merely,  the  subscriber 
becomes  bound  to  accept  and  pay  for  the  shares  he  has 
subscribed  for.  And  to  guard  against  any  imposition 
upon  those  who  have  subscribed  for  stock,  the  law  pro- 
vides that  a  subscription  for  capital  stock  cannot  be 
rescinded  or  canceled,  except  for  fraud  or  mistake,  with- 
out the  unanimous  consent  of  all  the  stockholders.  What 
mistakes,  or  what  acts  of  fraud  in  the  organization  of  a 
corporation,  would  entitle  any  party  to  demand  that  a 
subscription  for  stock  be  canceled,  must  depend  upon  the 
peculiar  facts  of  each  case.  If  a  party  were  induced  by 
false  statements  or  intentional  misrepresentations,  con- 
cerning material  matters  connected  with  the  proposed 
corporation,  to  subscribe  for  its  stock,  this  would  be  a 
fraud  upon  him  for  which  he  could  demand  that  his  sub- 
scription be  canceled.  But,  whatever  the  rights  of  the 
subscriber  might  be  in  the  courts,  the  corporation  itself 
can  never  cancel  a  subscription  for  stock  without  first 
having  the  unanimous  consent  of  all  the  stockholders. 
(Decided  by  the  Supreme  Court  in  the  case  of  Pacific 
Fruit  Company  vs.  Coon,  which  decision  is  printed  in 
Volume  107  of  the  California  Reports,  page  447.) 

Section  948. — COMPROMISE  WITH  SUBSCRIBER  FOR 
STOCK. — Where  subscribers  to  the  capital  stock  of  a  cor- 
poration by  reason  of  great  financial  loss  and  damage  are 
unable  to  take  and  pay  for  the  whole  amount  of  their 
subscription,  the  board  of  directors  of  the  corporation 
have  authority  to  compromise  the  matter  by  releasing 
them  from  their  subscription  to  the  extent  of  one-half  of 
the  number  of  shares  subscribed  for,  in  consideration  of 
their  acceptance  and  payment  for  the  remainder.  The 


710  BUSINESS  LAW  FOR  BUSINESS  MEN. 

general  rule  is,  that  a  subscriber  to  stock  of  a  corporation 
cannot  be  released  from  the  obligation  of  his  contract 
without  the  consent  of  his  fellow  stockholders  and  the 
creditors  of  the  corporation.  The  reason  for  the  rule  is 
found  in  the  doctrine,  which  views  the  subscribed  capital 
stock  of  a  corporation,  both  paid  and  unpaid,  as  a  trust 
fund  which  the  stockholders  and  creditors  have  the  right 
to  insist  shall  not  be  reduced  or  diminished  or  impaired 
except  with  their  consent.  In  considering  the  application 
of  the  rule,  however,  it  must  be  kept  in  mind  that  the 
creditor  of  a  corporation  is  not  a  direct  party  to  the  con- 
tractual relation  entered  into  between  the  corporation  and 
a  subscriber  to  its  capital  stock,  and  the  creditor's  rights 
do  not  extend  so  far  as  to  permit  him  to  interfere  and 
prevent  a  stockholder  from  altering  his  relation  toward 
the  corporation  with  respect  to  his  membership  therein 
as  a  holder  of  its  shares. 

A  solvent  stockholder  may  make  a  valid  agreement 
with  the  corporation,  securing  first  the  consent  of  all  the 
other  stockholders  thereto,  for  his  release  from  his  sub- 
scription contract.  Such  an  agreement  will  not  prevent 
existing  creditors  from  having  recourse  against  the  re- 
tiring stockholder  upon  his  statutory  liability.  Express 
authority  given  by  the  charter  or  by-laws  of  the  corpora- 
tion, is  essential,  however,  to  the  execution  of  such  an 
agreement  by  the  board  of  directors  of  a  corporation. 

While  the  power  in  the  stockholders  of  a  corporation 
to  accept  a  surrender  of  the  shares  of  a  subscriber  may 
not  be  exercised  by  the  board  of  directors  in  the  absence 
of  express  authority  given  them  by  the  charter  or  by-laws, 
an  exception  is  recognized  to  the  extent  that  the  directors 
may  make  compromises  with  insolvent  or  irresponsible 
subscribers.  Such  compromises  usually  take  the  form, 
that  in  consideration  of  the  subscriber  paying  for  a  por- 
tion of  the  shares  agreed  to  be  taken,  he  is  released,  so 
far  as  the  corporation  is  concerned,  as  to  liability  for  the 
remainder.  (Decided  by  the  District  Court  of  Appeals  in 
the  case  of  Thomas  vs.  Wentworth  Hotel  Company,  which 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  711 

decision  is  printed  in  Volume  12,  California  Appellate 
Decisions,  page  834.) 

Section  949. — TRANSFER  OF  SHARES  OF  STOCK. — Shares 
of  stock  in  a  corporation  are  transferred  by  indorsement 
and  the  delivery  of  the  certificate.  The  indorsement  is 
made  by  the  signature  of  the  owner,  his  agent,  attorney, 
administrator,  or  executor.  The  transfer  thus  made,  by 
indorsement  and  delivery,  and  nothing  more,  is  valid  be- 
tween the  parties  to  it.  But  to  make  such  a  transfer 
good  as  to  third  parties,  something  more  is  required ;  the 
transfer  must  be  entered  upon  the  books  of  the  corpora- 
tion, so  as  to  show  the  names  of  the  parties  by  whom  and 
to  whom  transferred,  the  number  of  the  certificate,  the 
number  of  shares,  and  the  date  of  the  transfer. 
Civil  Code,  Section  324. 

Section  950. — TRANSFER  'OF  STOCK  HELD  BY  NON- 
RESIDENT.— The  officers  of  a  corporation  are  not  bound 
to  enter  on  its  books  any  transfer  of  its  shares  owned  by 
parties  residing  out  of  the  State,  and  are  not  bound  to 
issue  a  certificate  to  the  transferee,  unless  the  person 
claiming  under  the  transfer,  or  the  attorney  or  agent  of 
the  non-resident,  makes  an  affidavit  or  produces  other  sat- 
isfactory evidence  that  the  non-resident  owner  was  alive 
at  the  date  of  the  transfer ;  and  if  this  affidavit  is  not  made 
or  evidence  of  such  fact  produced,  the  corporation  may 
require  an  indemnity  bond,  with  two  sureties,  conditioned 
to  protect  the  corporation  against  any  liability  to  the 
estate  of  the  owner  of  the  shares,  in  case  of  his  being  in 
fact  dead  before  the  transfer ;  and  if  neither  the  affidavit 
nor  other  evidence,  nor  the  indemnity  bond,  is  furnished 
when  required,  the  corporation  and  its  officers  will  not 
be  liable  for  refusing  to  enter  the  transfer  on  the  books. 
Civil  Code,  Section  326. 

Section  951. — TRANSFER  OF  STOCK  HELD  BY  MARRIED 
WOMAN. — Shares  of  stock  in  corporations  held  by  or 


712  BUSINESS  LAW  FOE  BUSINESS  MEN. 

owned  by  a  married  woman  may  be  transferred  by  her, 
or  her  agent  or  attorney,  without  the  signature  of  her 
husband,  by  indorsement  and  delivery  of  the  stock. 
Civil  Code,  Section  325. 

Section  952. — VOID  CERTIFICATES. — It  is  unlawful  for 
any  corporation  in,  Calif ornia  to  issue  stock  except  for 
money  paid,  labor  done,  or  property  actually  received. 
Stock  cannot  be  lawfully  issued  without  such  considera- 
tion, and  all  certificates  issued  by  any  corporation  in  vio- 
lation of  this  provision  of  the  law  are  void. 
Civil  Code,  Section  359. 

Section  953. — REMEDY  AGAINST  CORPORATION  REFUSING 
TO  REGISTER  TRANSFER  OF  STOCK. — If  the  officers  of  a  cor- 
poration refuse  to  register  a  transfer  of  stock  on  its 
books,  the  person  to  whom  the  stock  has  been  transferred 
may  lawfully  treat  such  refusal  as  a  conversion  of  the 
shares  by  the  corporation.  He  may  then  sue  the  cor- 
poration and  obtain  a  judgment  for  the  value  of  the  stock 
at  the  time  of  the  refusal  to  register  the  transfer,  with 
interest  at  seven  per  cent  per  annum  from  that  time. 
Civil  Code,  Section  3336. 

Section  954. — CERTIFICATES  OF  STOCK  ARE  NOT  NEGO- 
TIABLE.— Certificates  of  stock  in  a  corporation  are  not 
negotiable,  in  a  commercial  sense.  They  are  mere  evi- 
dences of  the  holder's  title  to  a  given  share  in  the  prop- 
erty and  franchises  of  the  corporation  of  which  he  is  a 
member.  Consequently,  if  a  corporation  issues  to  an 
owner  of  shares  of  stock  a  certificate  transferable  on  the 
books  of  the  company  by  indorsement  and  surrender  of 
the  certificate,  and  he  indorses  the  same  and  then  loses  it, 
and  it  comes  into  the  hands  of  a  bona  fide  purchaser  for 
value,  such  purchaser  acquires  no  right  to  the  stock. 
(Decided  by  the  Supreme  Court  in  the  case  of  Sherwood 
vs.  Meadow  Valley  Mining  Company,  which  decision  is 
printed  in  Volume  50  of  the  California  Reports,  page 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  713 

412.)  In  the  case  cited,  the  language  of  Parsons  on  Con- 
tracts is  referred  to,  where  he  says:  "The  result  would 
seem  to  be  that  all  corporation  bonds  and  government 
stocks,  which  pass  by  delivery,  or  indorsement  with  de- 
livery, are  negotiable;  but  that  certificates  of  stock  in  a 
corporation  are  not." 

Section  955. — WHEN  COKPORATION  CANNOT  CLAIM  ITS 
OWN  STOCK  INVALID. — A  corporation  is  precluded  from 
setting  up  the  claim  that  its  own  stock  is  invalid,  or  not 
issued  according  to  law,  where  the  rights  of  a  bona  fide 
purchaser  are  involved.  So  it  has  been  held  that,  where 
a  corporation  issues  capital  stock,  and  represents  it  as 
fully  paid  and  causes  it  to  be  so  listed  on  the  stock  and 
bond  exchange,  the  law  will  deny  it  the  right  to  claim  that 
the  stock  is  invalid,  as  against  a  bona  fide  purchaser,  even 
if  the  stock  was  in  fact  issued  without  consideration. 
(Decided  by  the  Supreme  Court  in  the  case  of  Smith  vs. 
Martin,  which  decision  is  printed  in  Volume  135  of  the 
California  Reports,  page  247.) 

Section  956. — REMEDY  AGAINST  CORPORATION  FOR  RE- 
FUSING TO  RECOGNIZE  STOCKHOLDER. — If  the  corporation 
refuses  to  recognize  the  lawful  holder  of  stock  as  a  stock- 
holder, or  refuses  to  deliver  to  him  a  new  certificate,  or 
to  register  him  on  its  books,  he  has  two  remedies.  He 
may  sue  in  the  Superior  Court  and  compel  the  corpora- 
tion to  recognize  him  as  a  stockholder,  by  registering  him 
upon  its  books  and  delivering  to  him  a  new  certificate; 
or,  he  may  sue  the  corporation  for  damages,  on  the 
ground  that  by  its  refusal  it  has  been  guilty  of  a  conver- 
sion of  his  stock.  These  remedies  are  given  not  only  to 
the  real  owner  of  the  stock,  but  also  to  others,  as  the 
pledgee,  the  guardian,  or  the  administrator.  (Decided 
by  the  Supreme  Court  in  the  case  of  Herbert  Kraft  Com- 
pany Bank  vs.  Bank  of  Orland,  which  decision  is  printed 
in  Volume  133  of  the  California  Reports,  page  64.) 


714  BUSINESS  LAW  FOB  BUSINESS  MEN. 

Section  957. — MORTGAGE  OF  SHARES  OF  STOCK. — The 
statute  law  declares  what  personal  property  may  be 
mortgaged  in  California.  Other  personal  property,  how- 
ever, may  be  mortgaged,  and  the  mortgage  will  be  good 
as  between  the  parties  to  it.  Shares  of  stock  in  a  cor- 
poration are  personal  property.  A  mortgage  of  shares 
of  stock  may  be  made,  which  is  valid  and  binding  between 
the  parties,  and  without  delivery  of  possession  of  the  cer- 
tificate of  stock.  Such  a  mortgage  is  void  as  to  creditors 
and  subsequent  purchasers  in  good  faith  for  a  valuable 
consideration ;  but  where  no  such  persons  are  complain- 
ing, the  mortgage  is  good  between  the  parties  to  it. 

Section  958. — SEAL  OF  CORPORATION. — Every  corpora- 
tion must  have  a  seal,  but  it  need  not  be  used  upon  every 
occasion.  Corporations,  like  individuals,  may  appoint 
agents,  and  make  most  of  the  contracts  which  fall  within 
their  general  powers,  without  the  use  of  a  seal. 

Section  959. — DEED  WITHOUT  CORPORATE  SEAL. — In  a 
suit  involving  the  validity  of  the  deed  of  a  corporation, 
executed  without  the  corporate  seal  by  persons  signing 
as  Directors,  one  who  claims  under  such  deed  must  show 
affirmatively  that  the  deed  was  authorized  by  a  resolu- 
tion of  the  Directors  entered  on  the  records  of  the  cor- 
poration, or  that  it  was  ratified  by  such  resolution. 
(Decided  by  the  Supreme  Court  in  the  case  of  Barney  vs. 
Pforr,  which  decision  is  printed  in  Volume  117  of  the 
California  Reports,  page  56'.) 

Section  960. — WHAT  REAL  ESTATE  MAY  BE  HELD  BY 
CORPORATION. — A  corporation  may  hold  indefinitely  any 
real  estate  necessary  to  be  used  by  it  in  the  conduct  of 
its  legitimate  business ;  but  the  Constitution  of  California 
provides  that  no  corporation  shall  hold  for  a  longer 
period  than  five  years  any  real  estate,  except  such  as  may 
be  necessary  for  carrying  on  its  business.  Therefore,  if 
a  corporation  acquires  any  real  estate,  in  any  manner, 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  715 

which  is  not  necessary  in  carrying  on  its  business,  it  must 
sell  such  real  estate  within  five  years  after  the  title  is 
vested  in  it ;  and  if  it  does  not  do  so,  the  Attorney-General 
may  bring  a  suit  against  the  corporation,  in  the  name  of 
the  people  of  the  State,  to  compel  it  to  sell  the  land. 

Constitution  of  California,  Article  12,  Section  9. 

Section  961. — CORPORATION  MUST  KEEP  WITHIN  OBJECT 
OF  ITS  CREATION. — It  is  one  of  the  cardinal  principles 
governing  the  conduct  of  a  corporation  that  it  must  keep 
within  the  purposes  and  objects  for  which  it  was  organ- 
ized. If  organized  to  carry  on  a  particular  business,  it 
cannot  engage  in  another.  So,  if  a  corporation  formed 
to  do  a  banking  business  should  engage  in  insurance,  the 
latter  business  would  be  outside  of  its  legitimate  object, 
and  its  acts  in  that  business  would  have  no  validity.  So 
far  has  this  principle  been  carried  in  California,  our 
Supreme  Court  has  said  that  a  contract  of  a  corporation, 
outside  of  the  object  of  its  creation  as  defined  by  the  law 
of  its  organization,  and  therefore  beyond  the  powers  con- 
ferred upon  it  by  the  Legislature,  is  not  voidable  only, 
but  wholly  void  and  of  no  legal  effect.  The  objection  to 
such  a  contract  is  not  merely  that  the  corporation  ought 
not  to  have  made  it,  but  that  it  could  not  make  it. 

Section  962. — VOID  CONTRACT  CANNOT  BE  EATIFIED. — 
A  contract  which  is  absolutely  void,  because  outside  of 
the  objects  of  the  corporation,  cannot  be  ratified.  The 
contract  cannot  be  ratified  by  either  party  to  it,  because 
it  could  not  have  been  authorized  by  either.  No  perform- 
ance on  either  side  can  give  a  void  contract  any  validity, 
or  be  the  foundation  of  any  right  of  action  upon  it. 
(Decided  by  the  Supreme  Court  in  the  case  of  Chemical 
National  Bank  vs.  Havermal,  which  decision  is  printed 
in  Volume  120  of  the  California  Reports,  page  53.) 

Section  963. — WHEN  CORPORATION  BOUND  BY  ITS  OWN 
INVALID  ACT. — While  an  absolutely  void  contract  cannot 


716  BUSINESS  LAW  FOB  BUSINESS  MEN. 

be  ratified,  yet  corporations  are  often  bound  by  their  own 
invalid  acts,  as  where  the  Directors  have  done  an  act 
without  their  lawful  power,  but  the  corporation  has  re- 
tained the  benefits  and  still  enjoys  the  fruits  of  the  trans- 
action. In  such  a  case,  the  corporation  is  not  permitted 
to  deny  the  validity  of  its  own  act,  although  it  was  ir- 
regular or  invalid.  This  rule  is  illustrated  by  a  decision 
of  the  Supreme  Court,  where  a  promissory  note  was 
irregularly  executed  by  the  president  and  secretary  of  a 
corporation,  and  upon  being  sued  on  the  note,  the  cor- 
poration, without  returning  or  offering  to  return  the 
money  received  from  the  lender,  denied  the  validity  of 
the  note  and  attempted  to  repudiate  it.  The  Supreme 
Court  said:  "Assuming  that  the  contract  was  outside 
its  power,  the  law  does  not  allow  a  corporation  to  retain 
the  benefits  which  it  has  received  from  the  contract  and 
escape  liability  upon  it.  The  invalidity  of  a  contract  is 
subject  to  the  equitable  exception  that,  although  a  cor- 
poration in  making  a  contract  acts  in  disagreement  with 
its  charter,  where  it  is  a  simple  question  of  capacity  or 
authority  to  contract,  arising  either  on  a  question  of 
regularity  of  organization,  or  of  power  conferred  by  the 
charter,  a  party  who  has  had  the  benefit  of  the  agree- 
ment cannot  be  permitted,  in  an  action  founded  upon  it, 
to  question  its  validity.  It  would  be  in  the  highest  degree 
inequitable  and  unjust  to  permit  the  defendant  to  repu- 
diate a  contract  the  fruits  of  which  he  retains.  The  ex- 
ception referred  to  is  founded  upon  the  fact  that  the  con- 
tract, though  invalid,  has  been  executed  in  the  interests 
of  the  corporation,  and  for  its  benefit  and  advantage. 
Where,  therefore,  it  has  received  the  fruits  of  such  a  con- 
tract, it  cannot  refuse  payment  on  the  ground  that  it  had 
no  power  to  contract.  It  would  be  otherwise  if  the  con- 
tract had  not  been  executed."  (Decided  by  the  Supreme 
Court  in  the  case  of  Main  vs.  Casserly,  which  decision 
is  printed  in  Volume  97  of  the  California  Reports, 
page  127.) 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  717 

Section  964. — NOTICE  TO  CORPORATION. — The  president 
is  the  proper  person  to  whom  notice,  which  is  to  affect  a 
corporation,  is  to  be  given.  The  corporation  has  no  eyes, 
ears,  or  understanding,  save  through  its  agents.  The 
president  is  considered  the  head  of  the  corporation,  and 
it  is  his  duty  to  report  to  the  directors  information  affect- 
ing the  interests  of  the  corporation.  Therefore,  notice 
of  any  matter,  given  to  the  president,  is  notice  to  the 
corporation. 

Section  965. — LEASE  OP  FRANCHISE. — Where  a  cor- 
poration secures  a  franchise,  by  municipal  grant,  to 
operate  gas  and  electric  works,  and  to  supply  the  inhab- 
itants of  the  city  with  the  product,  it  cannot  lawfully  lease 
its  works  and  privileges  to  another,  and  such  a  lease, 
when  made,  is  against  public  policy  and  void.  The  reason 
for  this  is,  a  franchise  is  a  personal  privilege,  and  can 
never  be  assigned  without  the  consent  of  the  grantor. 
(Decided  by  the  Supreme  Court  in  the  case  of  Visalia 
Gas  and  Electric  Light  Company  vs.  Sims,  which  decision 
is  printed  in  Volume  104  of  the  California  Reports, 
page  326.) 

Section  966. — MORTGAGE  OF  CORPORATION  PROPERTY. — 
The  president  has  not  the  power  by  virtue  of  his  office 
to  mortgage  the  property  of  the  corporation.  Nor  has 
the  secretary  such  power  by  virtue  of  his  office.  Nor 
have  both  together  the  power  which  neither  has  sep- 
arately, nor  have  the  stockholders  such  power.  The 
powers  of  a  corporation  must  be  exercised,  and  its  prop- 
erty controlled,  by  its  board  of  directors,  the  decision  of 
a  majority  of  the  directors,  when  lawfully  assembled, 
being  valid  as  a  corporate  act.  A  mortgage  of  the  cor- 
poration property  can  only  be  made  by  authority  of  a 
resolution  of  the  board  of  directors,  adopted  by  a  ma- 
jority vote,  at  a  meeting  lawfully  held,  and  the  trans- 
action recorded  in  its  minutes.  If  there  is  no  resolution 


718  BUSINESS  LAW  FOR  BUSINESS  MEN. 

of  the  board  of  directors  authorizing  it,  a  mortgage  of 
the  corporation's  property,  though  executed  by  the 
proper  officers,  is  illegal  and  invalid. 

Section  967. — ASSIGNMENT  OF  ACCOUNTS. — In  the  con- 
veyance of  real  estate,  and  the  encumbrance  of  corpora- 
tion property  by  mortgage,  corporations  are  held  to  much 
narrower  rules  than  apply  to  the  transaction  of  its  or- 
dinary business  affairs.  It  is  not  contemplated  that  the 
Board  of  Directors  shall  meet  upon  every  occasion  when 
a  contract  is  to  be  made,  or  other  act  done,  in  the  ordinary 
conduct  of  the  business  of  the  company.  Therefore,  the 
president  or  general  manager  of  a  corporation  has  power 
to  assign  its  book  accounts  for  collection,  where  the  as- 
signment is  in  the  ordinary  course  of  its  business,  and 
known  to  and  acquiesced  in  by  the  directors,  and  such  a 
transaction  as  the  officers  have  been  in  the  habit  of  doing ; 
and  such  assignment  under  such  circumstances  will  be 
valid  without  previous  authorization  by  resolution  of  the 
board.  The  president  or  general  manager  may  also  have 
like  authority  to  make  assignments  of  notes  held  by  the 
corporation,  to  its  creditors,  either  in  payment  of  or  as 
security  for  the  payment  of  the  debt  of  the  corporation, 
without  express  authority  of  the  board  of  directors. 
(Decided  by  the  Supreme  Court  in  the  case  of  Greig  vs. 
Riordan,  which  decision  is  printed  in  Volume  99  of  the 
California  Reports,  page  316.) 

Section  968. — LIABILITY  OF  PROMOTERS. — A  promoter 
is  one  who  brings  about  the  incorporation  and  organiza- 
tion of  a  corporation;  who  brings  together  the  persons 
who  become  interested  in  the  enterprise,  aids  in  procuring 
subscriptions,  and  sets  in  motion  the  machinery  which 
results  in  the  formation  of  the  corporation.  A  promoter 
occupies  a  position  of  confidence  towards  those  whom  he 
induces  to  enter  into  the  enterprise.  And  if  a  promoter 
obtains  property  for  the  corporation,  and  transfers  the 
property  to  the  corporation  for  a  sum  which  he  falsely 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  719 

represents  to  be  the  cost  price,  but  which  is  really  much 
more,  he  will  be  liable  to  the  stockholders  for  the  profit 
made  by  him  through  his  deceit.  And  in  all  other  matters 
a  promoter  must  deal  fairly  and  openly  with  his  asso- 
ciates in  the  formation  of  a  corporation. 

Section  969. — WHAT  Is  A  CORPORATION  DE  FACTO.— 
It  sometimes  happens  that,  in  the  formation  of  a  cor- 
poration, many  of  the  acts  required  to  be  performed  in 
order  to  make  a  complete  organization  may  have  been 
irregularly  performed,  or  some  of  them  may  have  been 
entirely  omitted;  yet,  if  the  company  has  proceeded, 
claiming  in  good  faith  to  be  a  corporation  under  the  laws 
of  California,  and  is  doing  business  as  such  corporation, 
a  party  with  whom  it  transacts  business,  and  who  accepts 
the  benefit  of  its  acts,  cannot  deny  the  validity  of  its  in- 
corporation. For  it  is  termed  a  corporation  de  facto,  a 
company  in  fact  doing  the  business  in  good  faith  for 
which  it  was  designed,  although  not  organized  strictly  in 
accordance  with  law. 

Section  970. — WHO  MAY  QUESTION  THE  VALIDITY  OF  A 
CORPORATION. — The  question  of  the  due  incorporation  of 
any  company  claiming  in  good  faith  to  be  a  corporation 
under  the  laws  of  this  State,  and  doing  business  as  such 
corporation,  or  of  its  right  to  exercise  corporate  powers, 
cannot  be  inquired  into,  collaterally,  in  any  private  suit 
to  which  such  de  facto  corporation  may  be  a  party.  The 
State  alone,  through  its  Attorney-General,  has  power  to 
bring  a  suit  to  test  the  right  of  such  a  corporation  to 
exercise  corporate  powers. 

Section  971. — DENIAL  THAT  A  CORPORATION  EXISTS.— 
It  does  not  follow,  because  the  State  alone  can  question 
the  validity  of  a  corporation  or  -its  right  to  exercise  cor- 
porate powers,  when  the  company  claims  in  good  faith  to 
be  a  corporation  and  is  doing  business  as  such,  that  an 
individual  is  never  permitted  to  deny  the  corporate 


720  BUSINESS  LAW  FOB  BUSINESS  MEN. 

existence.  For  it  is  true  that,  whenever  a  corporation 
brings  a  suit  in  the  courts  of  this  State,  it  must  allege 
that  it  is  a  corporation,  and  the  defendant  may  deny  the 
fact,  and  then  the  corporation  must  prove  it.  And  if  it 
should  appear  that  a  body  of  men  had  met  and  declared 
that  they  constituted  themselves  a  corporation,  but 
neither  subscribed  to  the  capital  stock,  nor  adopted 
Articles  of  Incorporation,  nor  appointed  the  officers,  nor 
performed  any  act  in  the  organization  of  the  corporation 
required  by  law,  nor  transacted  any  business  as  a  cor- 
poration— in  such  a  case  the  court  would  declare,  even  in 
a  suit  between  private  parties,  that  there  was  no  incor- 
poration and  no  right  to  exercise  corporate  powers. 

Section  972. — STOCKHOLDER'S  RIGHT  TO  INSPECT  BOOKS 
AND  RECORDS. — The  stockholder  is  interested  in  all  the 
affairs  and  management  of  the  corporation.  He  is,  in 
one  sense,  a  part  owner  of  the  assets,  his  part  being 
represented  by  the  number  of  shares  owned  by  him. 
The  law  of  California,  recognizing  the  necessity  for  an 
inspection  by  the  stockholder  of  the  books  and  records, 
whenever  he  desires  to  do  so,  has  provided  that  all  cor- 
porations for  profit  must  keep  a  record,  among  other 
things,  of  all  their  business  transactions ;  and  that  such 
records  shall  always  be  open  to  the  inspection  of  any 
director,  member,  or  stockholder.  It  is  the  legal  right  of 
the  stockholder  to  inspect,  and  the  duty  of  the  officers  to 
allow  him  to  inspect,  at  all  times,  the  books  and  records 
of  the  corporation. 

Constitution  of  California,  Article  12,  Section 
14;  Civil  Code,  Section  377. 

Section  973. — MOTIVES  OF  STOCKHOLDER  IN  MAKING 
EXAMINATION  OF  BOOKS. — The  motives  of  the  stockholder 
in  demanding  the  right  to  make  an  examination  of  the 
books  of  the  corporation  will  make  no  difference.  He 
may  not  really  have  any  specific  interest  at  stake,  ren- 
dering his  inspection  necessary;  there  may  be  no  bene- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  721 

ficial  purpose  on  his  part  for  which  the  examination,  is 
desired;  he  may  wish  to  enforce  a  mere  naked  right,  or 
to  gratify  mere  idle  curiosity;  his  motives  may  in  fact 
be  improper,  and  he  may  be  seeking  to  gain  information 
of  a  secret  nature  with  the  object  of  furnishing  it  to  a 
rival  company  or  corporation,  to  the  injury  and  damage 
of  the  corporation  whose  books  he  examines;  but  none 
of  these  facts,  if  they  exist,  will  be  a  legal  excuse  for 
refusing  to  allow  a  shareholder,  however  small  his  in- 
terest, to  examine  the  books  and  records  of  the  corpora- 
tion. The  shareholder  is  not  required  to  show  any  reason 
or  occasion  for  making  the  examination,  nor  can  he  be 
met  with  the  defense  that  his  motives  are  improper. 
(Decided  by  the  Supreme  Court  in  the  case  of  Johnson 
vs.  Langdon,  which  decision  is  printed  in  Volume  135  of 
the  California  Eeports,  page  624.) 

Section  974. — LIABILITY  OF  STOCKHOLDER  FOR  FURNISH- 
ING INFORMATION  TO  EIVAL  CORPORATION. — When  it  be- 
comes known  to  the  officers  of  a  corporation  that  a  stock- 
holder has  made  an  examination  of  the  books  with  an 
improper  motive,  and  that  he  has  furnished  information 
thus  obtained  to  a  rival  corporation  or  company,  the  cor- 
poration he  has  so  injured  and  damaged  is  not  left  by 
the  law  without  a  remedy.  The  guilty  stockholder  cannot 
be  enjoined  from  inspecting  the  books,  nor  can  the  books 
be  lawfully  closed  to  him.  But,  by  thus  obtaining  and 
disclosing  information,  he  becomes  liable  in  damages  to 
the  corporation,  and  the  corporation  can  recover  a  judg- 
ment against  him  for  all  the  damages  which  are  occa- 
sioned to  it  by  his  conduct.  True,  he  may  not  be  finan- 
cially able  to  pay  the  amount  recovered,  and  the  judg- 
ment, when  obtained,  may  be  worthless ;  but  the  law  does 
not  take  these  matters  into  account;  and  a  suit  for 
damages  is  the  only  remedy  a  corporation  has  against 
its  own  stockholder  who  examines  its  books  with  an  im- 
proper motive  and  for  the  purpose  of  injuring  it. 


722  BUSINESS  LAW  FOB  BUSINESS  MEN. 

Section  975. — EEMEDY  OF  STOCKHOLDER  WHEN  INSPEC- 
TION OF  BOOKS  Is  EEFUSED. — If  a  stockholder  applies  to 
the  officer,  generally  the  secretary,  in  charge  of  the  books, 
and  demands  the  right  to  make  an  examination,  his 
remedy  upon  refusal  is  to  apply  to  the  Superior  Court 
of  the  county  for  a  writ  of  mandate.  The  shareholder 
has  a  right  to  be  fully  informed  as  to  the  conditions  of 
the  corporation,  the  manner  in  which  its  affairs  are  con- 
ducted, and  how  the  capital  to  which  he  has  contributed 
is  employed  and  managed.  And  if  an  examination  of 
the  books  is  refused  him,  upon  showing  this  fact  in  a 
petition  to  the  Superior  Court,  together  with  the  fact 
that  he  is  a  stockholder,  the  law  requires  the  court  to 
issue  a  writ  commanding  the  officers  of  the  corporation 
to  open  its  books,  records,  and  journals  to  his  examina- 
tion and  inspection. 

Section  976. — LIABILITY  OF  STOCKHOLDER  FOR  CORPORA- 
TION DEBTS. — The  law  of  California  imposes  upon  each 
stockholder  the  burden  of  paying  the  debts  of  the  cor- 
poration. Each  stockholder  is  individually  and  per- 
sonally liable  for  such  proportion  of  the  debts  of  the 
corporation  as  the  amount  of  stock  owned  by  him  bears 
to  the  whole  of  the  subscribed  capital  stock.  That  is,  if 
a  person  owns  shares  of  stock  to  the  amount  of  $10,000, 
and  the  subscribed  capital  stock  is  $100,000,  he  will  be 
individually  and  personally  liable  for  the  one-tenth  part 
of  the  debts  of  the  corporation.  It  will  make  no  differ- 
ence in  his  liability  whether  the  subscriptions  have  been 
paid  in  or  not;  for  his  proportion  is  measured,  not  by 
the  capital  actually  paid  in,  but  by  the  capital  stock  sub- 
scribed. If  debts  or  claims  are  owing  by  or  presented  to 
a  corporation,  the  stockholder  is  liable  only  for  his  pro- 
portion of  such  debts  or  claims.  It  will  make  no  differ- 
ence, either,  whether  the  corporation  is  a  domestic  or 
foreign  corporation ;  the  liability  of  their  stockholders  in 
California  is  the  same.  The  liability  of  a  stockholder  is 
not  released  by  any  subsequent  transfer  of  stock,  and 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  723 

such  transfer  will  not  free  him  from  responsibility  on 
account  of  a  debt  incurred  by  the  corporation  while  he 
was  a  stockholder. 

Civil  Code,  Section  322. 

Section  977. — LIABILITY  OF  MEMBER  WHERE  THERE  Is 
No  CAPITAL  STOCK. — In  corporations  having  no  capital 
stock,  each  member  is  individually  and  personally  liable 
for  his  proportion  of  its  debts  and  liabilities.  His  lia- 
bility is  to  be  measured  by  a  comparison  of  the  amount 
of  the  debt  with  the  number  of  members ;  and,  therefore, 
if  the  corporation  owes  $10,000,  and  there  are  ten  mem- 
bers, each  will  be  liable  for  the  one-tenth  part  of  the  debt, 
or  $1,000. 

Civil  Code,  Section  322. 

Section  978. — PLEDGEE  OR  TRUSTEE  NOT  LIABLE  FOR 
DEBTS. — A  person  who  holds  stock  as  collateral  security 
does  not  become,  by  reason  of  the  pledge,  liable  for  the 
debts  of  the  corporation ;  but  the  pledger  remains  liable 
as  before  the  pledge.  A  person  holding  stock  merely 
as  a  trustee  does  not  become,  in  such  representative 
capacity,  liable  for  the  debts  of  the  corporation;  but  the 
person  he  represents  as  trustee  is  deemed  the  stockholder, 
as  respects  such  liability. 

Civil  Code,  Section  322. 

Section  979. — WHEN  LIABILITY  OF  STOCKHOLDER  BE- 
GINS.— The  liability  of  a  stockholder  for  the  debts  of  the 
corporation  begins  when  he  acquires  his  stock.  He  is 
not  liable  for  the  debts  of  the  corporation  incurred  before 
he  acquired  his  stock.  For  instance,  to  make  a  stock- 
holder liable  to  pay  his  proportion  of  the  amount  due  on 
a  note  made  by  the  corporation,  it  must  appear  that  the 
debt  for  which  the  note  was  given  was  incurred  since  he 
became  a  stockholder.  For  if  a  corporation  buys  goods, 
before  the  stockholder  acquires  his  stock,  and  afterwards 
makes  its  note  for  the  amount,  that  stockholder  is  not 


724  BUSINESS  LAW  FOB  BUSINESS  MEN. 

liable  on  the  note,  because  it  was  made  for  a  debt  incurred 
prior  to  the  time  when  he  became  a  stockholder.  The 
stockholder's  liability  begins  with  the  creation  of  the 
original  debt,  and  the  debt  must  be  incurred  while  he  is 
a  stockholder,  and  not  before;  for  otherwise,  he  is  not 
liable  at  all.  (Decided  by  the  Supreme  Court  in  the  case 
of  Winona  Wagon  Company  vs.  Bull,  which  decision  is 
printed  in  Volume  108  of  the  California  "Reports,  page  1.) 

Section  980. — FRAUDULENT  TRANSFER. — The  question 
sometimes  arises  whether,  when  a  corporation  becomes 
insolvent,  and  unable  to  pay  its  debts  as  they  become  due 
in  the  ordinary  course  of  business,  a  stockholder  can 
transfer  his  shares  to  another  and  thus  be  rid  of  liability 
for  the  debts  of  the  concern.  The  Supreme  Court,  in  the 
case  of  Welch  vs.  Sargent,  said  on  this  point:  " Gen- 
erally speaking,  the  law  places  no  restriction  upon  the 
right  of  a  stockholder  of  a  corporation  to  transfer  his 
stock,  so  long  as  the  corporation  is  solvent.  But  after  the 
corporation  has  become  insolvent,  and  the  stockholder 
knows  this,  a  shareholder  cannot  transfer  his  stock  to 
irresponsible  parties  so  as  to  relieve  himself  from  lia- 
bility to  the  creditors."  It  matters  not  what  his  inten- 
tion was,  for  he  may  have  transferred  the  stock  in  good 
faith,  yet  the  law  will  still  protect  the  creditors  of  an 
insolvent  corporation  by  holding  such  a  transfer  void  as 
to  them.  (Decided  by  the  Supreme  Court  in  the  case  of 
Welch  vs.  Sargent,  which  decision  is  printed  in  Volume 
127  of  the  California  Eeports,  page  72.) 

Section  981. — STOCKHOLDER  MAY  SUE  OTHER  STOCK- 
HOLDERS.— A  stockholder  may  sue  other  stockholders  in 
the  same  corporation  for  their  pro  rata  of  a  debt  due 
him  by  the  corporation.  (Decided  by  the  Supreme  Court 
in  the  case  of  Brown  vs.  Merrill,  which  decision  is  printed 
in  Volume  107  of  the  California  Eeports,  page  446.) 


BUSINESS  CONTEACTS  AND  LEGAL  OBLIGATIONS.  Y25 

Section  982. — ASSIGNEE  OF  CREDITOR  MAY  SUE  STOCK- 
HOLDERS.— The  creditor  of  a  corporation  may  assign  his 
account  for  collection,  and  the  assignee  will  have  the  right 
to  sue  the  stockholders  in  Ids  own  name.  It  is  no  defense, 
in  a  suit  against  stockholders,  that  the  assignee,  instead 
of  the  original  creditor,  brings  the  suit  to  collect  the 
amount  of  the  debt. 

Section  983. — CREDITOR'S  EIGHT  TO  UNPAID  SUBSCRIP- 
TIONS.— Debts  due  to  a  corporation  constitute  a  portion 
of  its  assets,  and  may  be  reached  by  creditors.  Among 
these  are  unpaid  subscriptions  to  stock.  As  to  creditors, 
the  corporation  is  presumed  to  have  sought  credit  based 
on  its  supposed  capital,  actually  paid  in  or  due  from  its 
stockholders.  As  the  supposed  capital  is  the  sole  basis 
of  credit,  the  stockholders,  who  are  the  real  parties  carry- 
ing on  the  business,  must  make  the  representation  as  to 
its  capital  good;  and  a  corporation  cannot  release  the 
obligations  of  stockholders  to  pay  up  its  unpaid  sub- 
scriptions, and  thus  evade  the  payment  of  creditors. 
And  the  creditors  may  bring  a  suit  to  collect  the  unpaid 
balance  due  on  stock  of  a  corporation  which  has  become 
insolvent. 

Section  984. — WITHIN  WHAT  TIME  SUIT  AGAINST 
STOCKHOLDER  MUST  BE  COMMENCED. — A  suit  against  a 
stockholder  by  a  creditor  of  a  corporation  must  be  com- 
menced within  three  years  after  the  cause  of  action 
accrues.  If  a  corporation  owes  a  debt,  and  the  creditor 
wishes  to  sue  a  stockholder  for  his  proportion  of  the 
amount  due,  he  must  sue  within  three  years  after  the 
debt  was  created,  or  the  liability  of  the  stockholder  will 
be  barred.  And  in  this  connection  it  has  been  decided 
that  the  liability  of  the  stockholder  cannot  be  renewed  or 
extended  by  any  renewal  or  extension  of  the  indebtedness 
which  the  creditor  may  make  with  the  corporation. 
(Decided  by  the  Supreme  Court  in  the  case  of  Hyman  vs. 
Coleman,  which  decision  is  printed  in  Volume  82  of  the 


726  BUSINESS  LAW  FOB  BUSINESS  MEN. 

California  Reports,  page  650.)  The  liability  of  the  stock- 
holder is  created  and  exists  by  statute.  The  liability 
arises  when  a  debt  is  contracted  by  the  corporation.  The 
liability  is  limited  to  three  years  from  the  time  it  arises, 
and  the  corporation  has  no  power  to  extend  that  limita- 
tion without  direct  authority  from  the  stockholders. 
Therefore,  if  a  debt  is  owing  to  a  corporation,  and  the 
corporation  afterwards  takes  a  note  from  the  debtor,  the 
liability  of  the  stockholder  does  not  begin  when  the  note 
is  given,  but  dates  back  to  the  time  when  the  debt  was 
created.  (Decided  by  the  Supreme  Court  in  the  case  of 
Hunt  vs.  Ward,  which  decision  is  printed  in  Volume  99 
of  the  California  Eeports,  page  612.) 

Code  of  Civil  Procedure,  Section  359. 

Section  985. — WHEN  LIABILITY  OF  STOCKHOLDER  Is 
SATISFIED. — Each  stockholder  has  a  several  liability,  and 
that  liability  is  proportionate  to  the  amount  of  his  stock ; 
and  when  he  has  paid  his  portion  of  any  debt,  or  of  all 
the  debts  of  the  corporation,  he  is  freed  from  all  liability 
on  that  account. 

Section  986. — LIABILITY  OF  STOCKHOLDERS  IN  DISTIL- 
LERY FOR  FEDERAL  TAXES. — Every  stockholder  in  a  cor- 
poration possessing  a  still,  distillery,  or  distilling  ap- 
paratus, is  individually  and  personally  liable  to  the 
United  States  for  the  taxes  imposed  on  the  liquors  dis- 
tilled. His  individual  property,  although  in  no  way  con- 
nected with  the  business  of  such  corporation,  may  be 
seized  and  distrained  for  Federal  taxes  due  on  spirits 
produced  by  it.  (Decided  by  the  Supreme  Court  in  the 
case  of  Richter  vs.  Blasingame,  which  decision  is  printed 
in  Volume  110  of  the  California  Reports,  page  530.) 

Section  987. — HOLDING  PROPERTY  IN  OTHER  COUNTIES. 
A  corporation  acquiring  or  holding  property  in  a  county 
other  than  its  principal  place  of  business  must  file  in  the 
office  of  the  County  Clerk  of  such  county  a  certified  copy 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  727 

of  its  Articles  of  Incorporation.    The  copy  must  be  cer- 
tified by  the  Secretary  of  State. 
Civil  Code,  Section  299. 

Section  988. — WITHIN  WHAT  TIME  CORPORATION  MUST 
COMMENCE  BUSINESS. — A  corporation  must  organize,  by 
the  election  of  a  Board  of  Directors,  and  must  commence 
business,  within  one  year  from  the  date  of  its  certificate 
of  incorporation.  If  it  does  not  do  so,  or,  if  organized 
for  the  construction  of  any  particular  works,  it  fails  to 
commence  the  construction  of  its  works  within  one  year, 
any  creditor  may  complain  to  the  Attorney-General,  who 
will  begin  a  suit  in  the  name  of  the  State  and  have  the 
Court  declare  the  corporate  existence  forfeited  and  at 
an  end. 

Statutes  of  1901,  page  632. 

Section  989. — LIABILITY  OF  PURCHASER  OF  SUBSCRIPTION 
STOCK. — A  purchaser  of  stock  of  a  corporation,  in  good 
faith  and  for  a  valuable  consideration,  from  an  original 
subscriber,  who  has  not  paid  the  full  subscription  price 
thereof,  is  liable  for  the  unpaid  subscription,  where  such 
non-payment  appears  from  the  books  of  the  corporation, 
notwithstanding  that  he  has  no  actual  notice  or  knowl- 
edge of  the  same  and  it  is  represented  to  him  by  the 
president  of  the  corporation  and  other  sellers  of  stock 
that  the  same  was  fully  paid  for  and  it  so  appears  on  the 
face  of  the  certificates.  Such  representation  made  by 
the  president  of  a  corporation  are  not  binding  upon  it, 
without  proof  of  express  authority  to  make  them,  nor  is 
the  right  of  the  corporation  to  require  full  payment  of 
the  subscription  price  affected  by  such  representations 
made  by  the  other  original  subscribers. 

When  the  transferees  of  subscription  stock  cause  the 
transfer  to  be  recorded  on  the  books  of  the  corporation, 
they  become  liable  for  the  unpaid  subscription  price 
thereof,  and  no  express  promise  on  their  part  to  assume 
or  pay  the  same  is  necessary. 


728  BUSINESS  LAW  FOE  BUSINESS  MEN. 

In  this  State  certificates  of  stock  are  not  negotiable 
instruments,  but  mere  evidence  of  the  holder's  right  to 
a  given  share  in  the  franchise  and  property  of  the  cor- 
poration, and  a  purchaser  takes  them  subject  to  all 
equities  in  favor  of  the  corporation. 

Unpaid  subscriptions  for  stock  are  assets  in  bank- 
ruptcy, in  the  event  of  the  insolvency  of  the  corporation, 
and  recoverable  by  the  trustees. 

The  amount  due  from  stockholders  for  subscribed 
stock  is  a  trust  fund  for  the  creditors  of  the  corporation, 
and  such  unpaid  subscriptions  are  a  part  of  its  assets, 
and  may  be  collected  by  its  creditors. 

(Decided  by  the  Supreme  Court  of  California,  in  the 
case  of  Perkins  vs.  Cowles,  which  decision  is  printed  in 
Volume  XXXIX  of  California  Decisions,  page  397.) 

Section  990. — FAILURE  TO  ELECT  OFFICERS. — If  a  cor- 
poration does  organize  within  one  year,  but  neglects  and 
fails,  for  two  years  thereafter,  to  elect  a  President,  Secre- 
tary, Cashier,  or  any  necessary  officers,  and  to  transact 
in  regular  order  the  business  for  which  it  was  incor- 
porated, its  corporate  powers  cease  and  it  will  be 
dissolved. 

Statutes  of  1901,  page  632. 

Section  991. — INCREASE  OF  CAPITAL  STOCK. — A  cor- 
poration may  increase  its  capital  stock,  at  any  time,  and 
the  law  provides  what  must  be  done  when  an  increase  of 
stock  is  desired.  To  increase  the  capital  stock,  a  meet- 
ing of  the  stockholders  must  be  called  for  that  purpose 
by  a  resolution  of  the  Directors.  A  notice  must  be  pub- 
lished in  a  newspaper,  once  a  week,  for  at  least  sixty 
days,  stating  that  the  object  of  the  meeting  is  to  vote  on 
the  question  of  increasing  the  capital  stock ;  the  amount 
to  which  it  is  proposed  to  increase  the  capital;  and  the 
time  and  place  of  holding  the  meeting.  The  meeting 
must  be  held  at  the  principal  place  of  business  of  the  cor- 
poration and  in  the  building  where  the  Directors  usually 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  729 

meet.  In  addition  to  the  notice  by  publication,  the  Secre- 
tary must  also  address  a  copy  of  the  notice  to  each  of  the 
stockholders  whose  names  appear  on  the  company's 
books,  at  his  place  of  residence,  if  known ;  and  if  the  resi- 
dence of  the  stockholder  is  not  known,  the  notice  must 
be  addressed  to  him  at  the  place  where  the  company  has 
its  principal  place  of  business;  and  the  notice  must  be 
mailed  to  each  stockholder  at  least  thirty  days  before  the 
day  appointed  for  the  meeting.  When  the  meeting  takes 
place,  two-thirds  of  the  subscribed  or  issued  stock  must 
be  voted  in  favor  of  the  proposition  to  increase  the  capital 
stock,  in  order  to  carry  it. 

Statutes  of  1903,  page  347. 

Section  992. — DECREASE  OF  CAPITAL  STOCK. — The  capi- 
tal stock  of  a  corporation  may  be  decreased  in  either  one 
of  two  ways.  It  may  be  decreased  by  a  vote  of  the  stock- 
holders, at  a  meeting  for  the  purpose,  held  in  the  same 
manner  and  after  similar  notice  as  a  meeting  for  increase 
of  stock.  The  notice  must  state  the  amount  of  the  de- 
crease proposed,  and  the  proposed  decrease  must  be 
carried  by  a  vote  representing  at  least  two-thirds  of  the 
subscribed  or  issued  capital  stock.  The  law  provides  a 
second  mode  of  decreasing  the  capital  stock.  A  corpora- 
tion may  diminish  its  capital  stock  by  the  unanimous  vote 
of  its  Board  of  Directors,  at  a  regular  meeting,  or  at  a 
special  meeting  called  for  that  purpose,  and  approved  by 
the  written  assent  of  stockholders  holding  two-thirds  of 
the  subscribed  or  issued  capital  stock.  The  written 
assent  of  the  stockholders  must  be  filed  with  the  Secre- 
tary. The  Secretary,  as  soon  as  the  resolution  of  the 
Directors  is  passed  providing  for  the  decrease,  must  send 
a  copy  of  the  resolution  to  each  stockholder  whose  name 
appears  on  the  company's  books;  he  must  send  by  mail, 
postage  prepaid,  addressed  to  the  known  place  of  resi- 
dence of  the  stockholder,  or  to  the  principal  place  of  busi- 
ness of  the  corporation,  if  the  residence  of  the  stockholder 


730  BUSINESS  LAW  FOB  BUSINESS  MEN. 

is  not  known;  and  the  copy  of  the  resolution  must  be 
mailed  to  each  stockholder  at  least  thirty  days  before  the 
certificate  mentioned  in  the  following  section  is  made  and 
filed.  Within  the  thirty  days  any  stockholder  may  file 
with  the  Secretary  his  dissent  in  writing.  The  capital 
stock  cannot  be  decreased  to  an  amount  less  than  the  in- 
debtedness of  the  corporation. 

Statutes  of  1903,  page  348. 

Section  993. — CERTIFICATE  OF  INCREASE  OR  DECREASE  OF 
CAPITAL  STOCK. — If  capital  stock  is  increased  or  de- 
creased by  a  vote  of  the  stockholders,  a  certificate,  signed 
and  verified  by  the  President  and  Secretary  and  a 
majority  of  the  Directors,  and  with  the  corporate  seal 
attached,  must  be  filed  in  the  office  of  the  County  Clerk, 
and  a  certified  copy  must  be  filed  in  the  office  of  the  Secre- 
tary of  State.  The  certificate  must  show  that  all  the 
requirements  of  the  law  have  been  complied  with;  also, 
the  amount  to  which  the  capital  stock  has  been  increased 
or  diminished;  the  amount  of  stock  represented  at  the 
meeting,  and  the  total  vote  in  the  affirmative,  and  the 
total  vote  in  the  negative;  and  the  total  number  of  sub- 
scribed or  issued  shares  of  capital  stock  of  the  corpora- 
tion. If  the  stock  is  decreased  by  a  vote  of  the  Directors, 
a  similar  certificate  must  be  filed,  which  must  show,  also, 
the  total  amount  of  stock  represented  by  the  written 
assents  and  the  written  dissents  filed  with  the  Secretary. 
Statutes  of  1903,  page  349. 

Section  994. — PAPER  IN  WHICH  NOTICES  MUST  BE 
PUBLISHED. — When  the  by-laws  of  a  corporation  pre- 
scribe the  paper  in  which  notices  of  meetings  of  Directors 
or  stockholders  are  to  be  published,  such  notices  must  be 
published  in  that  paper.  If  the  by-laws  do  not  prescribe 
any  particular  paper,  the  Directors  may  select  the  paper 
in  which  the  notices  may  be  published. 

Section  995. — ASSESSMENT  OF  STOCK. — The  Directors 
of  any  corporation  in  California,  after  one-fourth  of  its 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  731 

capital  stock  has  been  subscribed,  may,  for  the  purpose 
of  paying  expenses,  conducting  business,  or  paying  debts, 
levy  and  collect  assessments  upon  the  subscribed  capital 
stock. 

Civil  Code,  Section  331. 

Section  996. — AMOUNT  OF  ASSESSMENT. — The  law  pro- 
vides generally  that  no  one  assessment  must  exceed  ten 
per  cent  of  the  capital  stock  named  in  the  Articles  of  In- 
corporation. To  this  general  provision  there  are  three 
exceptions,  viz. :  (1)  If  the  whole  capital  of  a  corporation 
has  not  been  paid  up,  and  the  corporation  is  unable  to 
meet  its  liabilities  or  to  satisfy  the  claims  of  its  creditors, 
the  assessment  may  be  for  the  full  amount  unpaid  upon 
the  capital  stock;  or  if  a  less  amount  is  sufficient,  then 
it  may  be  for  such  a  percentage  as  will  raise  that  amount ; 
(2)  The  Directors  of  railroad  corporations  may  assess 
the  capital  stock  in  installments  of  not  more  than  ten  per 
cent  per  month,  unless  their  Articles  of  Incorporation 
provide  otherwise ;  and  (3)  the  Directors  of  fire  or  marine 
insurance  corporations  may  assess  such  a  percentage  of 
the  capital  stock  as  they  deem  proper. 
Civil  Code,  Section  332. 

Section  997. — ORDER  LEVYING  ASSESSMENT. — The  as- 
sessment must  be  levied  by  an  order  of  the  Board  of 
Directors.  Every  order  levying  an  assessment  must 
specify  the  amount  thereof,  to  whom,  and  where  payable ; 
fix  a  day,  subsequent  to  the  full  term  of  publication  of 
the  assessment  notice,  on  which  the  unpaid  assessments 
shall  be  delinquent,  not  less  than  thirty  nor  more  than 
sixty  days  from  the  time  of  making  the  order  levying  the 
assessment;  and  a  day  for  the  sale  of  delinquent  stock, 
not  less  than  fifteen  nor  more  than  sixty  days  from  the 
day  the  stock  is  declared  delinquent. 
Civil  Code,  Section  334. 

Section  998. — LEVY  OF  ASSESSMENT. — The  right  to  levy 
an  assessment  upon  the  capital  stock  of  a  corporation 


732  BUSINESS  LAW  FOR  BUSINESS  MEN. 

can  only  be  legally  exercised  in  the  manner  provided  by 
law  or  by  the  charter  of  the  corporation. 

(a)  Levy  Must  Be  Made  at  Regular  or  Specially 
Catted  Meeting. — An  assessment  upon  the  capital  stock  of 
a  corporation  can  be  levied  only  at  a  regular  meeting  or 
at  a  special  meeting  regularly  called. 

(b)  Adjournment  of  Time  of  Holding  Regular  Meet- 
ing Toy  Minority  of  Directors  to  Future  Day  Not  a  Regu- 
lar Meeting — Assessment  Levied  at  Such  Meeting  Void.— 
An  assessment  levied  by  a  majority  of  a  board  of  direc- 
tors of  a  corporation  in  the  absence  and  without  the 
knowledge  of  the  minority  of  the  board,  at  a  time  to 
which  the  regular  monthly  meeting  of  the  board  had 
been  adjourned  by  a  minority  of  the  board  present  on  the 
day  of  the  regular  meeting,  on  account  of  the  absence  of 
a  quorum,  is  void,  as  such  meeting  is  neither  a  regular 
meeting  nor  a  specially  called  meeting. 

(c)  Directors'  Meetings — Adjournment  by  Minority 
Unauthorized. — There  is  no  provision  of  the  Code  author- 
izing a  meeting  of  the  directors  of  a  corporation  to  be 
adjourned  by  a  minority,  and  such  act  is  invalid  under 
the  express  provision  of  Section  305  of  the  Civil  Code. 

(Decided  by  the  California  District  Court  of  Appeals, 
in  the  case  of  Raisch  vs.  M.  K.  &  T.  Oil  Co.,  which  de- 
cision is  printed  in  California  Apellate  Decisions,  Volume 
6,  No.  284,  page  403.) 

Section  999. — NOTICE  OP  ASSESSMENT. — A  notice  of  the 
assessment  must  be  published  by  the  Secretary,  once  a 
week  for  four  successive  weeks,  in  a  newspaper  published 
at  the  principal  place  of  business,  if  there  be  one,  or,  if 
there  is  none,  then  the  notice  must  be  published  in  some 
other  newspaper  in  the  county.  If  the  principal  place 
of  business  is  in  one  county,  and  the  works  of  the  com- 
pany in  another,  the  notice  must  be  published  in  both 
counties  for  the  same  length  of  time.  Also,  the  notice 
must  either  be  personally  served  upon  each  stockholder, 
or  sent  through  the  mail  addressed  to  him.  If  the  stock- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  733 

holder's  address  is  known,  the  notice  must  be  mailed 
there ;  but  if  the  address  is  not  known,  it  is  sufficient  to 
mail  the  notice  to  him  at  the  principal  place  of  business 
of  the  corporation. 

Civil  Code,  Section  336. 

Section  1000. — FORM  OF  NOTICE  OF  ASSESSMENT. — The 
notice  of  assessment,  mentioned  in  the  preceding  section, 
must  be  substantially  in  the  following  form : 

NOTICE  OF  ASSESSMENT. 

WILLITS  STATE  BANK. — Location  of  principal  place  of 
business,  Willits,  Mendocino  County,  State  of  California. 
Notice  is  hereby  given,  that  at  a  meeting  of  the  Directors, 

held  on  the day  of ,  19 , 

an  assessment  of per  share  was 

levied  upon  the  capital  stock  of  the  corporation,  payable 
on  the day  of ,  19 ,  to  the  Secre- 
tary of  said  Willits  State  Bank,  at  his  office  in  said  bank 
in  Willits,  Mendocino  County,  State  of  California.  Any 
stock  upon  which  this  assessment  shall  remain  unpaid  on 

the day  of ,  19 ,  will  be  delinquent 

and  advertised  for  sale  at  public  auction,  and,  unless  pay- 
ment is  made  before,  will  be  sold  on  the day 

of ,  19 ,  to  pay  the  delinquent  assess- 
ment, together  with  costs  of  advertising  and  expenses 
of  sale. 

Secretary. 
Office  at  Willits  State  Bank,  Main  Street, 

Willits,  California. 

Section  1001. — How  ASSESSMENT  MAY  BE  ENFORCED.— 
The  law  provides  two  methods  for  the  enforcement  of 
the  liabilities  of  stockholders  to  the  corporation,  by 
reason  of  assessment  levied  upon  the  capital  stock — one 
by  a  sale  of  the  stock  for  the  delinquent  assessment ;  the 
other  by  a  suit  against  the  stockholder  to  recover  from 


734  BUSINESS  LAW  FOB  BUSINESS  MEN. 

him  the  amount  of  the  assessment.  The  Board  of  Direc- 
tors has  the  option  to  adopt  one  or  the  other  method  of 
enforcing  the  payment  of  an  assessment  on  stock  lawfully 
levied. 

Civil  Code,  Section  349. 

Section  1002. — NOTICE  OF  SALE. — If  any  portion  of  the 
assessment  remains  unpaid,  on  the  day  named  in  the 
notice  for  declaring  the  stock  delinquent,  the  Secretary 
must,  if  the  Directors  elect  to  have  the  stock  sold,  pub- 
lish a  notice  of  sale  in  the  same  paper  in  which  the  delin- 
quent notice  was  published.  The  notice,  when  published 
in  a  daily  paper,  must  be  published  for  ten  days,  ex- 
cluding Sundays  and  holidays,  previous  to  the  day  of 
sale.  When  published  in  a  weekly  paper,  it  must  be  pub- 
lished in  each  issue  for  two  weeks  previous  to  the  day 
of  sale.  The  first  publication  of  all  delinquent  sales  must 
be  at  least  fifteen  days  prior  to  the  day  of  sale.  The 
notice  must  specify  every  certificate  of  stock,  the  number 
of  shares  it  represents,  and  the  amount  due  thereon, 
except  where  certificates  may  not  have  been  issued  to 
parties  entitled  thereto,  in  which  case  the  number  of 
shares  and  amount  due  thereon,  together  with  the  fact 
that  the  certificates  for  such  shares  have  not  been  issued, 
must  be  stated. 

Civil  Code,  Sections  338,  339. 

Section  1003. — FORM  OF  NOTICE  OF  SALE. — The  follow- 
ing is  a  form  of  the  notice  of  sale  mentioned  in  the 
preceding  section: 

NOTICE  OF  SALE  OF  STOCK  FOE  DELINQUENT 
ASSESSMENT. 

WILLITS  STATE  BANK. — Location  of  principal  place  of 
business,  Willits,  Mendocino  County,  State  of  California. 
Notice  is  hereby  given,  that  there  is  delinquent  upon  the 
following  described  stock  of  the  corporation,  on  account 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  735 

of  assessment  levied  on  the day  of , 

19 ,  the  several  amounts  set  opposite  the  names  of  the 

respective  shareholders,  as  follows :  (Here  insert  names, 
number  of  certificate,  number  of  shares,  and  amount.) 
And  in  accordance  with  law,  and  an  order  of  the  Board  of 

Directors  made  on  the day  of. ,  19 , 

so  many  shares  of  each  parcel  of  such  stock  as  may  be 
necessary  will  be  sold,  at  public  auction,  at  the  office  of 
the  Secretary  of  said  corporation,  at  the  Willits  State 
Bank,  Main  Street,  Willits,  Mendocino  County,  State  of 

California,  on  the day  of ,  19 ,  at 

10  o'clock  A.  M.  of  that  day,  to  pay  delinquent  assess- 
ments thereon,  together  with  costs  of  advertising  and 
expenses  of  the  sale. 


Secretary. 

Office  at  Willits  State  Bank,  Main  Street,  Willits,  Mendo- 
cino County,  State  of  California. 

Section  1004. — WHO  ARE  LIABLE  ON  ASSESSMENTS.— 
For  the  purpose  of  ascertaining  those  who  are  liable  to 
it  for  the  amount  of  an  assessment,  a  corporation  can 
only  look  to  the  list  of  stockholders  as  their  names  are 
registered  upon  its  books.  Where  an  assignment  of  stock 
is  made  after  the  levy  of  an  assessment,  but  no  formal 
transfer  is  made  on  the  books  of  the  company,  the 
assignor  is  still  liable  on  the  assessment.  Where  stock 
has  been  assigned,  and  a  transfer  of  the  stock  has  been 
duly  made  on  the  books  of  the  company,  the  assignee 
becomes  liable  on  assessments. 

Section  1005. — EXTENSION  OF  TIME  FOR  PAYMENT  AND 
SALE. — The  dates  fixed  in  any  notice  of  assessment  or 
notice  of  delinquent  sale  may  be  extended  from  time  to 
time  for  not  more  than  thirty  days,  by  order  of  the 
Directors,  or  by  the  Secretary  when  a  delinquent  sale 
is  restrained  by  a  court,  entered  on  the  records  of  the 
corporation ;  but  no  order  extending  the  time  for  the  per- 
formance of  any  acts  specified  in  any  notice  is  effectual 


736  BUSINESS  LAW  FOR  BUSINESS  MEN. 

unless  notice  of  such  extension  or  postponement  is  ap- 
pended to  and  published  with  the  notice  to  which  the 
order  relates. 

Civil  Code,  Section  345. 

Section  1006. — SALE  OF  STOCK  FOR  ASSESSMENT. — By 
the  publication  of  the  notice,  the  corporation  acquires 
jurisdiction  to  sell  and  convey  a  perfect  title  to  all  of  the 
stock  described  in  the  notice  of  sale  upon  which  any  por- 
tion of  the  assessment  or  cost  of  advertising  remains 
unpaid  at  the  hour  appointed  for  the  sale,  but  must  sell 
no  more  of  such  stock  than  is  necessary  to  pay  the  assess- 
ments due  and  costs  of  sale.  On  the  day,  at  the  place,  and 
at  the  time  appointed  in  the  notice  of  sale,  the  Secretary 
must,  unless  otherwise  ordered  by  the  Directors,  sell  or 
cause  to  be  sold  at  public  auction,  to  the  highest  bidder 
for  cash,  so  many  shares  of  each  parcel  of  the  described 
stock  as  may  be  necessary  to  pay  the  assessments  and 
charges  thereon,  according  to  the  terms  of  sale;  if  pay- 
ment is  made  before  the  time  fixed  for  sale,  the  party 
paying  is  only  required  to  pay  the  actual  cost  of  adver- 
tising, in  addition  to  the  assessments.  The  person  offer- 
ing at  such  sale  to  pay  the  assessment  and  costs  for  the 
smallest  number  of  shares  or  fraction  of  a  share  is  the 
highest  bidder,  and  the  stock  purchased  must  be  trans- 
ferred to  him  on  the  stock  books  of  the  corporation,  on 
payment  of  the  assessment  and  costs. 

Civil  Code,  Sections  340,  341,  342. 

Section  1007. — PURCHASE  OF  DELINQUENT  STOCK  BY 
THE  CORPORATION. — If,  at  the  sale  of  stock,  no  bidder  of- 
fers the  amount  of  the  assessments  and  charges  due,  the 
same  may  be  bid  in  and  purchased  by  the  corporation, 
through  the  Secretary,  President,  or  any  Director,  at  the 
amount  of  the  assessments,  costs,  and  charges  due;  and 
the  amount  of  the  assessments,  costs,  and  charges  must 
be  credited  as  paid  in  full  on  the  books  of  the  corporation, 
and  entry  of  the  transfer  of  the  stock  to  the  corporation 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  737 

must  be  made  on  the  books.  While  the  stock  remains  the 
property  of  the  corporation,  it  is  not  assessable,  nor  must 
any  dividends  be  declared  thereon;  but  all  assessments 
and  dividends  must  be  apportioned  upon  the  stock  held  by 
the  stockholders  of  the  corporation.  All  purchases  of  its 
own  stock  made  by  any  corporation  vest  the  legal  title  to 
the  stock  in  the  corporation;  and  the  stock  so  purchased 
is  held  subject  to  the  control  of  the  stockholders,  who  may 
make  such  disposition  of  the  same  as  they  deem  fit,  in  ac- 
cordance with  the  by-laws  of  the  corporation  or  the  vote 
of  a  majority  of  all  the  remaining  shares.  Whenever  any 
portion  of  the  capital  stock  of  a  corporation  is  held  by  the 
corporation  by  purchase,  a  majority  of  the  remaining 
shares  is  a  majority  of  the  stock,  for  all  purposes  of  elec- 
tion, or  voting  on  any  question  at  a  stockholders'  meeting. 
Civil  Code,  Sections  343,  344. 

Section  1008. — SUIT  TO  EECOVEE  AMOUNT  OF  ASSESS- 
MENT.— On  the  day  specified  for  declaring  the  stock  de- 
linquent, or  at  any  subsequent  time  before  the  sale  of  the 
delinquent  stock,  the  Board  of  Directors  may  order  all 
such  proceedings  stopped,  and  may  elect  to  sue  the  delin- 
quent stockholders  for  their  assessments.  The  stock- 
holder is  liable  in  the  suit  for  the  amount  of  the  assess- 
ment, and  for  the  costs  and  expenses  incurred  by  the 
corporation  in  trying  to  collect  it. 
Civil  Code,  Section  349. 

Section  1009. — LIEN  FOR  ASSESSMENT. — After  an  as- 
sessment has  been  made,  a  corporation  has  a  lien  for  the 
payment  of  the  assessment,  which  is  not  affected  by  the 
issuance  of  a  new  certificate  and  a  transfer  of  the  shares. 
The  lien  is  upon  the  shares,  and  not  upon  the  certificate. 
When  an  old  certificate  is  surrendered,  and  a  new  certifi- 
cate is  issued,  the  new  certificate  represents  the  same 
shares ;  but  the  shares  themselves  remain  subject  to  any 
lien  the  corporation  may  have  upon  them,  and  the  new 
owner  takes  subject  to  such  lien.  The  identity  of  the 


738  BUSINESS  LAW  FOB  BUSINESS  MEN. 

stock  is  not  affected  by  the  transfer.  The  keeping  of  a 
stock  book,  in  which  the  original  issue  and  all  subsequent 
transfers  must  be  entered,  enables  the  holder  or  purchaser 
to  trace  his  shares  back  to  the  original  issue  by  the  num- 
bers of  the  different  certificates,  and  thus  identify  the 
shares  upon  which  any  assessment  has  been  made,  and 
enables  him  to  ascertain  with  certainty,  in  connection  with 
the  other  records  of  the  corporation  relating  to  assess- 
ments and  delinquent  sales,  whether  his  shares  are  free 
from  liens  or  liability  in  favor  of  the  corporation ;  and  in 
the  same  manner  enables  the  corporation  to  enforce  its 
delinquent  assessment  upon  the  shares  liable  therefor,  no 
matter  how  many  transfers  have  been  made  subsequent 
to  the  assessment ;  each  transferee  taking  the  legal  title, 
but  subject  to  the  assessment,  just  as  the  grantee  of  the 
legal  title  to  land  takes  it  subject  to  all  valid  recorded 
liens.  (Decided  by  the  Supreme  Court  in  the  case  of  Craig 
vs.  Hesperia  Land  and  Water  Company,  which  decision  is 
printed  in  Volume  113  of  the  California  Reports,  page  7.) 

Section  1010. — TRUSTEE  NOT  LIABLE  FOR  ASSESSMENTS 
ON  STOCK. — Whenever  shares  of  the  capital  stock  of  any 
corporation  stand  in  the  name  of  a  trustee  with  the 
names  of  the  beneficiaries  of  the  trust  disclosed  thereon 
or  whenever  the  corporation  has  notice  that  any  of  its 
shares  of  stock  are  held  in  trust,  and  has  a  list  of  the 
names  of  the  beneficiaries  of  such  trust,  even  though  the 
certificate  representing  said  shares  is  issued  in  the  name 
of  the  trustee  individually,  and  without  any  notice  thereon 
of  such  trust,  the  person  holding  such  stock  as  trustee 
shall  not  be  personally  liable  for  assessments  made  or 
levied  by  the  corporation  upon  such  stock,  but  such  per- 
sonal liability  for  stock  assessments  shall  only  be  upon 
and  against  the  beneficial  owners  of  such  stock  or  the  ben- 
eficiaries of  the  trust  of  which  such  stock  may  constitute 
a  part. 

Act  of  the  Legislature,  appproved  May  7,  1919 ;  in 
effect  July  22,  1919. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  739 

Section  1011. — BY-LAWS  OF  CORPORATION. — Every  cor- 
poration formed  under  the  laws  of  California  must,  within 
one  month  after  filing  Articles  of  Incorporation,  adopt 
By-Laws  for  the  government  of  the  corporation.  The  By- 
Laws  adopted  must  not  be  inconsistent  with  the  Consti- 
tution and  laws  of  the  State. 

Section  1012. — How  BY-LAWS  ADOPTED. — The  assent 
of  stockholders,  representing  a  majority  of  all  the  sub- 
scribed capital  stock,  or  a  majority  of  the  members,  if 
there  be  no  capital  stock,  is  necessary  to  adopt  By-Laws, 
if  they  are  adopted  at  a  meeting  called  for  that  purpose. 
By-Laws  may  also  be  adopted,  without  a  meeting  for  that 
purpose,  by  the  written  assent  of  the  holders  of  two- 
thirds  of  the  stock,  or  by  the  written  assent  of  two-thirds 
of  the  members,  if  there  is  no  capital  stock.  If  a  meeting 
of  stockholders  is  called  for  the  purpose  of  adopting  By- 
Laws,  notice  must  be  given  by  publication  in  a  newspaper 
for  two  weeks,  by  order  of  the  acting  President. 
Civil  Code,  Section  301. 

Section  1013. — WHAT  BY-LAWS  MAY  PROVIDE  FOR.— 
A  corporation  may,  by  its  By-Laws,  provide  for  the  fol- 
lowing things :  (1)  The  time,  place,  and  manner  of  calling 
and  conducting  its  meetings,  and  may  dispense  with  notice 
of  all  regular  meetings  of  the  stockholders  or  directors; 
(2)  The  number  of  stockholders  or  members  constituting 
a  quorum;  (3)  The  mode  of  voting  by  proxy;  (4)  The 
qualifications  and  duties  of  directors,  the  time  of  their 
annual  election,  and  the  mode  and  manner  of  giving  no- 
tice of  such  election;  (5)  The  compensation  and  duties  of 
officers;  (6)  The  manner  of  election  and  the  term  of  office 
of  all  officers  other  than  the  directors;  (7)  Suitable  pen- 
alties may  be  provided  for  the  violation  of  the  By-Laws, 
not  exceeding  $100  for  any  one  offense;  (8)  The  amount 
of  stock  to  be  owned  by  a  director;  (9)  For  the  filling 
of  vacancies  on  the  board  of  directors;  (10)  For  the  issu- 
ing of  certificates  of  stock  before  full  payment  therefor; 


740  BUSINESS  LAW  FOB  BUSINESS  MEN. 

(11)  For  the  disposal  of  stock  owned  by  the  corporation; 
and,  (12)  The  By-Laws  may  specify  the  newspaper  in 
which  all  notices  of  the  meetings  of  stockholders  or  direc- 
tors, when  notice  is  necessary,  shall  be  published. 

Civil  Code,  Sections  301,  305,  308,  323,  344. 

Section  1014. — BOOK  OF  BY-LAWS. — The  law  provides 
that  all  By-Laws  adopted  must  be  certified  by  a  majority 
of  the  directors  and  secretary  of  the  corporation,  and 
copied  in  a  legible  hand,  in  a  book  kept  in  the  office  of  the 
corporation,  to  be  known  as  the  "Book  of  By-Laws,"  anil 
no  By-Law  shall  take  effect  until  so  copied,  and  the  book 
shall  then  be  opened  to  the  inspection  of  the  public  during 
office  hours  of  each  day  except  holidays. 
Civil  Code,  Section  304. 

Section  1015. — AMENDMENT  OF  BY-LAWS. — The  By- 
Laws  can  be  amended  by  a  vote  of  the  stockholders  at  the 
annual  meeting,  or  at  a  special  meeting  called  for  that 
purpose.  There  must  be  a  vote  representing  two-thirds 
of  the  subscribed  stock.  The  By-Laws  may  also  be  amend- 
ed, without  a  meeting,  by  the  written  assent  of  the  holders 
of  two-thirds  of  the  stock,  or  two-thirds  of  the  members 
if  there  is  no  capital  stock. 

Civil  Code,  Section  304. 

Section  1016. — REPEALING  OLD  AND  ADOPTING  NEW  BY- 
LAWS.— Old  By-Laws  may  be  repealed  absolutely,  and 
new  By-Laws  adopted  in  their  place,  in  the  same  manner 
as  amendments  are  made,  stated  in  Section  1015. 

Section  1017. — RECORD  OF  AMENDMENTS. — The  law  pro- 
vides that,  "whenever  any  amendment  or  new  By-Law  is 
adopted,  it  shall  be  copied  in  the  Book  of  By-Laws  with 
the  original  By-Laws,  and  immediately  after  them,  and 
shall  not  take  effect  until  so  copied.  If  any  By-Law  be 
repealed,  the  fact  of  repeal,  with  the  date  of  the  meeting  at 
which  the  repeal  was  enacted,  or  written  assent  was  filed, 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  741 

shall  be  stated  in  said  book,  and  until  so  stated  the  repeal 
shall  not  take  effect." 

Civil  Code,  Section  304. 

Section  1018. — THE  BOARD  OF  DIRECTORS. — The  cor- 
porate powers,  business,  and  property  of  corporations 
must  be  exercised,  conducted,  and  controlled  by  a  Board 
of  Directors. 

Section  1019. — NUMBER  OF  DIRECTORS. — The  law  is,  that 
the  number  of  directors  cannot  be  less  than  three,  but 
may  be  any  number  more  than  three.  The  number  of 
directors  may  be  increased  to  more  than  three  without 
limit,  to  as  many  as  may  be  desired  at  any  time  after 
articles  of  incorporation  have  been  fiTed,  by  a  vote  of  the 
majority  of  the  stockholders  of  the  corporation ;  and  if  the 
corporation  has  been  formed  with  more  than  three  direc- 
tors, a  majority  of  the  stockholders  may  vote  to  decrease 
the  directors  to  any  number  not  less  than  three.  The  in- 
crease or  decrease  of  the  number  of  directors  must  be  at 
a  meeting  of  the  stockholders  called  for  that  purpose. 
When  the  number  of  directors  has  been  increased  or  de- 
creased, a  certificate  stating  that  fact  must  be  filed  in  the 
same  manner  as  articles  of  incorporation  were  filed. 

Act  of  the  Legislature,  in  effect  May  18,  1907. 

Section  1020. — QUALIFICATION  OF  DIRECTORS. — A  major- 
ity of  the  directors  must  be  citizens  of  California.  Direc- 
tors of  corporations  for  profit  must  be  holders  of  its  stock 
to  an  amount  fixed  by  the  By-Laws  of  the  corporation; 
directors  of  all  other  corporations  must  be  members 
thereof. 

Statutes  of  1901,  page  308. 

Section  1021. — DIRECTORS  FOR  THE  FIRST  YEAR. — The 
directors  to  serve  for  the  first  year,  or  until  the  time 
fixed  for  the  election  of  directors,  are  designated  in  the 
Articles  of  Incorporation ;  and  the  person  named  in  the 


742  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Articles  of  Incorporation,  upon  the  organization  of  a  cor- 
poration, will  serve  until  their  successors  are  regularly 
elected. 

Section  1022. — ELECTION  OF  DIRECTORS. — The  directors 
of  a  corporation  must  be  elected  annually  by  the  stock- 
holders or  members,  and  if  no  provision  is  made  in  the 
By-Laws  for  the  time  of  election,  the  election  must  be 
held  on  the  first  Tuesday  in  June.  There  must  be  a  ma- 
jority of  the  subscribed  capital  stock,  or  of  the  members 
where  there  is  no  capital  stock,  represented  at  the  meet- 
ing for  the  election  of  directors,  either  in  person  or  by 
proxy  in  writing.  The  election  msut  be  by  ballot,  and 
every  stockholder  has  the  right  to  vote  in  person  or  by 
proxy  the  number  of  shares  standing  in  his  name,  for  as 
many  persons  as  there  are  directors  to  be  elected,  or  he 
may  cumulate  his  shares  and  give  one  candidate  as  many 
votes  as  the  number  of  directors  multiplied  by  the  number 
of  his  shares  of  stock  shall  equal ;  or  the  stockholder  may 
distribute  his  shares  on  the  same  principle  among  as 
many  candidates  as  he  shall  think  fit.  These  provisions 
of  the  law  apply  to  all  corporations  doing  business  in 
this  State,  domestic  or  foreign.  The  director  receiving 
the  highest  number  of  votes  shall  be  declared  elected.  In 
corporations  having  no  capital  stock,  each  member  of  the 
corporation  may  cast  as  many  votes  for  one  director  as 
there  are  directors  to  be  elected,  or  he  may  distribute 
them  among  any  or  all  the  candidates. 
Civid  Code,  Sections  302,  312. 

Section  1023. — NOTICE  OF  MEETINGS. — Notice  of  meet- 
ings of  the  stockholders  to  elect  directors  must  be  given, 
by  the  Secretary,  unless  all  of  the  stockholders  waive  such 
notice  in  writing.  When  all  the  stockholders  or  mem- 
bers of  a  corporation  are  present  at  any  meeting,  however 
called  or  notified,  and  sign  a  written  consent  thereto  on 
the  records  of  such  meetings,  or  if  those  not  present  sign 
in  writing  a  waiver  of  notice  of  such  meeting,  which 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  743 

waiver  is  presented  and  made  a  part  of  the  records  of 
such  meeting,  the  doings  of  such  meeting  are  as  valid  as 
if  had  at  a  meeting  legally  called  and  noticed. 

Act  of  the  Legislature,  approved  February  22, 
1909. 

Section  1024. — WHO  MAY  VOTE  AT  ELECTION  OF  DIREC- 
TOKS. — To  entitle  a  person  to  vote  at  the  election  of  direc- 
tors, he  must  be  a  bona  fide  stockholder,  having  stock  in 
his  own  name  on  the  stock  books  of  the  corporation  at 
least  ten  days  before  the  election.  It  is  made  a  requisite 
of  the  right  to  vote  that  the  voter  shall  not  only  be  reg- 
istered as  a  stockholder,  but  that  he  shall  have  been  so 
registered  for  at  least  ten  days  prior  to  the  election,  and 
that  he  shall  also  be  a  bona  fide  stockholder  at  the  time  of 
the  election.  The  voter  must  be  either  the  owner  of  the 
stock,  or  have  some  other  interest  in  it,  in  order  to  be  a 
bona  fide  stockholder.  Therefore,  one  in  whose  name 
stock  has  been  registered  upon  the  books  of  the  corpora- 
tion, but  who  has  never  had  any  interest  in  the  stock,  and 
is  only  a  dummy  for  the  real  owner,  and  when  the  change 
on  the  books  was  made  for  the  purpose  of  enabling  the 
real  owner  to  avoid  his  liabilities,  is  not  a  bona  fide  stock- 
holder, within  the  meaning  of  the  law,  and  should  not  be 
allowed  to  vote  at  an  election  of  directors.  (Decided  by 
the  Supreme  Court  in  the  case  of  Smith  vs.  S.  F.  and  N.  P. 
Railway  Company,  which  decision  is  printed  in  Volume 
115  of  the  California  Reports,  page  584.) 
Civil  Code,  Sections  307,  312. 

Section  1025. — WHO  MAY  VOTE  STOCK  IN  HANDS  OF 
PLEDGEE  OK  TRUSTEE. — All  shares  of  stocks  standing  on  the 
books  of  a  corporation  in  the  name  of  any  person  as 
pledgee  or  trustee,  may  be  represented  or  voted  by  such 
pledgee  or  trustee,  but  only  in  case  the  pledger  or 
beneficial  owner  fails  to  represent  and  vote  the  same,  ft 
may  be  agreed,  however,  that  the  stock  shall  be  voted  in 
a  different  manner. 

Act  of  the  Legislature,  approved  March  9,  19J1. 


744  BUSINESS  LAW  FOB  BUSINESS  MEN. 

Section  1026. — WHO  MAY  VOTE  STOCK  IN  HANDS  OF  AD- 
MINISTEATOK  OB  ExECUTOB. — When  the  owner  or  pledgee 
is  dead,  he  must  be  succeeded  by  his  personal  representa- 
tive, that  is,  by  his  executor  or  administrator.  In  such 
case,  the  administrator  or  executor  will  have  the  right  to 
have  the  stock  transferred  on  the  books  of  the  corporation 
to  him,  and  will  be  entitled  to  vote  the  stock.  In  the  case 
of  a  trustee  who  dies,  the  law  will  not  allow  the  trust  to 
die  with  him,  but  will  proceed  to  appoint  another  trustee 
to  succeed  him,  and  in  this  case  the  succeeding  trustee 
will  be  entitled  to  have  the  stock  transferred  to  him,  and 
may  vote  it. 

Section  1027. — WHO  MAY  VOTE  STOCK  BELONGING  TO 
MINOB. — The  guardian  of  a  minor,  the  owner  of  stock  in  a 
corporation,  is  entitled  to  vote  it. 

Section  1028. — WHO  MAY  VOTE  STOCK  BELONGING  TO 
INSANE  PEBSON. — The  guardian  of  the  estate  of  an  insane 
person,  the  owner  of  stock  in  a  corporation,  is  entitled 
to  vote  it. 

Section  1029. — VOTING  BY  PEOXY. — A  stockholder  may 
be  represented  at  all  elections  by  proxy.  He  may  select 
any  one  he  pleases  as  his  proxy,  to  vote  his  stock,  and  the 
person  selected  by  him  need  not  himself  be  a  stockholder. 
A  corporation  has  no  power  to  restrict  the  right  of  voting 
by  proxy  to  certain  persons,  or  to  control  their  selection 
by  the  stockholders  in  any  way,  or  to  curtail  in  any  other 
respect  the  right  to  vote  by  proxy.  There  was  for  a  long 
time  in  California  a  custom  among  banking  corporations 
to  have  a  By-Law  providing  that  no  person  not  a  stock- 
holder would  be  allowed  to  vote  as  a  proxy,  but  the  Su- 
preme Court  has  declared  such  a  By-Law  invalid,  upon 
the  ground  that  a  corporation  has  no  power  to  make  or 
enforce  it.  The  law  places  no  restriction  whatever  upon 
the  stockholder  as  to  the  person  he  shall  be  at  liberty  to 
select  to  act  under  his  proxy;  and  a  corporation  has  no 


BUSINESS  CONTEACTS  AND  LEGAL  OBLIGATIONS.  745 

power  to  either  qualify  or  limit  the  right  to  vote  by  proxy. 
(Decided  by  the  Supreme  Court  in  the  case  of  Peoples 
Home  Savings  Bank  vs.  Superior  Court,  which  decision  is 
printed  in  Volume  104  of  California  Eeports,  page  649.) 
The  law  provides  that  every  proxy  must  be  executed  in 
writing  by  the  stockholder  himself,  or  by  his  duly  author- 
ized attorney.  A  proxy  is  valid  for  eleven  months  after 
its  date,  unless  the  time,  not  exceeding  seven  years,  is 
specified  in  it.  Every  proxy  is  revocable  at  the  pleasure 
of  the  person  executing  it.  The  By -Laws  may  provide  the 
mode  of  voting  by  proxy. 

Civil  Code,  Section  312. 

Section  1030. — ORGANIZATION  OF  BOARD  OF  DIRECTORS. — 
Immediately  after  their  election,  the  directors  must  or- 
ganize by  the  election  of  a  President,  a  Secretary,  and  a 
Treasurer. 

Civil  Code,  Section  308. 

Section  1031. — DUTIES  OF  PRESIDENT,  SECRETARY  AND 
TREASURER. — The  duties  of  the  President,  the  Secretary 
and  the  Treasurer  may  be  prescribed  by  the  corporation 
in  its  By-Laws.  They  may  be  required  to  perform  any 
duty  consistent  with  the  objects  of  the  corporation  and 
not  inconsistent  with  the  laws  of  the  State. 

Section  1032. — OTHER  OFFICERS. — A*  corporation  may 
appoint  other  officers  than  those  named  by  the  law,  and 
prescribe  what  their  duties  shall  be.  Such  officers  may  be 
provided  for  in  the  By-Laws,  and  appointed  by  the  Board 
of  Directors. 

Section  1033. — QUORUM  OF  DIRECTORS. — A  majority  of 
the  Board  of  Directors  constitutes  a  quorum  for  the  trans- 
action of  business.  Unless  a  quorum  is  present  and  act- 
ing, no  business  performed,  or  act  done,  is  valid,  as 
against  the  corporation.  No  legal  quorum  of  a  Board  of 
Directors  is  present  when  action  is  attempted  to  be  taken 


746  BUSINESS  LAW  FOE  BUSINESS  MEN. 

on  a  matter  as  to  which  one  of  the  directors  necessary  to 
make  the  quorum  is  interested ;  and  resolutions  passed  at 
such  a  meeting  cannot  be  ratified  by  the  stockholders. 
Civil  Code,  Section  305. 

Section  1034. — VOTE  or  DIRECTOR  ON  MATTER  IN  WHICH 
HE  Is  INTERESTED.— A  director  of  a  corporation  cannot 
legally  vote  or  act  upon  any  matter  in  which  he  is  finan- 
cially interested  adversely  to  the  corporation.  By  virtue 
of  his  position,  he  is  disqualified  from  voting  or  in  any 
mode  acting  in  his  official  capacity  as  a  director,  for  the 
purpose  of  creating  an  obligation  in  his  own  favor.  So 
strictly  is  this  principle  adhered  to  by  the  courts,  that  no 
question  is  allowed  to  be  raised  as  to  the  fairness  or  un- 
fairness of  the  contract  so  entered  into.  A  director  must 
not  participate  in  any  act  in  which  his  personal  interest  is 
antagonistic  to  that  of  the  corporation.  Being  interested 
in  the  subject-matter,  the  law  does  not  allow  him,  as  a  di- 
rector, to  deal  with  himself,  and  thus  be  subject  to  the 
temptation  to  advance  his  own  interests.  The  Supreme 
Court  of  California  had  under  consideration  a  case  where 
a  director  named  Wells  formed  a  part  of  a  quorum,  at  a 
meeting  of  the  board,  which  voted  the  execution  of  a  mort- 
gage on  the  property  of  the  corporation  to  him ;  and  the 
court  held  that  the  mortgage  was  invalid,  saying:  "The 
same  rules  which  preclude  an  interested  director  from 
uniting  with  other  directors  in  the  creation  of  an  obliga- 
tion in  favor  of  himself  by  his  vote,  forbid  him  from  unit- 
ing with  them  in  creating  such  obligation  by  any  act  or 
exercise  of  his  official  position ;  and  a  meeting  at  which 
there  is  not  a  majority  of  the  directors,  exclusive  of  such 
interested  director,  is  not  a  competent  board  for  the  trans- 
action of  any  corporate  business.  By  reason  of  the  dis- 
qualification of  Wells  from  taking  any  part  in  passing 
the  resolution  for  executing  the  note  and  mortoo-e  to  him- 
self, he  could  neither  vote  in  favor  of  the  resolution,  nor 
by  his  presence  help  to  create  a  quorum  by  which  the 
other  two  directors  could  adopt  it.  For  the  purpose  of 


BUSINESS  CONTKACTS  AND  LEGAL  OBLIGATIONS.  747 

any  action  upon  this  resolution,  he  was  as  much  a  stranger 
to  the  board  as  if  he  had  never  been  elected  a  director; 
and,  although  he  may  have  been  physically  present  in  the 
room  with  the  other  two  directors,  he  was  not  for  that 
purpose  a  competent  part  of  the  board,  any  more  than 
would  have  been  any  other  bystander,  and  there  was  not, 
therefore,  a  quorum  of  the  board  ' present  and  acting'  at 
the  time  the  resolution  was  adopted."  (Decided  by  the 
Supreme  Court  in  the  case  of  Curtin  vs.  Salmon  River 
Hydraulic  Gold  Mining  Company,  which  decision  is  print- 
ed in  Volume  130  of  the  California  Reports,  page  345.) 

Section  1035. — REGULAK  AND  SPECIAL  MEETINGS. — The 
time  of  holding  the  meetings  of  the  Board  of  Directors 
may  be  fixed  in  the  By-Laws,  and  the  By-Laws  may  pro- 
vide that  no  notice  be  given  of  regular  meetings.  Where 
a  special  meeting  is  called,  for  any  purpose,  all  of  the 
directors  must  be  notified  by  the  Secretary  in  the  proper 
manner.  If  the  meeting  is  special,  and  the  directors  are 
not  all  notified,  the  meeeting  is  not  duly  assembled,  and 
its  action  does  not  bind  the  corporation  as  a  valid  corpor- 
ate act. 

Section  1036. — PUBLICITY  CANNOT  MAKE  ILLEGAL  ACT 
OF  DIRECTORS  VALID. — The  publicity  alone  of  an  illegal 
and  unauthorized  act  of  the  directors  of  a  corporation 
does  not  make  it  valid ;  and  directors  charged  with  doing 
an  illegal  act  cannot  defend  it  by  saying  that  their  act 
was  open,  and  not  secret. 

Section  1037. — VACANCY  IN  BOARD  OF  DIRECTORS. — The 
By-Laws  of  a  corporation  may  provide  the  manner  in 
which  a  vacancy  in  the  Board  of  Directors  shall  be  filled. 
If  the  By-Laws  make  no  provision  for  filling  a  vacancy, 
the  Board  of  Directors  must  appoint  a  member  to  fill  the 
vacancy.  ;  j  ^  •.' 

Civil  Code,  Section  305. 


748  BUSINESS  LAW  FOB  BUSINESS  MEN. 

Section  1038. — CAN  A  CORPORATION  PERFORM  CORPOR- 
ATE ACTS,  SUCH  AS  THE  MORTGAGING  OF  ITS  REAL  PROPERTY, 
WHILE  THERE  Is  A  VACANCY  IN  ITS  BOARD  OF  DIRECTORS  ?— 
This  question  was  a  new  one  in  the  United  States  prior 
to  the  year  1899.  In  that  year  the  Supreme  Court  of  Cali- 
fornia made  a  decision  in  a  case  where  this  question  was 
directly  raised,  (where  there  was  a  vacancy  in  a  board  of 
five,  and  the  remaining  four  members,  without  filling  the 
vacancy,  undertook  to  authorize  a  mortgage  of  the  cor- 
poration's real  estate),  holding  that  a  vacancy  in  the 
board  does  not  prevent  it  from  acting  so  as  to  bind  the 
corporation,  if  there  is  a  majority  of  a  full  board  remain- 
ing. Chief  Justice  Beatty,  giving  the  decision  of  the  court, 
said  on  this  subject:  "The  By-Laws  of  this  corporation, 
and,  I  suppose,  its  Articles  of  Incorporation,  provided  for 
a  board  of  five  directors,  and  the  question  is  whether  dur- 
ing a  vacancy  in  ane  of  these  directorships  the  four  re- 
maining directors  could  lawfully  assemble  for  the  trans- 
action of  any  business  except  the  filling  of  such  vacancy. 
Counsel  have  not  cited  any  case  decided  in  this  State  or 
any  other  in  the  United  States  in  which  this  question  has 
been  directly  decided.  It  is  no  doubt  true  that  directors 
owe  to  their  constituents  the  duty  of  keeping  the  board 
full,  by  promptly  filling  vacancies  as  they  occur ;  and  this 
for  the  reason  that  shareholders  are  entitled  to  the  bene- 
fit of  the  experience  and  advice  of  all  the  members  of  a 
full  board  in  the  transaction  of  all  its  business.  When 
the  directors  violate  this  duty,  there  may  be  sound  rea- 
sons for  holding  that  they  should  not  be  allowed  to  take 
any  advantage,  as  against  the  shareholders,  of  acts  or  res- 
olutions passed  when  a  full  board  was  not  in  existence. 
But  when  the  corporation  is  dealing  with  a  stranger,  who, 
acting  in  good  faith  and  in  ignorance  of  the  existence  of 
a  vacancy  in  the  board  of  directors,  parts  with  his  proper- 
ty on  the  faith  of  what  he  is  induced  to  believe  is  a  valid 
corporate  obligation,  the  case  is  certainly  very  different 
in  its  substantial  merits.  The  votes  of  a  majority  of  a 
full  board  may  authorize  a  corporate  act,  although  there 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  749 

may  be  a  vacancy  in  the  board."  (Decided  by  the  Su- 
preme Court  in  the  case  of  Porter  vs.  Lassen  County  Land 
and  Cattle  Company,  which  decision  is  printed  in  Volume 
127  of  the  California  Reports,  page  661.) 

Section  1039. — SERVICES  OF  DIRECTOR  OUTSIDE  OF  His 
DUTIES  As  SUCH. — Where  a  director  of  a  corporation  per- 
forms services  as  its  manager,  or  in  any  other  legitimate 
way,  not  pertaining  to  his  duties  as  director,  he  is  entitled 
to  recover  from  the  corporation  the  reasonable  value  of 
such  services,  though  no  rate  of  compensation  was  fixed 
by  the  board  of  directors  prior  to  performance  of  the 
services.  (Decided  by  the  Supreme  Court  in  the  case  of 
Bassett  vs.  Fairchild,  which  decision  is  printed  in  Volume 
132  of  the  California  Reports,  page  631.) 

Section  1040. — LIABILITY  OF  DIRECTORS  FOR  MONEY  EM- 
BEZZLED.— The  directors  of  a  corporation  are  individually 
and  personally  liable  to  its  creditors  for  money  embez- 
zled by  any  of  the  officers  of  the  corporation.  This  the 
Constitution  of  the  State  declares.  But  they  are  liable 
only  to  all  the  creditors,  and  one  creditor  cannot  sue 
alone  to  recover  his  debt  by  reason  of  failure  to  pay  when 
the  funds  of  a  corporation  have  been  embezzled.  All  the 
creditors  must  be  joined  in  such  a  suit,  and  the  money 
recovered  to  the  corporation  from  the  directors  will  con- 
stitute a  trust  fund  to  be  paid  to  all  the  creditors. 

Section  1041. — ADVANCES  OF  MONEY  BY  DIRECTOR.— 
Where  money  is  advanced  to  a  corporation  by  a  director, 
when  the  corporation  is  in  debt  and  unable  to  obtain  mon- 
ey from  other  sources,  and  such  money  is  received  and 
made  use  of  in  the  business  of  the  corporation,  it  will  be 
liable  to  him  for  the  repayment  of  the  sum  advanced. 

Section  1042. — DIRECTORS  IN  Two  CORPORATIONS. — The 
fact  that  two  corporations  have  the  same  directors,  or 
that  some  of  the  directors  in  one  are  also  directors  in 


750  BUSINESS  LAW  FOR  BUSINESS  MEN. 

the  other,  does  not  prevent  the  two  corporations  from 
dealing  with  each  other.  Where  two  corporations,  through 
their  Boards  of  Directors,  make  a  contract  with  each  oth- 
er, the  directors  who  are  common  to  both  are  not  within 
the  rule  which  prohibits  one  who  acts  in  a  fiduciary  capac- 
ity from  dealing  with  himself.  Two  corporations  have  the 
right,  within  the  scope  of  their  chartered  powers,  to  deal 
with  each  other;  and  this  right  is  not  destroyed  by  the 
fact  that  some,  or  even  a  majority,  of  the  directors  are 
common  to  both.  Of  course,  if  such  directors  should 
wrongfully  use  their  powers  to  the  prejudice  of  one  of  the 
corporations,  their  action  could  be  set  aside  for  fraud. 
But  common  directors  owe  the  same  fidelity  to  both  cor- 
porations, and  there  is  no  presumption  that  they  will  deal 
unfairly  with  either;  and  therefore  their  acts  as  such 
common  directors  are  not  void. 

Section  1043. — AUTHORITY  OF  PRESIDENT. — The  Presi- 
dent of  a  corporation  may  have  more  extensive  powers 
conferred  upon  him  than  a  strict  interpretation  of  the  law 
would  show.  The  directors  of  a  business  corporation  have 
power,  by  resolution,  to  give  the  President  general  author- 
ity to  incur  debts,  negotiate  loans,  enter  into  contracts, 
and  otherwise  act  as  the  agent  of  the  corporation;  and 
where  a  resolution  of  this  kind  is  passed  at  a  meeting  of 
the  directors,  unless  it  is  in  direct  conflict  with  the  By- 
Laws,  the  President  will  have  authority  to  do  all  such  acts 
on  behalf  of  the  corporation  as  are  mentioned  in  the  reso- 
lution. (Decided  by  the  Supreme  Court  in  the  case  of  Mc- 
Cormick  vs.  Stockton  and  Tuolumne  County  E.  B.  Com- 
pany, which  decision  is  printed  in  Volume  130  of  the  Cali- 
fornia Reports,  page  100.) 

Section  1044. — PRESIDENT  MAY  EMPLOY  ATTORNEY.— 
The  President  of  a  corporation  has  power  to  employ  an 
attorney,  when  the  exigencies  of  his  company  require  it. 
He  need  not  obtain  the  consent  of  the  directors  or  stock- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  751 

holders  to  do  this.    By  virtue  of  his  position  as  official 
head  of  the  corporation  he  has  the  power  to  do  so. 

Section  1045. — DIVIDENDS. — The  directors  of  a  corpor- 
ation cannot  make  dividends,  except  from  the  surplus 
profits  arising  from  the  business.  The  directors  cannot 
withdraw,  divide,  or  pay  to  the  stockholders,  or  any  of 
them,  any  part  of  the  capital  stock,  while  the  corporation 
is  a  going  concern. 

Civil  Code,  Section  309. 

Section  1046. — AGREEMENT  TO  DIVIDE  CAPITAL  STOCK 
AMONG  STOCKHOLDERS  VOID. — An  agreement  upon  the  part 
of  a  corporation  to  divide  its  whole  capital  stock  among 
its  stockholders,  prior  to  its  dissolution,  is  void. 

Where  a  corporation  wrongfully  pays  to  some  of  its 
stockholders  their  proportionate  share  of  the  money  re- 
ceived from  the  sale  of  the  entire  property  of  the  corpora- 
tion, the  remedy  of  a  stockholder  who  has  not  been  paid 
is  to  compel  the  restoration  of  the  funds  illegally  dis- 
tributed. 

(Decided  by  the  Supreme  Court  of  California,  in  the 
case  of  Tapscott  vs.  Mexican  Colorado  Eiver  Land  Com- 
pany, which  decision  is  printed  in  California  Decisions, 
Volume  35,  page  598.) 

Section  1047. — EXTENT  OF  DEBTS  TO  BE  CREATED. — The 
directors  of  a  corporation  have  no  power  to  create  debts 
beyond  the  amount  of  the  subscribed  capital  stock.  If  they 
create  debts  beyond  the  capital  stock,  the  directors  are  in- 
dividually, jointly,  and  severally  liable  to  the  corporation 
and  the  creditors  for  such  debts.  A  director,  however,  who 
is  not  present  at  the  meeting  when  the  debt  is  created, 
or  who  has  his  dissent  to  the  board's  action  entered  on 
the  minutes,  will  not  be  liable. 

Civil  Code,  Section  309. 

Section  1048. — RECORDS  OF  CORPORATION. — All  corpor- 
ations for  profit  in  California  are  required  by  the  law  to 


752  BUSINESS  LAW  FOR  BUSINESS  MEN. 

keep  a  record  of  all  their  business  transactions ;  a  journal 
of  all  meetings  of  their  directors,  members,  or  stockhold- 
ers, with  the  time  and  place  of  holding  the  same,  whether 
regular  or  special,  and  if  special,  its  object,  how  author- 
ized, and  the  notice  thereof  given.  The  record  must  em- 
brace every  act  done  or  ordered  to  be  done;  who  were 
present,  and  who  absent ;  and,  if  requested  by  any  direc- 
tor, member,  or  stockholder,  the  time  shall  be  noted  when 
he  entered  the  meeting  or  obtained  leave  of  absence  there- 
from. On  a  similar  request,  the  ayes  and  nos  must  be 
taken  on  any  proposition,  and  a  record  thereof  made.  On 
similar  request,  the  protest  of  any  director,  member,  or 
stockholder,  to  any  action  or  proposed  action,  must  be 
entered  in  full.  All  such  records  must  be  open  to  the  in- 
spection of  any  director,  member,  stockholder,  or  creditor 
of  the  corporation.  Corporations  for  profit  must  also 
keep  a  book  to  be  known  as  "Stock  and  Transfer  Book," 
in  which  must  be  kept  a  record  of  all  stock ;  the  names  of 
the  stockholders,  or  members,  alphabetically  arranged; 
installments  paid  or  unpaid ;  assessments  levied  and  paid 
or  unpaid ;  a  statement  of  every  alienation,  sale,  or  trans- 
fer of  stock  made,  the  date  thereof,  and  by  and  to  whom ; 
and  all  such  other  records  as  the  By-Laws  prescribe. 
Such  "Stock  and  Transfer  Book"  must  be  kept  open  to 
the  inspection  of  any  stockholder,  member,  or  creditor. 
Civil  Cole,  Sections  377,  378. 

Section  1049. — REMOVAL  OF  DIRECTORS  FROM  OFFICE.— 
No  director  can  be  removed  from  office,  unless  by  a  vote 
of  two-thirds  of  the  members,  or  of  stockholders  holding 
two-thirds  of  the  capital  stock,  at  a  general  meeting  held 
after  previous  notice  of  the  time  and  place,  and  of  the 
intention  to  propose  such  removal.  Meetings  of  stock- 
holders for  this  purpose  may  be  called  by  the  President 
or  by  a  majority  of  the  directors,  or  by  members  or  stock- 
holders holding  at  least  one-half  of  the  votes.  Such  calls 
must  be  in  writing,  and  addressed  to  the  Secretary,  who 
must  thereupon  give  notice  of  the  time,  place,  and  object 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  753 

of  the  meeting,  and  by  whose  order  it  is  called.  If  the 
Secretary  refuse  to  give  the  notice,  or  if  there  is  no  Sec- 
retary, the  call  may  be  addressed  directly  to  the  members 
or  stockholders,  and  be  served  as  a  notice,  in  which  case 
it  must  specify  the  time  and  place  of  meeting. 

Section  1050, — EXAMINATION  OF  CORPORATION. — As  the 
right  of  corporations  to  exist  and  do  business  comes  from 
the  State,  it  follows  logically  that  the  State  retains  the 
power  to  examine  into  the  affairs  of  all  corporations  at 
any  time.  The  law  provides  that  the  Governor  may  re- 
quire the  Attorney  General,  or  the  District  Attorney  of 
any  county,  to  make  an  examination  into  the  affairs  of  a 
corporation  and  report  to  the  Governor.  The  Legislature 
may  also  examine  into  the  condition  and  affairs  of  a  cor- 
poration, by  a  committee  appointed  by  either  the  Senate 
or  Assembly.  And  the  Legislature  may  dissolve  all  cor- 
porations by  repealing  the  laws  under  which  they  were 
created. 

Civil  Code,  Sections  382,  383,  384. 

Section  1051. — DISSOLUTION  OF  CORPORATION. — The 
dissolution  of  a  corporation  may  be  voluntary,  or  invol- 
untary. It  is  voluntary,  when  the  dissolution  is  effected 
by  consent  of  the  stockholders  or  members.  It  is  invol- 
untary, when  the  dissolution  is  compelled  against  or  with- 
out the  consent  of  the  stockholders  or  members.  If  volun- 
tary, an  application  is  made  to  the  Superior  Court  of  the 
county  where  the  principal  place  of  business  of  the  cor- 
poration is.  This  application  to  the  court  must  first  be 
authorized  by  a  resolution  of  the  members  or  stockhold- 
ers, adopted  by  a  two-thirds  vote  of  the  members,  where 
there  is  no  capital  stock,  or  by  a  vote  of  the  holders  of 
two-thirds  of  the  subscribed  capital  stock ;  and  it  must  also 
appear  that  all  claims  and  demands  against  the  corpora- 
tion have  been  paid  and  discharged.  A  corporation  may 
also  be  dissolved  against  the  consent  of  the  stockholders 


754  BUSINESS  LAW  FOB  BUSINESS  MEN. 

by  a  judgment  of  dissolution  in  a  suit  brought  by  the  At- 
torney General.  In  such  a  suit,  if  it  appears  that  the 
corporation  is  doing  a  business  not  provided  for  by  its 
charter,  or  has  ceased  to  do  business  at  all,  or  its  term  of 
existence  has  expired,  or  is  in  such  a  condition  that  it  can 
no  longer  hope  to  carry  out  the  ends  and  purposes  of  the 
corporation,  the  corporation  will  be  declared  dissolved  by 
judgment  of  the  court. 

Code   of  Civil  Procedure,   Sections   803,   1227, 
1228. 

Section  1052. — DISPOSITION  TO  BE  MADE  OF  PROPERTY 
UPON  DISSOLUTION. — Upon  the  dissolution  of  a  corpora- 
tion the  capital  stock,  and  all  property  of  the  corporation, 
will  be  divided  among  the  stockholders  in  proportion  to 
the  number  of  shares  held  by  each.  But  before  any  such 
division  can  be  made,  it  must  appear  that  all  debts  of 
the  corporation  have  been  paid.  The  directors  of  a  dis- 
solved corporation  have  authority  to  go  on  and  make  final 
settlement  of  its  affairs,  and  have  power  to  make  a  di- 
vision of  the  property  left  over  after  the  payment  of  the 
debts. 

Civil  Code,  Section  309. 

Section  1053. — FALSE  REPORTS. — Any  officer  of  a  cor- 
poration who  wilfully  gives  a  certificate,  or  wilfully  makes 
an  official  report,  public  notice,  or  entry  in  any  of  the  rec- 
ords or  books  of  the  corporation,  concerning  the  corpora- 
tion or  its  business,  which  is  false  in  any  material  repre- 
sentation, is  liable  for  all  the  damages  resulting  therefrom 
to  any  person  injured  thereby ;  and  if  two  or  more  officers 
unite  or  participate  in  the  commission  of  any  of  such  acts, 
they  are  jointly  and  severally  liable. 
Civil  Code,  Section  316. 

Section  1054. — TRANSFER  OF  FRANCHISE. — No  sale, 
lease,  assignment,  transfer,  or  conveyance  of  the  business, 
franchise  and  property,  as  a  whole,  of  any  corporation  is 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  755 

valid  without  the  consent  of  stockholders  holding  of  record 
at  least  two-thirds  of  the  issued  capital  stock  of  the  cor- 
poration; such  consent  to  be  either  expressed  in  writing, 
executed  and  acknowledged  by  such  stockholders,  and  at- 
tached to  such  sale,  lease,  assignment,  transfer,  or  con- 
veyance, or  by  a  vote  at  a  stockholders '  meeting  called  for 
that  purpose ;  but  with  such  assent  so  expressed,  such  sale, 
lease,  assignment,  transfer,  or  conveyance  is  valid. 
Statutes  of  1903,  page  396. 

Section  1055. — TRANSFER  OF  FOREIGN  CONCESSIONS.— 
A  corporation  owning  grants,  concessions,  franchises,  and 
property,  in  a  foreign  country,  has  the  right  under  out- 
laws to  sell  and  convey  the  same ;  but  such  sale  and  con- 
veyance can  only  be  made  by  a  resolution  adopted  by  the 
vote  of  a  majority  of  the  Board  of  Directors,  and  the 
written  consent  of  the  holders  of  two-thirds  of  the  capital 
stock. 

Statutes  of  1899,  page  95. 

Section  1056. — GENERAL  POWERS  OF  CORPORATIONS. — • 
The  law  provides  what  shall  be  the  general  powers  of  a 
corporation  in  California.  Every  corporation  in  Cali- 
fornia has  power,  (1)  To  sue  and  be  sued  in  any  court; 
(2)  To  make  and  use  a  common  seal,  and  alter  the  same 
at  pleasure;  (3)  To  purchase,  hold,  and  convey  such  real 
and  personal  estate  as  the  purpose  of  the  corporation  may 
require ;  (4)  To  appoint  such  subordinate  officers  or  agents 
as  the  business  of  the  corporation  may  require,  and  to  al- 
low them  suitable  compensation;  (5)  To  make  By-Laws, 
not  inconsistent  with  any  existing  law,  for  the  manage- 
ment of  its  property,  the  regulation  of  its  affairs,  and  for 
the  transfer  of  its  stock;  (6)  To  admit  stockholders  or 
members,  and  to  sell  their  stock  or  shares  for  the  payment 
of  assessments  or  installments;  (7)  To  enter  into  any 
obligations  or  contracts  essential  to  the  transaction  of 
its  ordinary  affairs,  or  for  the  purpose  of  the  corporation. 


756  BUSINESS  LAW  FOE  BUSINESS  MEN. 

The  manner  of  the  exercise  of  these  general  powers  has 
already  been  stated  in  preceding  sections. 
Civil  Code,  Section  354. 

Section  1057. — VOTING  TKUST  AGREEMENTS  IN  MAR- 
KETING CORPORATIONS. — Nothing  contained  in  the  law  shall 
prevent  the  execution  of  valid  pooling  or  voting  trust 
agreements  by  the  stockholders  of  a  corporation  organized 
for  the  purpose  of  marketing  agricultural  products,  and 
the  principal  business  of  which  is  the  preparation  for 
and  the  marketing  of  such  products,  the  majority  of  the 
stock  of  which  is  owned  by  producers  of  such  products ; 
and  it  shall  be  lawful  for  any  number  of  the  owners  of  the 
capital  stock  of  such  corporation,  in  order  to  prevent 
the  capital  stock  thereof  from  being  controlled  by  inter- 
ests hostile  to  such  producers  and  to  secure  safe  and  pru- 
dent management  of  the  corporation  in  the  interests  of  the 
whole  number  of  its  stockholders,  to  enter  into  agree- 
ments with  each  other  by  which,  for  a  definite  period  of 
time  stated  therein,  the  capital  stock  of  such  corporation 
owned  by  them  shall  be  voted  as  the  owners  of  a  ma- 
jority of  the  stock  represented  by  such  agreement  shall 
direct  from  time  to  time,  or  to  enter  into  agreements  by 
which  the  stock  to  which  they  shall  be  entitled  shall  be 
issued  to  trustees  selected  from  among  the  signers  to  be 
held  and  voted  by  such  trustees  for  the  period  specified  in 
and  in  accordance  with  the  terms  of  said  agreement,  and 
the  mutual  promises  of  the  several  signers  of  any  such 
agreement  shall  be  sufficient  consideration  for  the  making 
thereof. 

Act  of  the  Legislature,  approved  April  21,  1919 ; 
in  effect  July  22,  1919. 

Section  1058. — NUMBER  OF  DIRECTORS — INCREASE  OR 
DECREASE. — Any  corporation  or  association  may  increase 
or  diminish  the  number  of  its  directors  or  trustees  by  the 
vote  or  written  assent  of  stockholders  representing  a  ma- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  757 

jority  of  its  subscribed  capital  stock,  or,  if  it  has  no  capital 
stock,  -by  the  vote  or  written  assent  of  a  majority  of  the 
members.  A  certificate  over  the  corporate  seal,  setting 
forth  the  action  taken  by  the  stockholders,  or  members, 
and  stating  the  new  number  of  directors,  shall  be  signed 
by  the  President  and  Secretary  of  such  corporation  or 
association,  and  filed  in  the  office  of  the  county  clerk  of 
the  county  where  its  original  articles  of  incorporation 
were  filed,  and  a  copy  of  said  certificate,  certified  by  such 
county  clerk,  shall  be  filed  in  the  office  of  the  Secretary 
of  State,  whereupon  the  number  of  directors  or  trustees 
shall  be  changed  as  stated  in  said  certificate.  This  law 
appplies  to  all  corporations  existing  under  the  laws  of  the 
State  of  California,  whether  organized  and  incorporated 
prior  to  the  enactment  of  the  Civil  Code,  or  subsequent 
thereto. 

Act  of  the  Legislature,  approved  May  10,  1917; 
in  effect  July  27, 1917. 

Section  1059. — FINANCIAL  STATEMENT  TO  STOCKHOLD- 
ERS.— Upon  the  written  request  of  not  less  than  ten  per 
cent  of  the  stockholders,  presented  not  less  than  two  weeks 
prior  to  the  time  of  the  annual  election,  there  must  be 
served  upon  each  stockholder,  at  least  one  week  prior  to 
such  election,  one  copy  of  a  financial  statement  of  the  af- 
fairs of  the  corporation,  which  must  show  the  authorized 
capital  stock  of  the  corporation,  the  amount  of  capital 
stock  subscribed,  the  amount  of  capital  actually  paid  in, 
the  assets  and  the  surplus  and  undivided  profits  of  the 
corporation,  the  amount  paid  to  employes,  the  names  and 
addresses  of  all  the  officers  and  directors  of  the  corpora- 
tion, the  amount  of  mortgages,  bonded  or  other  indebt- 
edness of  the  corporation,  and  the  amount,  of  the  last 
annual,  semi-annual  or  quarterly  dividend,  and  a  general 
summary  of  the  business  transacted  by  the  corporation 
since  the  last  preceding  annual  meeting.  The  financial 
statement  herein  referred  to  shall  be  signed  by  the  Presi- 
dent and  Secretary  of  the  corporation,  and  shall  be  sworn 


758  BUSINESS  LAW  FOB  BUSINESS  MEN. 

to  by  them,  and  must  be  personally  served  upon  each 
stockholder,  or,  in  lieu  of  personal  service,  must  be  sent  by 
mail  addressed  to  each  stockholder  at  his  place  of  resi- 
dence if  known,  or  if  not  known,  at  the  place  where  the 
principal  office  of  the  corporation  is  situated.  The  Presi- 
dent or  Secretary  of  any  corporation  who  with  intent  to 
deceive  shall  sign  a  false  financial  statement  shall  be 
deemed  guilty  of  a  misdemeanor. 

Statutes  of  1915;  in  effect  August  8,  1915. 

Section  1060. — CORPORATE  SECURITIES  ACT. — In  1917 
the  Legislature  of  California  passed  a  law  known  as  the 
Corporate  Securities  Act,  and  also  frequently  referred  to 
as  the  "blue  sky  law,"  for  the  regulation  and  supervision 
of  the  sale  of  securities,  and  to  prevent  fraud  in  the  sale 
of  securities.  The  provisions  of  the  law  are  as  follows : 

Meaning  of  "Security."  -The  word  security  includes 
(among  certain  definitions  in  sections  1  and  2  of  the  act)  : 

(a)  All  shares  or  other  interests  or  rights  into  which 
the  capital,  capital  stock,  or  property  of  companies  or 
rights  of  stockholders  or  members  thereof  are  divided,  in- 
cluding all  treasury  shares  and  shares  of  their  own  capital 
stock  purchased  or  otherwise  acquired  by  companies  upon 
delinquent  assessment  sales  or  in  any  other  lawful  man- 
ner, and  all  certificates  and  other  instruments  issued  by 
them  or  their  authority,  evidencing  or  representing  such 
shares,  interests,  or  rights ; 

(b)  All  bonds,  debentures,  and  evidences  of  indebted- 
ness issued  by  any  company ;  and 

(c)  Any  instrument  issued  or  offered  to  the  public  by 
any  company,  evidencing  or  representing  any  right  to  par- 
ticipate or  share  in  the  profits  or  earnings  or  the  distri- 
bution of  assets  of  any  business  carried  on  for  profit ;  ex- 
cepting therefrom  the  following: 

1.  Bills  of  exchange  and  promissory  notes  not  offered 
to  the  public  by  the  drawer,  maker,  or  underwriter  there- 
of, and  all  mortgages  and  deeds  of  trust  of  property  sit- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  759 

uated  in  this  State,  executed  to  secure  the  payment  there- 
of ;  and 

2.  Any  security  listed  in  any  standard  manual  of  in- 
formation, as  to  which  the  commissioner  shall  first  make 
and  file  his  written  finding  to  the  effect  that  such  security 
is  fully  and  accurately  described  in  such  manual  and  that 
a  sale  thereof  will  not,  in  his  opinion,  work  a  fraud  upon 
the  purchaser  thereof;  provided,  that  if  such  finding  shall 
thereafter  be  vacated  or  set  aside,  such  security  shall  not 
thereafter  be  deemed  to  be  included  within  this  exception. 

(b)  "Sale." — A  "sale,"  within  the  meaning  of    this 
act,  includes  every  contract  by  which,  for  a  pecuniary  con- 
sideration, called  a  price,  one  transfers  to  another  an  in- 
terest in  property,  and  also  an  exchange,  a  pledge,  a  hy- 
pothecation, and  any  transfer  in  trust  or  otherwise  as  se- 
curity for  the  performance  of  an  obligation,  and  also  any 
issue  of  any  security  by  a  company;  and  the  word  "sell," 
as  used  in  this  act,  includes  every  act  by  which  such  sale 
is  made. 

(c)  "Agent." — The  word  "agent"  as  used  in  this  act 
means  and  includes  every  person  or  company  employed 
or  appointed  by  a  company  or  a  broker  who  shall,  within 
this  State,  either  as  an  employe  or  otherwise,  for  a  com- 
pensation, sell,  offer  for  sale,  negotiate  for  the  sale  of,  or 
take  subscriptions  for  any  security  of  any  company  of  its 
own  issue  offered  for  sale  by  it. 

(d)  "Broker." — The  word  "broker"  as  used  in  this 
act  includes  every  person  or  company,  other  than  an  agent 
who  shall,  in  this  state,  engage,  either  wholly  or  in  part, 
in  the  business  of  selling,  offering  for  sale,  negotiating 
for  the  sale  of,  or  otherwise  dealing  in  any  security  or 
securities  issued  by  others,  or  of  underwriting  any  issue 
of  securities  or  of  purchasing  such  securities  with  the  pur- 
pose of  reselling  them  or  of  offering  them  for  sale  to  the 
public  for  a  commission  or  at  a  profit;  excepting  there- 
from the  following : 

(a)  Any  owner  of  any  security  who  is  not  the  issuer 
or  an  underwriter  thereof,  who  sells  or  exchanges  the 


760  BUSINESS  LAW  FOB  BUSINESS  MEN. 

same  for  his  own  account ;  provided,  that  such  sale  or  ex- 
change is  not  made  in  the  course  of  repeated  and  suc- 
cessive transactions  of  like  or  similar  character  by  him ; 

(b)  Any  trustee  of  a  trust  created  by  or  declared  in  a 
will  or  a  judicial  writ,  order,  decree  or  judgment,  who, 
in  such  capacity,  lawfully  disposes  of  any  property ; 

(c)  Any  company  transacting  a  banking  or  insurance 
business  in  this  State,  selling  a  security  for  an  owner 
thereof  or  a  broker,  other  than  an  underwriter  thereof,  at 
a  commission  of  not  more  than  2  per  cent  of  the  par  or  face 
value  thereof;  provided,  such  sale  is  not    made  in  the 
course  of  repeated  and  successive  transactions  of  like  or 
similar  character  by  such  company ; 

(d)  One,  not  the  issuer,  who  disposes  of  securities 
to  a  broker  or  to  a  purchaser  who,  as  a  part  of  his  regular 
business,  purchases  such  securities ; 

(e)  Any  pledge  holder  selling,  in  good  faith  and  not 
for  the  purpose  of  avoiding  the  provisions  of  this  act,  and 
in  the  ordinary  course  of  business,  a  security  pledged 
with  him  as  security  for  a  bona  fide  debt. 

(e)  Permit  to  Sell  Securities. — Sec.  3.  No  company 
shall  sell,  except  upon  a  sale  for  a  delinquent  assessment, 
or  offer  for  sale,  negotiate  for  sale  of,  or  take  subscrip- 
tions for  any  security  of  its  own  issue  until  it  shall  have 
first  applied  for  and  secured  from  the  commissioner  a  per- 
mit authorizing  it  so  to  do.  Such  application  shall  be  in 
writing,  shall  be  verified  as  provided  for  the  verification 
of  pleadings,  and  shall  be  filed  in  the  office  of  the  commis- 
sioner. In  such  application  the  applicant  shall  set  forth 
the  names  and  addresses  of  its  officers,  the  location  of  its 
office,  an  itemized  account  of  its  financial  condition,  the 
amount  and  character  of  its  assets  and  liabilities,  a  de- 
tailed statement  of  the  plan  upon  which  it  proposes  to 
transact  business,  a  copy  of  any  security  it  proposes  to 
issue,  a  copy  of  any  contract  it  proposes  to  make  concern- 
ing the  same,  a  copy  of  any  prospectus  or  advertisement, 
or  other  description  of  such  securities,  then  prepared  by 
or  for  it  for  distribution  or  publication,  and  such  addi- 


Section  1060,  page  760,  sub-division  (e),  "Business  Law  for  Business 
Men"— SUBSCRIPTIONS  FOR  SHARES— Neither  this  act  nor  any  provi- 
sion hereof  shall  be  deemed  to  prohibit  subscriptions  for  shares  of  a  domestic 
corporation  made  prior  to  the  incorporation  thereof  and  set  forth  in  its  ar- 
ticles of  incorporation;  but  such  subscriptions  shall  be  deemed  to  have  been 
made  and  accepted  upon  the  condition  that  such  corporation  shall  be  incorpo- 
rated within  ninety  days  thereafter  and,  when  incorporated,  shall  with  reason- 
able diligence  apply  for  and  secure  from  the  commissioner  a  permit  author- 
izing the  issue  of  the  shares  so  subscribed  for,  in  accordance  with  such  sub- 
scriptions. 

Act  of  the  Legislature  of  California,  approved  June  1,  1921;  in  effect 
August  1,  1921. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  761 

tional  information  concerning  the  company,  its  condition 
and  affairs  as  the  commissioner  may  require.  If  the 
applicant  is  a  partnership  or  an  unincorporated  associa- 
tion or  joint  stock  company,  it  shall  file  with  its  applica- 
tion a  copy  of  its  articles  of  partnership  or  association, 
and  all  other  papers  pertaining  to  its  organization.  If  the 
applicant  is  a  trustee,  it  shall  file  with  its  application  a 
copy  of  all  instruments  by  which  the  trust  is  created  and 
in  which  it  is  accepted,  acknowledged  or  declared.  If  the 
applicant  is  a  corporation,  it  shall  file  with  its  application 
a  copy  of  all  minutes  of  any  proceedings  of  its  directors  or 
stockholders  or  members  relating  to  or  affecting  the  issue 
of  such  securities,  and  also  a  copy  of  its  articles  of  incor- 
poration and  of  its  by-laws  and  of  any  amendments  there- 
to. If  the  applicant  is  a  corporation  or  association  organ- 
ized under  the  laws  of  any  other  State,  territory,  or  gov- 
ernment, it  shall  also  file  with  its  application  a  certificate, 
executed  by  the  proper  officer  of  such  state,  territory,  or 
government  not  more  than  thirty  days  before  the  filing 
of  such  application,  showing  that  such  applicant  is  author- 
ized to  transact  business  in  such  State,  territory,  or  gov- 
ernment ;  and  also,  in  such  form  as  the  commissioner  may 
prescribe  its  written  instrument,  irrevocably  appointing 
the  commissioner  and  his  successor  in  office  its  true  and 
lawful  attorney  upon  whom  all  process  in  any  action  or 
proceeding  against  it  may  be  served,  with  the  same  effect 
as  if  said  corporation  or  association  were  organized  or 
created  under  the  laws  of  this  State  and  had  been  lawfully 
served  with  process  therein. 

(f )  Examination  of  Application. — Sec.  4.  Upon  the  fil- 
ing of  such  application,  it  shall  be  the  duty  of  the  commis- 
sioner to  examine  it  and  the  other  papers  and  documents 
filed  therewith,  and  he  may,  if  he  deems  it  advisable,  make 
or  have  made  a  detailed  examination,  audit,  and  investi- 
gation of  the  applicant  and  its  affairs.  If  he  finds  that  the 
proposed  plan  of  business  of  the  applicant  is  not  unfair, 
unjust,  or  inequitable,  that  it  intends  to  fairly  and  honestly 
transact  its  business,  and  that  the  securities  that  it  pro- 


762  BUSINESS  LAW  FOB  BUSINESS  MEN. 

poses  to  issue  and  the  methods  to  be  used  by  it  in  issuing 
or  disposing  of  them  are  not  such  as,  in  his  opinion,  will 
work  a  fraud  upon  the  purchaser  thereof,  the  commission- 
er shall  issue  to  the  applicant  a  permit  authorizing  it  to 
issue  and  dispose  of  securities,  as  therein  provided,  in 
this  State,  in  such  amounts  and  for  such  considerations 
and  upon  such  terms  and  conditions  as  the  commissioner 
may  in  said  permit  provide.  Otherwise,  he  shall  deny 
the  application  and  refuse  such  permit  and  notify  the 
applicant  in  writing  of  his  decision.  Every  permit  shall 
recite  in  bold  type  that  the  issuance  thereof  is  permissive 
only  and  does  not  constitute  a  recommendation  or  in- 
dorsement of  the  securities  permitted  to  be  issued.  The 
commissioner  may  impose  such  conditions  as  he  may  deem 
necessary  to  the  issue  of  such  securities,  and  shall  have 
the  power  to  establish  such  rules  and  regulations  as  may 
be  reasonable  or  necessary  to  insure  the  disposition  of  the 
proceeds  of  such  securities  in  the  manner  and  for  the  pur- 
poses provided  in  such  permit,  and  may,  from  time  to 
time  for  cause,  amend,  alter,  or  revoke  any  permit  issued 
by  him,  or  temporarily  suspend  the  rights  of  the  applicant 
under  such  permit. 

(g)  Certificate  of  Agent  or  Broker. — Sec.  5.  No  per- 
son or  company  shall  act  as  an  agent  or  broker  until  such 
person  or  company  shall  have  first  applied  for  and  secured 
from  the  commissioner  a  certificate,  then  in  effect,  author- 
izing such  person  or  company  so  to  do.  Every  such  certifi- 
cate shall  expire  on  the  thirty-first  day  of  December  next 
after  its  issuance,  unless  sooner  revoked.  To  secure  such 
certificate,  the  applicant  shall  make  and  file  in  the  office  of 
the  commissioner  an  application  therefor  in  writing,  veri- 
fied by  or  in  behalf  of  the  applicant.  In  such  application, 
the  applicant  shall  set  forth  in  addition  to  such  other  in- 
formation as  may  be  required  by  the  commissioner : 

1.  The  name  and  address  of  the  applicant,  and,  if  it  be 
a  corporation,  association,  or  joint  stock  company,  the 
name  and  address  of  each  of  its  managing  officers  arid 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  763 

agents,  and,  if  it  be  a  partnership,  the  name  and  address 
of  each  of  the  partners ; 

2.  A  succinct  statement  of  facts  showing  that  the  ap- 
plicant, and  its  managing  officers  and  agents,  if  it  be  a  cor- 
poration, or  members,  if  it  be  a  partnership,  have  a  good 
business  reputation ; 

3.  If  the  applicant  is  a  broker,  the  general  plan  and 
character  of  the  business  of  the  applicant. 

For  filing  such  application,  the  applicant  shall  pay  a 
fee  as  hereinafter  provided.  If  the  applicant  is  a  corpora- 
tion or  association  organized  under  the  laws  of  any  other 
state,  territory,  or  government,  it  shall  file  with  its  appli- 
cation a  copy  of  its  articles  of  incorporation  or  associa- 
tion, together  with  a  certificate  executed  by  the  proper 
officer  of  such  state,  territory,  or  government  not  more 
than  thirty  days  before  the  filing  of  such  application, 
showing  that  such  applicant  is  authorized  to  transact 
business  in  such  State,  territory  or  government,  and  also, 
in  such  form  as  the  commissioner  may  prescribe,  its  writ- 
ten instrument,  irrevocably  appointing  the  commissioner 
and  his  successsor  in  office  its  true  and  lawful  attorney 
upon  whom  all  process  in  any  action  or  proceeding  against 
it,  arising  out  of  or  founded  upon  the  actual  fraud  of 
such  applicant  in  the  sale  of  securities  within  this  State, 
may  be  served,  with  the  same  effect  as  if  said  corporation 
or  association  were  organized  or  created  under  the  laws 
of  this  state  and  had  been  lawfully  served  with  process 
therein. 

(h)  Certificate  Issued. — Sec.  6.  The  commissioner 
shall  examine  such  application,  and  shall  make  such 
further  investigation  of  the  applicant  and  its  affairs  as 
he  shall  deem  advisable.  If,  from  such  examination,  the 
commissioner  shall  be  satisfied  of  the  good  business 
reputation  of  the  applicant  and  of  its  officers  or  members, 
if  any,  he  shall  issue  such  certificate.  Otherwise,  he  shall 
refuse  the  same  and  deny  the  application  and  notify  the 
applicant  of  his  decision.  The  commissioner  may  at  any 
time  revoke  any  broker's  or  agent's  certificate  issued  by 


764  BUSINESS  LAW  FOE  BUSINESS  MEN. 

him  if  he  shall  find  that  the  holder  thereof  is  of  bad  busi- 
ness repute,  or  has  violated  any  provision  of  this  act,  or 
has  engaged,  or  is  about  to  engage  in  any  fraudulent 
transaction. 

(i)  Advertisements  Submitted  to  Commissioner. — 
Sec.  7.  No  person,  partnership,  association,  or  corpora- 
tion, other  than  a  broker  holding  a  broker's  certificate, 
then  in  effect,  shall  issue,  circulate,  or  publish  any  adver- 
tisement, pamphlet,  prospectus,  or  circular  concerning 
any  security,  to  be  issued  by  any  company,  that  such  per- 
son, partnership,  association,  or  corporation  desires  or 
proposes  to  sell,  until  the  company  proposing  to  issue 
such  security  shall  have  first  secured  from  the  commis- 
sioner a  permit  authorizing  it  to  issue  or  sell  such 
security;  nor  shall  any  company,  broker,  or  agent,  or 
any  other  person,  issue,  circulate,  or  publish  any  adver- 
tisement, pamphlet,  prospectus,  or  circular  concerning 
any  security  sold  or  offered  for  sale  by  it,  unless  the  name 
of  the  company,  broker,  agent,  or  person  issuing,  circulat- 
ing, or  publishing  the  same  shall  be  subscribed  thereto, 
and  a  true  copy  thereof  shall  have  been  first  filed  in  the 
office  of  the  commissioner,  or  deposited  in  a  United  States 
post  office,  properly  enclosed  in  a  sealed  envelope,  ad- 
dressed to  the  commissioner  at  Sacramento,  California, 
with  the  postage  duly  prepaid  thereon;  nor  shall  any 
company,  broker,  or  agent,  or  any  other  person,  issue, 
circulate,  or  publish  any  such  advertisement,  pamphlet, 
prospectus,  or  circular  after  notice  in  writing  given  to  it 
by  the  commissioner,  that,  in  his  opinion,  the  same  con- 
tains any  statements  that  is  false  or  misleading  or  other- 
wise likely  to  deceive  a  reader  thereof. 

( j)  Report  ~by  Company  on  Sale  of  Securities. — Sec.  8. 
Every  company  authorized  by  the  commissioner  to  sell 
securities  shall  thereafter,  at  such  times  as  it  may  be 
required  by  the  commissioner,  make  and  file  in  the  office 
of  the  commissioner  a  report,  setting  forth,  in  such  form 
as  the  commissioner  may  prescribe,  the  securities  sold  by 
it  under  the  authority  of  any  permit  issued  by  him,  the 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  765 

proceeds  derived  therefrom,  the  disposition  oT  such  pro- 
ceeds, and  such  other  information  concerning  its  property, 
officers,  or  affairs,  relating  to  or  affecting  the  value  of 
such  securities,  as  the  commissioner  may  require. 

(k)  Statement  l>y  Broker  on  Sale  of  Securities. — Sec. 
9.  Every  broker  shall,  at  such  times  as  it  may  be  required 
by  the  commissioner,  make  and  file  in  the  office  of  the  com- 
missioner a  true  and  correct  statement  concerning  any 
security  sold  or  offered  for  sale  by  such  broker,  showing 
the  name  and  location  of  the  principal  office  of  the  issuer 
of  such  security;  the  names  of  its  managing  officers,  if 
it  is  a  corporation,  or  its  members,  if  it  is  a  partnership ; 
its  assets,  liabilities,  and  issued  capital  stock,  at  the  close 
of  its  fiscal  year  then  last  ended,  or  at  a  later  date ;  its 
gross  income,  expenses,  and  fixed  charges  for  the  year 
next  preceding  such  date,  or  for  such  time  as  such  issuer 
of  such  security  has  transacted  business,  if  for  less  than 
one  year,  and  the  approximate  price  at  which  such  broker 
has  sold  or  proposes  to  sell  such  security,  together  with 
such  other  information,  of  which  the  broker  may  have 
knowledge,  as  the  commissioner  may  require. 

(1)  Papers  Open  to  Public  Inspection. — Sec.  10.  All 
papers,  documents,  reports,  and  other  instruments  in 
writing  filed  with  the  commissioner  under  this  act  shall 
be  open  to  public  inspection;  provided,  that  if,  in  his 
judgment,  the  public  welfare  or  the  welfare  of  any  com- 
pany, broker,  or  agent  demands  that  any  portion  of  such 
information  be  not  made  public,  he  may,  in  his  descretion, 
withhold  such  information  from  public  inspection  for 
such  time  as  in  his  judgment  is  necessary.  The  commis- 
sioner may  at  any  time  give,  issue,  or  make  public  any 
information  concerning  any  company  or  any  contracts, 
stocks,  bonds,  or  other  securities  sold  or  offered  for  sale 
within  this  state,  if  in  his  judgment  the  giving,  issuing,  or 
publishing  of  the  same  will  be  of  public  interest  or  ad- 
vantage or  will  tend  to  prevent  the  fraudulent  sale  of  such 
securities. 


766  BUSINESS  LAW  FOR  BUSINESS  MEN. 

(m)  Review  of  Orders,  Etc.,  of  Commissioner. — Sec. 
11.  Every  order,  decision,  permit  or  other  official  act  of 
the  commissioner  shall  be  subject  to  review,  and  any  party 
aggrieved  by  any  such  order,  decision,  or  permit  of  the 
commissioner  may  appeal  therefrom  to  the  superior  court 
of  the  county  of  Sacramento,  by  serving  upon  the  commis- 
sioner a  notice  of  such  appeal,  a  demand  in  writing  for  a 
certified  transcript  of  all  the  papers  on  file  in  his  office 
affecting  or  relating  to  such  decision,  and  the  payment  of 
the  fee  therefor,  within  sixty  days  after  the  making  of 
any  such  order,  permit,  or  decision.  Thereupon  the  com- 
missioner shall,  within  ten  days,  make  and  certify  such 
transcript,  and  the  appellant  shall,  within  five  days  there- 
after, file  the  same  and  the  notice  of  appeal  with  the  clerk 
of  said  court.  Upon  the  hearing  of  such  appeal,  the 
burden  of  proof  shall  lie  upon  the  appellant,  and  the 
court  shall  receive  and  consider  any  pertinent  evidence, 
whether  oral  or  documentary,  concerning  the  action  of 
the  commissioner  from  which  the  appeal  is  taken,  but  shall 
be  limited  to  a  consideration  and  determination  of  the 
question,  whether  there  has  been  an  abuse  of  discretion 
on  the  part  of  the  commissioner  in  making  such  order, 
decision,  or  permit. 

(n)  Securities  Void. — Sec.  12.  Every  security  issued 
by  any  company,  without  a  permit  of  the  commissioner 
authorizing  the  same  then  in  effect,  shall  be  void,  and 
every  security  issued  by  any  company,  with  the  authoriza- 
tion of  the  commissioner  but  not  conforming  in  its  provi- 
sions to  the  provisions,  if  any,  which  it  is  requred  by  the 
permit  of  the  commissioner  to  contain,  shall  be  void. 

(o)  Penalty  for  Company  Violating  Act. — Sec.  13. 
Every  company  which  shall  directly  or  indirectly  issue 
or  cause  to  be  issued  any  security  contrary  to  the  pro- 
visions of  this  act,  or  of  the  constitution  of  this  state,  or 
in  nonconformity  with  a  permit  of  the  commissioner 
authorizing  the  same,  or  which  applies  the  proceeds  from 
the  sale  thereof,  or  any  part  thereof,  to  any  purpose  other 
than  the  purpose  or  purposes,  if  any,  specified  in  such 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  767 

permit,  or  to  any  purpose  specified  in  such  permit  in  ex- 
cess of  any  amount  limited  in  such  permit  to  be  used  for 
such  purpose,  shall  be  guilty  of  a  public  offense  and  shall 
be  punishable  by  a  fine  not  exceeding  ten  thousand  dollars, 
(p)  Penalty  for  Officers,  Etc. — Sec.  14. — Every  officer, 
agent  or  employee  of  any  company,  and  every  other  per- 
son, who  knowingly  authorizes,  directs,  or  aids  in  the  issue 
or  sale  of,  or  issues  or  executes,  or  sells,  or  causes  or 
assists  in  causing  to  be  issued,  executed,  or  sold,  any 
security,  in  nonconformity  with  a  permit  of  the  commis- 
sioner then  in  effect  authorizing  such  issue,  or  contrary 
to  the  provisions  of  this  act,  or  of  the  constitution  of  this 
state,  or  who,  in  any  application  to  the  commissioner,  or 
in  any  proceeding  before  him,  or  in  any  examination, 
audit,  or  investigation  made  by  him  or  his  authority, 
knowingly  makes  any  false  statement  or  representation, 
or  who,  with  knowledge  of  its  falsity,  files  or  causes  to  be 
field  in  the  office  of  the  commissioner  any  false  state- 
ment or  representation  concerning  such  company  or  the 
property  which  it  then  holds  or  proposes  to  acquire,  or 
concerning  its  officers  or  its  financial  condition  or  other 
affairs,  or  concerning  its  proposed  plan  of  business,  or 
who,  with  knowledge  of  the  falsity  of  any  such  state- 
ment or  representation,  issues,  executes,  or  sells  or  causes 
to  be  issued,  executed,  or  sold,  any  security,  without  first 
informing  the  commissioner  of  the  falsity  of  such  state- 
ment in  writing,  or  who,  directly  or  indirectly,  knowingly 
applies,  or  causes  or  assists  in  causing  to  be  applied,  the 
proceeds  or  any  part  thereof,  from  the  sale  of  any  security 
to  any  purpose  contrary  to  the  provisions  of  the  permit 
authorizing  the  issue  of  such  security,  or  to  any  purpose 
specified  in  such  permit  in  excess  of  any  amount  limited 
in  such  permit  to  be  used  for  such  purpose,  or  who,  with 
knowledge  that  any  security  has  been  issued  or  executed 
in  violation  of  any  of  the  provisions  of  this  act,  sells  or 
offers  the  same  for  saler  or  who,  with  knowledge  that  any 
advertisement,  pamphlet,  prospectus,  or  circular  con- 
cerning any  security  contains  any  statement  that  is  false 


768  BUSINESS  LAW  FOB  BUSINESS  MEN. 

v 

or  misleading,  or  otherwise  likely  to  deceive  a  reader 
thereof,  issues,  circulates,  or  publishes  the  same,  or  shall 
cause  the  same  to  be  issued,  circulated,  or  published,  or 
who,  in  any  other  respect  wilfully  violates,  or  fails  to  com- 
ply with  any  of  the  provisions  of  this  act  or  who,  in  any 
other  respect,  wilfully  violates  or  fails,  omits,  or  neglects 
to  obey,  observe,  or  comply  with  any  order,  permit,  deci- 
sion, demand,  or  requirement,  or  any  part  or  provision 
thereof  of  the  commissioner  under  the  provisions  of  this 
act,  is  guilty  of  a  public  offense  and  shall  be  punished  by 
imprisonment  in  the  state  pricon  not  exceeding  five  years, 
or  in  a  county  jail  not  exceeding  two  years,  or  by  a  fine 
not  exceeding  five  thousand  dollars,  or  by  both  such  fine 
and  imprisonment. 

(q)  State  Corporation  Department  Created. — Sec.  15. 
There  is  hereby  created  a  state  corporation  department. 
The  chief  officer  of  such  department  shall  be  the  commis- 
sioner of  corporations.  He  shall  be  appointed  by  the 
governor  and  hold  office  at  the  pleasure  of  the  governor. 
He  shall  receive  an  annual  salary  of  five  thousand  dollars, 
to  be  paid  monthly  out  of  the  state  treasury  upon  a  war- 
rant of  the  controller.  He  shall  within  fifteen  days  from 
the  time  of  notice  of  his  appointment  take  and  subscribe 
to  the  constitutional  oath  of  office  and  file  the  same  in 
the  office  of  the  secretary  of  state  and  execute  to  the 
people  of  the  state  a  bond  in  the  penal  sum  of  ten 
thousand  dollars  with  corporate  security  or  two  or  more 
sureties,  to  be  approved  by  the  governor  of  the  state, 
for  the  faithful  discharge  of  the  duties  of  his  office. 

(r)  Powers  of  Commissioner. — The  commissioner 
shall  at  all  times  have  the  power  to  administer  oaths  and 
to  make  an  examination  or  investigation  of  the  books, 
records,  accounts,  and  other  papers,  and  of  the  business 
of  any  company,  broker,  or  agent  permitted  or  authorized 
by  him  to  sell  securities,  to  make  dividends,  to  create 
debts,  to  divide,  withdraw,  or  pay  to  the  stockholders,  or 
any  of  them,  any  part  of  its  capital  stock,  or  to  increase 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  769 

or  reduce  its  capital  stock.  On  any  examination,  audit, 
or  investigation  made  or  hearing  conducted  by  him,  he 
shall  have  the  power  to  take  the  testimony  of  any  witness 
and  to  issue  subpoenas  requiring  the  attendance  upon 
such  examination,  audit,  investigation,  or  hearing  in  any 
part  of  the  state  of  witnesses  and  the  production  of  books, 
documents,  and  other  things  under  their  control,  and  in 
any  such  case  to  take  or  cause  to  be  taken  the  deposition  of 
any  witness  residing  within  or  without  this  state. 

No  person  shall  be  excused  from  testifying  or  from 
producing  any  book,  document,  or  other  thing  under 
his  control  upon  any  such  examination,  audit,  investiga- 
tion, or  hearing  upon  the  ground  that  his  testimony,  or 
the  book,  document,  or  other  thing  required  of  him,  may 
tend  to  incriminate  him,  or  may  have  a  tendency  to  sub- 
ject him  to  punishment  for  a  felony,  or  to  a  penalty  or 
forfeiture;  but  no  person  shall  be  prosecuted,  punished, 
or  subjected  to  any  penalty  or  forfeiture  for  or  on  account 
of  any  act,  transaction,  matter,  or  thing  concerning  which 
he  shall  have  been  so  compelled  to  testify  under  oath,  or 
to  produce  such  documentary  or  other  evidence ;  provided, 
that  no  person  so  testifying  shall  be  exempt  from  prosecu- 
tion or  punishment  for  perjury  if  committed  by  him  in 
his  testimony.  The  authority  to  make  or  conduct  any 
such  examination,  audit,  investigation,  or  hearing,  includ- 
ing the  authority  to  administer  oaths,  and  to  subpoena 
witnesses  and  take  their  testimony,  may  be  delegated  by 
the  commissioner  to  any  deputy  or  examiner  appointed 
by  him  for  that  purpose.  Such  appointment  shall  be  made 
by  an  instrument  in  writing,  signed  by  the  commissioner 
under  his  official  seal,  arid  upon  such  examination,  audit, 
investigation,  or  hearing,  the  same  shall  be  produced  by 
such  deputy  or  examiner  at  any  time  upon  demand  there- 
for. 

(s)  Fees. — The  commissioner  shall  charge  and  collect 
the  following  fees : 

1.  For  filing  any  application  for  a  permit  to  issue 
securities,  ten  dollars,  plus — 


770  BUSINESS  LAW  FOR  BUSINESS  MEN. 

One  twentieth  of  one  per  cent  of  the  amount  of  any 
excess  of  the  aggregate  value  of  the  securities  sought  to 
be  issued  over  twenty  thousand  dollars  and  not  exceeding 
fifty  thousand  dollars ; 

One  twenty-fifth  of  one  per  cent  of  such  amount  in 
excess  of  fifty  thousand  dollars  and  not  exceeding  one 
hundred  thousand  dollars ; 

One  fiftieth  of  one  per  cent  of  such  amount  in  excess 
of  one  hundred  thousand  dollars  and  not  exceeding  five 
hundred  thousand  dollars;  and 

One  one-hundredth  of  one  per  cent  of  such  amount  in 
excess  of  five  hundred  thousand  dollars. 

The  value  of  such  securities  shall  be  deemed  to  be  their 
par  or  face  value,  if  they  have  a  par  or  face  value ;  other- 
wise, the  price  at  which  the  company  proposes  to  sell  or 
issue  the  same,  or  the  value,  as  alleged  in  the  application, 
of  the  consideration  (if  other  than  money)  to  be  received 
in  exchange  therefor. 

2.  For  filing  any  application  for  a  permit  or  other 
authority  to  make  dividends,  create  debts,  or  to  divide, 
withdraw,  increase,  reduce  or  pay  to  the  stockholders, 
or  any  of  them,  the  capital  stock,  or  any  part  thereof,  the 
same   amount   that  would   otherwise  be  chargeable   or 
collectible  if  such  application  were  for  a  permit  to  issue 
securities ;  provided,  that  in  any  such  case  the  value  shall 
be  determined  by  the  amount  of  dividends  made,  debts 
created,  or  capital  stock  divided,  withdrawn,  increased, 
reduced,  or  paid. 

3.  For  filing  any  application  for  a  broker 's  certificate, 
five  dollars. 

4.  For  filing  any  application  for  an  agent's  certificate, 
one  dollar. 

5.  For  any  examination,  audit,  or  investigation,  ten 
dollars  per  day  or  fraction  thereof,  if  made  by  the  com- 
missioner, or  the  actual  amount  of  the  salary  or  other 
compensation,  not  exceeding  ten  dollars  per  day,  paid  to 
any  deputy  or  other  employee  of  the  commissioner,  if 
made  by  a  deputy  or  other  employee,  for  each  day  or 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  771 

fraction  thereof  that  such  commissioner,  deputy,  or  other 
employee  shall  necessarily  be  absent  from  his  office  for 
the  purpose  of  making  such  examination,  audit,  or  investi- 
gation, plus  the  actual  amount  of  traveling  expenses  rea- 
sonably incurred  in  the  performance  of  such  work. 

6.  For  copies  of  papers  and  records  not  required  to 
be  certified  or  otherwise  authenticated  by  the  commis- 
sioner, ten  cents  for  each  folio. 

7.  For  certified  copies  of  official  documents,  orders, 
and  other  papers  filed  in  his  office ;  for  making  and  mailing 
copies  or  process  served  upon  him  under  the  provisions  of 
section  eighteen  of  this  act,  and  for  transcripts  on  appeal, 
fifteen  cents  for  each  folio  and  one  dollar  for  each  certifi- 
cate under  seal  affixed  thereto. 

8.  For  certificate  of  service  and  mailing  of  process 
served  upon  the  commissioner  under  the  provisions  of  sec- 
tion eighteen  of  this  act,  two  dollars. 

No  fees  shall  be  charged  or  collected  for  copies  of 
papers,  records,  or  official  documents  furnished  to  public 
officers  for  use  in  their  official  capacity  or  for  the  reports 
of  the  commissioner  in  the  ordinary  course  of  distribu- 
tion; but  the  commissioner  may  fix  a  reasonable  charge 
for  publication  issued  under  his  authority. 

The  commissioner  shall  adopt  a  seal  bearing  the  fol- 
lowing inscription:  "Commissioner  of  Corporations  State 
of  California."  The  seal  shall  be  affixed  to  all  writs, 
orders,  permits,  and  certificates  issued  by  him,  and  to 
such  other  instruments  as  he  shall  direct.  All  courts  shall 
take  judicial  notice  of  said  seal. 

(t)  Copies  of  Orders,  Etc. — The  commissioner  may 
execute  in  duplicate  any  order,  finding,  or  permit  issued 
by  him,  and  each  of  such  parts  shall  be  deemed  to  be  an 
original.  An  original  of  every  such  order,  finding,  or 
permit  shall  be  retained  and  preserved  by  him  in  his 
office.  Copies  of  all  documents,  orders,  and  permits  made, 
executed,  or  issued  by  the  commissioner,  and  of  all  papers 
filed  in  his  office,  when  certified  by  the  commissioner  under 
his  official  seal,  shall  be  received  in  evidence  in  all  cases 


772  BUSINESS  LAW  FOE  BUSINESS  MEN. 

in  like  manner  and  with  the  same  effect  as  the  originals. 
Any  order  or  permit  issued  by  the  commissioner,  or  a  copy 
thereof  certified  by  the  commissioner  under  his  official 
seal,  to  be  a  true  copy  of  the  original  order  or  permit, 
may  be  recorded  in  the  office  of  the  county  recorder  of  the 
county  in  which  is  located  the  principal  place  of  business 
of  the  company  affected  thereby  or  in  which  is  situated 
any  property  of  such  company,  and  such  record  shall  im- 
part notice  of  such  order  or  permit,  and  of  all  its  pro- 
visions, to  all  persons.  A  certificate  under  the  seal  of  the 
commissioner  that  any  such  order  or  permit  has  not  been 
amended,  altered,  revoked,  or  suspended  may  also  be 
recorded  in  the  same  offices  and  with  like  effect. 

(u)  Subscription  for  Shares  Prior  to  Incorporation. 
Neither  this  act  nor  any  provision  hereof  shall  be  deemed 
to  prohibit  subscriptions  for  shares  of  a  corporation  made 
prior  to  the  incorporation  thereof  and  set  forth  in  its 
articles  of  incorporation ;  but  such  subscriptions  shall  be 
deemed  to  have  been  made  and  accepted  upon  the  condi- 
tion that  such  corporation,  when  incorporated,  shall  with 
reasonable  diligence  apply  for  and  secure  from  the  com- 
missioner a  permit  authorizing  the  issue  of  the  shares 
so  subscribed  for,  in  accordance  with  such  subscriptions. 

(v)  Election  of  Officers  Prior  to  Issuing  Shares. — The 
directors  or  trustees  named  in  the  articles  of  incorpora- 
tion may,  prior  to  the  issue  of  any  shares,  organize  by 
the  election  of  a  president,  who  must  be  one  of  their  num- 
ber, a  secretary  and  a  treasurer;  and  such  directors,  or 
a  majority  of  them,  or  such  president  and  secretary  may, 
in  the  name  of  and  in  behalf  of  the  corporation,  present 
an  application  to  the  commissioner  as  herein  provided. 
Act  of  the  Legislature,  approved  May  18,  1917 ; 

in  effect  July  27,  1917. 

Act  of  the  Legislature,  approved  May  2,  1919 ; 
in  effect  July  22,  1919. 

Section  1061. — PUBLIC  UTILITIES. — The  control  of  pub- 
lic utilities  in  California  is  given  by  law  to  the  State  Bail- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  773 

road  Commission,  which  regulates  the  business  and 
approves  the  rates  and  charges  of  many  corporations. 
The  term  "public  utility,"  includes  every  common  carrier, 
pipe  line  corporation,  gas  corporation,  electrical  corpora- 
tion, telephone  corporation,  telegraph  corporation,  water 
corporation,  wharfinger,  warehouseman,  and  heat  cor- 
poration, where  the  service  is  performed  for  or  the  com- 
modity delivered  to  the  public  or  any  porton  thereof. 
Act  of  the  Legislature,  approved  May  11,  1919; 
in  effect  July  22, 1919. 

Section  1062. — INCOME  TAX  ON  CORPORATIONS. — A  law 
passed  by  the  Congress  of  the  United  States  creates  an 
income  tax  on  corporations.  The  law  applies  to  all  cor- 
porations, joint  stock  companies  or  associations, 
having  a  capital  stock,  and  to  all  insurance  com- 
panies, whether  organized  under  the  laws  of  any  state 
or  territory  of  the  United  States,  or  under  the  laws 
of  a  foreign  country,  engaged  in  business  in  any  state  or 
territory  of  the  United  States  or  in  Alaska  or  District 
of  Columbia.  The  tax  must  be  paid  annually  to  the 
United  States,  of  two  percentum  upon  the  entire  net  in- 
come received  from  all  sources  during  each  year.  The 
tax  on  corporations  organized  under  the  laws  of  any 
foreign  country  is  upon  the  amount  of  net  income  over 
and  above  five  thousand  dollars  received  from  business 
transacted  and  capital  invested  within  the  United  States 
and  its  territories,  Alaska  and  the  District  of  Columbia, 
during  each  year.  The  law  applies  only  to  corporations 
organized  and  operated  for  profit,  and  does  not  apply  to 
fraternal  societies,  or  to  labor,  agricultural  or  horticul- 
tural organizations.  The  net  income  must  be  ascertained 
by  deducting  from  the  gross  amount  all  ordinary  neces- 
sary expenses  of  maintenance  and  operation;  all  losses 
actually  sustained  during  the  year  and  not  made  up  by 
insurance  (and  in  case  of  insurance  companies  other  than 
dividends  paid  within  the  year  on  policy  and  annuity  con- 
tracts and  annual  additions  made  to  reserve  funds) ;  inter- 


774  BUSINESS  LAW  FOR  BUSINESS  MEN. 

est  paid  on  bonded  or  other  indebtedness  not  exceeding 
the  paid  up  stock  of  the  corporation,  and  in  the  case  of  a 
bank,  banking  association  or  trust  company,  interest 
actually  paid  on  deposits ;  all  sums  paid  within  the  year 
for  taxes.  Each  corporation,  by  its  President,  Vice- 
President,  or  other  principal  officer,  and  its  Treasurer  or 
Assistant  Treasurer,  must  make  a  true  statement  under 
oath  to  the  Collector  of  Internal  Revenue  on  or  before 
the  first  day  of  March  of  each  year,  showing  the  capital 
stock,  indebtedness,  gross  amount  of  income  for  the  year, 
amount  of  dividends  received,  expenses  paid  out,  losses 
sustained,  interest  paid,  and  the  net  income  of  the  cor- 
poration after  making  the  above  deductions.  The 
Government  may  appoint  revenue  agents  to  examine  any 
books  and  papers  of  any  corporation,  and  to  take  the 
testimony  of  the  officers  thereof,  whenever  there  is  doubt 
whether  a  statement  made  is  true  and  correct.  The  law 
provides  that  if  any  statement  made  is  false  or  with 
fraudulent  intent,  one  hundred  per  cent  must  be  added  to 
the  tax ;  and  in  the  case  of  the  refusal  or  neglect  to  make 
any  statement  or  to  verify  the  same  fifty  per  cent  must 
be  added  to  the  tax.  If  the  officer  of  the  corporation  who 
should  make  this  statement  is  sick  or  absent,  the  Collector 
may  allow  further  time,  not  exceeding  thirty  days.  The 
assessment  of  the  tax  must  be  made,  and  the  corporation 
notified  of  the  amount  due  from  it,  on  or  before  the  first 
day  of  June  of  each  year,  and  the  tax  must  be  paid  on  or 
before  the  fifteenth  day  of  June.  If  any  tax  remains  un- 
paid after  the  fifteenth  day  of  June  in  any  year,  and  for 
ten  days  after  notice  and  demand  by  the  Collector,  there 
must  be  added  the  sum  of  five  per  cent  on  the  amount  of 
the  tax  unpaid,  and  interest  at  the  rate  of  one  per  cent  per 
month  from  the  time  the  tax  becomes  due.  Every  cor- 
poration failing  to  comply  with  the  law  requiring  a  true 
statement  to  be  made  each  year,  is  liable  to  a  penalty  of 
not  exceeding  ten  thousand  dollars.  Any  person  guilty  of 
making  a  false  or  fraudulent  statement,  with  intent  to 
defeat  or  evade  the  tax,  will  be  guilty  of  a  misdemeanor 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  775 

and  subject  to  a  fine  not  exceeding  one  thousand  dollars 
or  imprisonment  not  exceeding  one  year,  or  both,  at  the 
discretion  of  the  Court,  besides  the  costs  of  prosecution. 

Act  of  Congress,  approved  August  5,  1909. 

Act  of  Congress,  approved  September  8,  1916. 

(a)  1919  Amendments. — The  federal  income  tax  law  is 
long  and  complicated,  and  no  more  can  be  attempted  than 
a  brief  resume  of  important  provisions  and  amendments. 
Nobody  pretends  to  have  a  thorough  understanding  of 
this  law,  and  the  taxpayers'  return  must  continue  to  be 
the  result  of  more  or  less  guesswork. 

(b)  Tax  Rates. — The  rate  of  normal  tax  on  individual 
incomes  has  been  raised  from  a  combination  of  2  per  cent 
under  the  Eevenue  Act  of  1915  and  2  per  cent  under  the 
Eevenue  Act  of  1917,  making  a  total  normal  of  4  per 
cent,  to  12  per  cent  for  1918  and  8  per  cent  for  1919,  with 
a  proviso  that  on  the  first  $4,000  of  taxable  income  of  a 
citizen  or  resident  of  the  United  States  the  rate  shall  be 
half  of  these  percentages.    Thus  if  an  individual's  gross 
income  is  $10,000  his  allowable  deductions  for  business 
expenses,  interest,  taxes,  etc.,  $3,000,  his  net  income  would 
be  $7,000.     Against  this,  if  married,  he  would  have  a 
credit  of  $2,000,  leaving  a  taxable  income  of  $5,000,  of 
which  $4,000  would  be  taxable  at  6  per  cent  and  $1,000 
at  12  per  cent.    He  would  also  be  liable  for  surtax  on 
the  excess  of  $7,000  over  $5,000,  the  amount  at  which  sur- 
taxes begin,  or  $2,000  at  the  rates  under  the  first  two 
brackets;  that  is,  on  $1,000,  the  amount  between  $5,000 
and  $6,000,  at  1  per  cent  and  on  $1,000  under  the  second 
bracket,  embracing  amounts  between  $6,000  and  $8,000, 
at  2  per  cent.    The  surtax  rates  run  from  1  per  cent  to 
65  per  cent  (in  addition  to  the  normal)  increasing  1  per 
cent  for  each  additional  $2,000  of  net  income  from  $6,000 
to  $100,000,  4  per  cent  for  each  additional  $50,000  between 
$100,000  and  $300,000,  3  per  cent  between  $300,000  and 
$500,000,  1  per  cent  between  $500,000  and  $1,000,000,  and 
1  per  cent  over  a  million.    An  important  addition  to  the 


776  BUSINESS  LAW  FOE  BUSINESS  MEN. 

section  imposing  rates  is  the  provision  that  in  case  of  the 
bona  fide  mines,  oil,  or  gas  wells,  where  the  principal 
value  of  the  property  has  been  demonstrated  by  develop- 
ment work  done  by  the  taxpayer  the  surtax  upon  the 
profit  made  from  the  sale  shall  not  exceed  20  per  cent  of 
the  selling  price. 

(c)  Exchange    of   Stock. — An    important   change    is 
made  in  that  as  to  exchange  of  stock  for  stock  or  securities 
of  no  greater  aggregate  par  or  face  value,  in  connection 
with  any  reorganization,  merger,  or  consolidation,  no 
profit  or  loss  shall  be  deemed  to  occur  from  the  exchange. 
If  the  aggregate  par  or  face  value  of  the  new  stock  re- 
ceived is  greater  than  the  aggregate  face  or  par  of  the 
old,  a  like  amount  of  the  new  is  treated  as  taking  the 
place  of  the  old,  and  the  excess  is  treated  as  profit  to  the 
extent  that  the  market  value  is  in  excess  of  the  value 
March  1,  1913,  or  cost,  of  the  old.    In  addition,  provision 
is  made  for  taking  inventory  value  if  inventory  is  made, 
as  an  alternative  to  cost,  where  property  was  purchased 
subsequent  to  March  1,  1913. 

(d)  Net  Losses. — "Net  loss"  is  defined  as  the  excess 
of  deductions  allowed  by  law  (other  than  dividends  in  the 
case  of  corporations)  over  the  gross  income  plus  tax  free 
interest,  such  net  loss  resulting  either  (1)  from  operation 
of  any  business  regularly  carried  on  by  the  taxpayer,  or 
(2)  from  the  bona  fide  sale  by  the  taxpayer  of  plant, 
building,  equipment,  etc.,  constructed,  installed  or  ac- 
quired by  the  taxpayer  on  or  after  April  6,  1917,  for  the 
production  of  articles  contributing  to  the  prosecution  of 
the  war.    Such  net  loss,  sustained  in  any  taxable  year 
beginning  after  October  31,  1918,  and  ending  prior  to 
January  1, 1920,  may  be  deducted  from  the  income  for  the 
preceding  year,  and  the  tax  recomputed  accordingly,  or, 
if  in  excess  of  the  net  income  for  such  preceding  taxable 
year,  the  excess  may  be  carried  over  into  the  succeeding 
year  as  a  deduction. 

(e)  Deductions. — The  most  important  new  deductions 
provide  that  at  the  time  of  filing  return  for  the  taxable 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  777 

year  1918  a  taxpayer  may  file  a  claim  for  abatement 
based  upon  a  substantial  loss  (whether  realized  or  not  by 
actual  sale)  resulting  from  a  material  reduction  (not  due 
to  temporary  fluctuation)  in  the  value  of  the  inventory 
of  such  year,  or  the  payment  after  the  close  of  the  year 
of  rebates  under  contracts  entered  into  during  the  year 
on  sales  made  in  such  year,  and  in  such  case  payment  of 
the  amount  of  the  tax  covered  by  the  claim  shall  not  be 
required  until  claim  is  decided,  but  the  taxpayer  must, 
if  required  by  the  Commissioner,  give  a  bond  in  double 
the  amount  of  the  claim,  for  the  payment  of  tax  and  inter- 
est, which  interest,  if  the  claim  is  disallowed,  is  1  per 
cent  a  month.  If  no  such  claim  is  filed,  but  it  is  shown 
to  the  satisfaction  of  the  Commission  that  during  the 
year  1919  the  taxpayer  has  suffered  such  a  loss,  the  tax 
for  the  year  1917  is  to  be  redetermined  and  the  loss  de- 
ducted from  the  income  for  that  year. 

(f)  Credits. — The  credits  allowed   (for  purposes  of 
normal  tax  only)    (a)  Dividends  from  taxable  corpora- 
tions and  personal  service  corporations  out  of  tax  paid 
earnings,  (b)  Interest  on  obligations  of  the  United  States 
and  bonds  of  the  War  Finance  Corporation  which  is 
included  in  gross  income  (note  that  the  only  interest  upon 
United  States  obligations  which  is  included  in  gross  in- 
come is  upon  obligations  issued  after  September  1,  1917), 
(c)  a  personal  exemption  of  $1,000  in  the  case  of  a  single 
person  or  $2,000  in  the  case  of  a  head  of  family  or  married 
person  living  with  husband  or  wife,  and  (d)  $200  for  each 
person  (other  than  husband  or  wife)  dependent  upon  and 
receiving  his  chief  support  from  the  taxpayer,  if  such 
dependent  person  is  under  18  or  mentally  or  physically 
incapacitated.    Under  the  previous  law  the  $200  deduc- 
tion was  limited  to  each  child  instead  of  to  each  person. 

(g)  Partnerships. — Partnerships,  as  heretofore,  arc 
not  subject  to  income  tax,  but  the  partners  must  return 
their  individual  shares  of  partnership  profits  and  pay 
tax  thereon,  whether  divided  or  not.    Provision  is  made 
for  prorating  the  share  of  earnings  of  a  fiscal  year  part- 


778  BUSINESS  LAW  FOK  BUSINESS  MEN. 

nership  according  to  the  proportionate  period  of  each 
year  covered. 

(h)  Individual  Returns. — Heretofore  returns  were  re- 
quired of  every  person  of  lawful  age  having  a  net  income 
of  $1,000  or  more.  This  is  charged  so  as  to  apply  to  every 
individual  having  a  net  income  of  $1,000  if  single  or  if 
married  and  not  living  with  husband  or  wife,  or  $2,000  if 
married,  and  living  with  husband  or  wife. 

(i)  Partnership  Returns. — Under  former  law,  part- 
nerships were  not  required  to  make  return  for  income  tax 
purposes  unless  requested  to  do  so  by  the  Commissioner. 
They  are  now  required  to  make  such  returns  showing 
gross  income,  deductions,  names  of  partners  and  dis- 
tributive shares  of  each. 

(j)  Returns  When  Accounting  Period  Is  Changed.— 
For  the  first  time,  the  right  is  given  to  an  individual  to 
make  return  on  a  fiscal  year  basis,  if  the  fiscal  year  ends 
with  the  last  day  of  any  month  other  than  December.  The 
phraseology  providing  for  a  change  from  a  calendar  to 
a  fiscal  year  or  back  from  one  fiscal  year  to  another  is 
simplified.  The  change  may  be  made  at  any  time  with 
the  approval  of  the  Commissioner,  but  in  case  the  change 
is  from  a  fiscal  to  a  calendar  year  a  separate  return  must 
be  made  for  the  period  from  the  close  of  the  last  fiscal 
year  for  which  return  was  made  to  December  31  follow- 
ing. In  the  case  of  change  from  calendar  to  fiscal  year  a 
separate  return  shall  be  made  for  the  period  from  the 
close  of  the  last  calendar  year  to  the  date  designated  as 
the  close  of  the  fiscal  year.  These  separate  returns  for  a 
part  year  must  of  course  be  filed  within  sixty  days  after 
the  close  of  the  period  for  which  the  return  is  made. 

(k)  Corporation  Tax. — On  all  corporations,  except 
exempt  corporations,  the  Act  levies  a  tax  of  12  per  cent  of 
the  taxable  income  for  the  year  1918  and  10  per  cent  for 
the  year  1919  and  each  year  thereafter.  Provision  is 
made  that,  for  the  purposes  of  the  Act  of  March  21,  1918, 
for  the  taking  over  by  the  Government  of  transportation 
companies,  five-sixths  of  the  tax  of  12  per  cent  and  four- 


BUSINESS  CONTKACTS  AND  LEGAL  OBLIGATIONS.  779 

fifths  of  the  tax  of  10  per  cent  shall  be  treated  as  levied 
by  an  act  amendatory  of  the  Revenue  Act  of  1917. 

(1)  Payment  in  Installments. — The  provision  imposr 
ing  5  per  cent  penalty  and  1  per  cent  a  month  interest  on 
any  amount  of  tax  remaining  unpaid  for  10  days  after 
notice  and  demand  is  retained,  but  it  is  provided  that  in 
case  of  a  bona  fide  claim  for  abatement  the  interest  while 
the  claim  is  pending  shall  be  at  the  rate  of  one-half  of  1 
per  cent  per  month  instead  of  1  per  cent.  Instructions 
printed  on  the  return  are  made  notice  and  demand  for  the 
first  installment,  and  if  a  distraint  warrant  is  served 
$5.00  is  added  to  the  tax. 

(m)  War  Excess  Profit  Tax. — The  income  subject  to 
excess  profits  tax  is  found  by  deducting  from  the  net  in- 
come as  determined  for  income  tax  purposes  (but  without 
deducting  the  credits  allowed  by  Sec.  236)  the  excess 
profits  credit  which  is  explained  hereafter.  So  much  of 
the  resulting  amount  as  does  not  exceed  20  per  cent  of 
the  invested  capital  is  subject  to  a  30  per  cent  tax,  and 
any  amount  in  excess  of  20  per  cent  of  the  invested  capital 
is  subject  to  a  65  per  cent  tax.  The  tax  rates  stated  above 
are  for  1918  only,  the  rates  for  1919  and  subsequent  years 
being  20  and  40  per  cent  respectively.  It  is  provided, 
however,  in  effect  that  if  any  corporation  during  the  tax- 
able year  1919  or  thereafter  makes  more  than  $10,000  out 
of  any  government  contract  or  contracts  made  between 
April  6,  1917,  and  November  11,  1918,  it  shall  pay  at  the 
1918  rate  on  the  proportion  of  net  income  attributable 
to  such  contract,  and  at  the  1919  rate  on  the  balance,  the 
proper  apportionment  and  allocation  of  the  deduction 
to  be  determined  under  rules  and  regulations  to  be  pre- 
scribed by  the  Commissioner.  The  above  provision  is 
subject  to  the  limitations  of  Section  302,  that  the  1918 
rate  shall  in  no  case  be  more  than  30  per  cent  of  the  in- 
come in  excess  of  $3,000  and  not  in  excess  of  $20,000  plus 
80  per  cent  of  the  income  in  excess  of  $20,000,  and  the 
3919  rate  shall  in  no  case  be  more  than  20  per  cent  plus 
40  per  cent  of  the  same  amounts  of  income  respectively. 


780  BUSINESS  LAW  FOB  BUSINESS  MEN. 

(n)  Luxury  Taxes. — Sec.  904  levies  a  tax  of  10  per 
cent  on  so  much  of  the  selling  price  of  any  of  the  follow- 
ing articles  when  sold  by  a  dealer  or  his  estate  as  is  in 
excess  of  the  amount  stated : 

Carpets  and  rugs,  on  amount  in  excess  of  $5.00  per 
square  yard ; 

Picture  frames,  on  amount  in  excess  of  $10.00  each ; 

Trunks,  on  amount  in  excess  of  $50.00  each; 

Valises,  traveling  bags,  on  amount  in  excess  of  $25.00 
each; 

Purses,  pocket-books  and  shopping  bags,  on  amount  in 
excess  of  $7.50  each; 

Portable  lighting  fixtures,  lamps,  etc.,  on  amount  in 
excess  of  $25.00  each ; 

Umbrellas,  parasols  and  sunshades,  on  amount  in  ex- 
cess of  $4.00  each ; 

Fans  on  amount  in  excess  of  $1.00  each ; 

House  or  smoking  jackets,  bath  and  lounging  robes,  on 
amount  in  excess  of  $7.50  each; 

Men's  waistcoats  sold  separately  on  amount  in  excess 
of  $5.00  each; 

Women's  and  misses'  hats,  bonnets,  and  hoods,  on 
amount  in  excess  of  $15.00  each ; 

Men's  and  boys'  hats,  on  amount  in  excess  of  $5.00 
each; 

Men's,  women's  misses'  and  boys'  shoes,  on  amount 
in  excess  of  $10.00  per  pair ; 

Men's  and  boys'  neckties  and  neckwear,  on  amount  in 
excess  of  $2.00  each; 

Men's  and  boys'  silk  stockings  or  hose,  on  amount  in 
excess  of  $1.00  per  pair; 

Women's  and  misses'  silk  stockings  or  hose,  on 
amount  in  excess  of  $2.00  per  pair ; 

Men's  shirts,  on  amount  in  excess  of  $3.00  each; 

Pajamas,  nightgowns  and  underwear,  on  amount  in 
excess  of  $5.00  each; 

Kimonos,  petticoats  and  waists,  on  amount  in  excess 
of  $15.00  each. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  781 

The  taxes  imposed  by  this  section  do  not  apply  to  any 
articles  made  of  or  ornamented  or  fitted  with  precious 
metals  or  imitations  thereof  or  ivory,  or  to  any  article 
made  of  fur  on  the  pelt,  or  of  which  such  fur  is  the 
component  part  of  chief  value,  or  to  liveries  or  hunting  or 
shooting  garments,  elsewhere  taxed.  The  taxes  are  to  be 
paid  to  the  vendor  by  the  purchaser,  and  by  him  returned 
to  the  United  States. 

Luxury  taxes  were  in  effect  May  1st,  1919. 

(o)  Tax  on  Employment  of  Child  Labor. — Under  this 
title  a  new  tax  is  laid  upon  every  person  (other  than  a 
bona-fide  boys'  or  girls'  canning  club  organized  by  the 
Agricultural  Department  of  a  state  or  the  United  States) 
employing  during  any  part  of  the  taxable  year  children 
under  16  years  of  age  in  any  quarry  or  mine,  or  under 
14  years  of  age  in  any  mill,  cannery,  factory,  workshop,  or 
manufacturing  establishment,  or  where  children  between 
the  ages  of  14  and  16  have  been  permitted  to  work  more 
than  eight  hours  in  any  day  or  six  days  in  any  week,  or  be- 
fore 6  a.  m.,  or  after  7  p.  m.,  during  any  portion  of  the  tax- 
able year,  the  tax  being  an  excise  tax  equivalent  to  10  per 
cent  of  the  entire  net  profits  from  the  sale  of  the  products 
of  the  mine,  quarry,  mill,  cannery,  workshop,  factory,  or 
manufacturing  establishment. 

The  amount  of  such  profits  is  to  be  computed  by  de- 
ducting from  the  gross  receipts  from  the  sale  of  such 
products  the  following  items  :  (a)  cost  of  raw  materials ; 
(b)  running  expenses;  (c)  interest  paid  on  debts  or  loans 
contracted  to  meet  the  needs  of  the  business;  (d)  taxes 
paid  with  respect  to  the  business  or  property  relating  to 
the  production ;  and  (e)  losses  in  connection  with  the  busi- 
ness. The  tax  is  not  to  be  imposed  if  the  employer  has 
procured,  relied  upon,  and  kept  a  certificate,  issued  in 
such  form  and  under  such  conditions  as  may  be  prescribed 
by  a  board  to  be  composed  of  the  Secretary  of  the  Treas- 
ury, the  Commissioner  and  the  Secretary  of  Labor,  or  a 
state  employment  certificate  issued  under  the  laws  of  the 
state  and  not  inconsistent  with  the  provisions  of  the  Act ; 


782  BUSINESS  LAW  FOB  BUSINESS  MEN. 

or  if  it  be  proven  to  the  satisfaction  of  the  Secretary  that 
the  employment  of  a  child  has  been  under  a  mistake  of 
fact  and  without  intention  to  evade  the  tax. 

(p)  1920  Decision  of  United  States  Supreme  Court. 
On  March  8, 1920,  the  Supreme  Court  of  the  United  States 
made  an  important  decision  on  taxation  of  dividends. 
The  decision  is  to  the  effect  that  the  surplus  fund  of  a 
corporation  carried  to  capital  account,  and  shares  of 
stock  issued  against  the  same  and  distributed  to  the  stock- 
holders, are  not  taxable.  Dividends  payable  in  cash  on 
stock  are  taxable,  whereas  dividends  payable  in  stock  of 
the  corporation  are  not  taxable. 

A.  J.  BLEDSOE,  ATTOBNEY-AT-LAW,  Los  Angeles,  CaL— 
Organization  of  corporations ;  election  of  directors,  state 
and  federal  taxes  (returns,  exemptions,  and  payments). 
See  title  page  of  this  book,  for  office  address  of  A.  J. 
Bledsoe. 


Section  1063,  page  783,  "Business  Law  for  Business  Men" — COMMER- 
CIAL BANK  AS  BROKER  FOR  LOANS— Add  to  section  1063,  as  follows: 

(a)  A  commercial  bank  may  act  as  the  broker  or  agent  for  others  in  mak- 
ing or  procuring  loans  on  real  estate  located  within  one  hundred  miles  of  the 
place  in  which  said  bank  may  be  located,  receiving  for  such  services  a  reason- 
able fee  or  commission;  provided,  however,  that  no  such  bank  shall  in  any 
case  guarantee  either  the  principal  or  interest  of  any  such  loans  or  assume 
or  guarantee  the  payment  of  any  premium  on  insurance  policies  issued  through 
its  agency  by  its  principal. 

Act  of  the  Legislature  of  California,  approved  June  3,  1921;  in  effect 
August  3,  1921. 


PART  X. 
BANK  LAWS  OF  CALIFORNIA. 

Section  1063. — COMMEKCIAL  BANKS. — The  term  "com- 
mercial bank,"  means  any  bank  authorized  by  law  to 
receive  deposits  of  money,  deal  in  commercial  paper  or  to 
make  loans  thereon,  and  to  lend  money  on  real  or  personal 
property,  and  to  discount  bills,  notes  or  other  commercial 
paper,  and  to  buy  and  sell  and  advertise  for  purchase  or 
sale  such  securities  as  are  permissible  for  investment  by 
commercial  banks,  gold  and  silver  bullion,  or  foreign  coins 
or  bills  of  exchange;  provided,  any  commercial  bank 
located  and  doing  business  in  any  place  the  population 
of  which  does  not  exceed  five  thousand  persons,  as  shown 
by  the  last  preceding  federal  census,  or  any  subsequent 
census  compiled  and  certified  under  any  law  of  this  state, 
may,  under  such  rules  and  regulations  as  may  be  pre- 
scribed by  the  superintendent  of  banks,  act  as  the  agent 
for  any  fire,  life,  or  other  insurance  company  authorized 
by  the  authorities  of  the  State  of  California  to  do  busi- 
ness in  this  state,  by  soliciting  and  selling  insurance  and 
collecting  premiums  on  policies  issued  by  such  company ; 
and  may  receive  for  services  so  rendered  such  fees  or 
commissions  as  may  be  agreed  upon  between  the  said 
bank  and  the  insurance  company  for  which  it  may  act 
as  agent;  provided,  however,  that  no  such  bank  shall  in 
any  case  assume  or  guarantee  the  payment  of  any  pre- 
mium on  insurance  policies  issued  through  its  agency  by 
its  principal ;  and  provided,  further,  that  said  bank  shall 
cot  guarantee  the  truth  of  any  statement  made  by  an  as- 
pured  in  filing  his  application  for  insurance. 

Act  of  the  Legislature  approved  May  15,  1919; 
in  effect  July  22, 1919. 

783 


784  BUSINESS  LAW  FOE  BUSINESS  MEN. 

Section  1064. — COPY  OF  ARTICLES  OF  INCORPORATION.— 
Every  corporation,  at  the  time  it  applies  for  a  certificate 
of  authority  to  do  a  banking  business,  must  file  with  the 
superintendent  of  banks  a  certified  copy  of  its  articles 
of  incorporation,  or  of  the  statute  chartering  such  cor- 
poration, a  certified  copy  of  its  by-laws,  and  also  a  certi- 
fied copy  of  all  instruments  amending  or  altering  such 
articles  of  incorporation  or  charter  or  by-laws.  There- 
after a  certified  copy  of  each  amendment  or  certificate 
designed  to  increase  or  decrease  the  capital  stock,  to 
change  the  number  of  directors,  to  amend  the  articles  of 
incorporation,  to  change  the  principal  place  of  business, 
or  the  name  of  such  corporation,  or  to  effect  any  other 
organic  change  shall  likewise  be  so  filed  before  such  in- 
strument takes  effect.  Each  certification  required  by  the 
provisions  of  this  section  other  than  that  of  by-laws  must 
be  by  the  secretary  of  state. 

Act  of  the  Legislature  approved  May  15,  1919; 
in  effect  July  22, 1919. 

Section  1065. — CAPITAL  AND  DEPOSIT  LIABILITIES. — The 
aggregate  of  paid-up  capital  together  with  the  surplus, 
of  every  commercial  bank,  must  equal  ten  per  centum  of 
its  deposit  liabilities.  The  aggregate  of  paid-up  capital 
and  surplus  of  every  savings  bank  having  a  capital  stock, 
and  the  reserve  fund  of  every  savings  bank  without  a 
capital  stock,  must  equal  the  following  percentages  of  its 
deposit  liabilities : 

(a)  Ten  per  centum  of  any  amount  up  to  and  includ- 
ing two  million  dollars. 

(b)  Seven  and  one-half  per  centum  of  any  amount  in 
excess  of  two  million  dollars  up  to  and  including  five 
million  dollars. 

(c)  Five  per  centum  of  any  amount  in  excess  of  five 
million  dollars  up  to  and  including  fifteen  million  dollars. 

(d)  Two  and  one-half  per  centum  of  any  amount  in 
excess  of  fifteen  million  dollars  up  to  and  including  forty 
million  dollars. 


Section  1065.  page  784,  "Business  Law  for  Business  Men" — CAPITAL 
AND  DEPOSIT  LIABILITIES  OF  COMMERCIAL  AND  SAVINGS 
BANKS — Substitute  the  following  for  section  1065,  page  784:  "The  aggre- 
gate of  paid-up  capital  together  with  the  surplus,  of  every  commercial  bank, 
must  equal  the  following  percentages  of  its  deposit  liabilities: 

"(a)  Ten  per  centum  of  any  amount  up  to  and  including  two  million  dol- 
lars. 

"(b)  Seven  and  one-half  per  centum  of  any  amount  in  excess  of  two 
million  dollars  up  to  and  including  five  million  dollars. 

"(c)   Five  per  centum  of  any  amount  in  excess  of  five  million  dollars. 

"The  aggregate  of  paid-up  capital  together  with  the  surplus  of  every  sav- 
ings bank  having  a  capital  stock,  and  the  reserve  fund  of  every  savings  bank 
without  a  capital  stock,  must  equal  the  following  percentages  of  its  deposit 
liabilities: 

SAVINGS  BANKS— "(d)  Ten  per  centum  of  any  amount  up  to  and 
including  one  million  dollars. 

"(e)  Seven  and  one-half  per  centum  of  any  amount  in  excess  of  one  mil- 
lion dollars  up  to  and  including  three  million  dollars. 

"(f)  Five  per  centum  of  any  amount  in  excess  of  three  million  dollars  up 
to  and  including  ten  million  dollars. 

"(g)  Two  and  one-half  per  centum  of  any  amount  in  excess  of  ten  mil- 
lion dollars  up  to  and  including  twenty-five  million  dollars. 

"(h)  One  per  centum  of  any  amount  in  excess  of  twenty-five  million 
dollars." 

Act  of  the  Legislature  of  California,  approved  June  3,  1921;  in  effect 
August  3,  1921. 

(a)  ORGANIZATION  CAPITAL— Commercial  and  savings  banks 
hereafter  organized  must  have  paid  up  in  cash  a  capital  stock  of  not  less  than 
$25,000,  population  up  to  5,000;  $50,000,  population  over  5,000  to  25,000; 
$100,000,  population  over  25,000  up  to  100,000;  $200,000,  population  over 
100,000  up  to  200,000;  $300,000,  population  over  200,000.  This  does  not  apply 
to  a  bank  located  in  a  place  annexed  to  a  larger  city;  but  no  such  bank  can 
move  from  its  original  place  of  business  after  annexation  until  it  shall  have 
the  capital  required  in  the  larger  place. 

Any  savings  bank  organized  without  capital  stock  must  have  a  reserve 
fund  of  at  least  one  million  dollars.  Every  bank  doing  a  departmental  busi- 
ness shall  have  paid  up,  in  cash,  capital  stock  as  follows: 

In  any  locality  in  which  the  population  does  not  exceed  five  thousand 
persons,  not  less  than  twenty-five  thousand  dollars  if  it  transacts  both  a  com- 
mercial and  savings  business,  or  not  less  than  one  hundred  twenty-five 
thousand  dollars,  if  it  transacts  both  a  commercial  and  trust  business,  or  not 
less  than  one  hundred  twenty-five  thousand  dollars  if  it  transacts  both  a 
savings  and  trust  business  and  not  less  than  one  hundred  twenty-five 
thousand  dollars  if  it  transacts  a  commercial,  savings  and  trust  business. 

In  any  city  in  which  the  population  is  more  than  five  thousand  persons, 
but  does  not  exceed  twenty-five  thousand  persons,  not  less  than  fifty  thousand 
dollars  if  it  transacts  both  a  commercial  and  savings  business,  or  not  less  than 
one  hundred  fifty  thousand  dollars  if  it  transacts  both  a  commercial  and  trust 
business,  or  not  less  than  one  hundred  fifty  thousand  dollars  if  it  transacts  both 
a  savings  and  trust  business,  and  not  less  than  one  hundred  fifty  thousand 
dollars  if  it  transacts  a  commercial,  savings  and  trust  business. 

In  any  city  in  which  the  population  is  more  than  twenty-five  thousand 
persons,  but  does  not  exceed  one  hundred  thousand  persons,  not  less  than  one 
hundred  thousand  dollars,  if  it  transacts  both  a  commercial  and  savings  busi- 
ness, or  not  less  than  two  hundred  thousand  dollars  if  it  transacts  both  a  com- 
mercial and  trust  business  or  not  less  than  two  hundred  thousand  dollars  if 
it  transacts  both  a  savings  and  trust  business,  and  not  less  than  two  hundred 
thousand  dollars  if  it  transacts  a  commercial,  savings  and  trust  business. 

In  any  city  in  which  the  population  is  more  than  one  hundred  thousand 
persons,  but  docs  not  exceed  two  hundred  thousand  persons,  not  less  than 
two  hundred  thousand  dollars  if  it  transacts  both  a  commercial  and  savings 
business,  or  not  less  than  four  hundred  thousand  dollars  if  it  transacts  both 
a  commercial  and  trust  business,  or  not  less  than  four  hundred  thousand 
dollars  if  it  transacts  both  a  savings  and  trust  business,  and  not  less  than 
four  hundred  thousand  dollars  if  it  transacts  a  commercial,  savings  and  trust 
business. 

In  any  city  in  which  the  population  exceeds  two  hundred  thousand  per- 
sons, not  less  than  three  hundred  thousand  dollars  if  it  transacts  both  a  com- 
mercial and  savings  business,  or  not  less  than  five  hundred  thousand  dollars 
if  it  transacts  both  a  commercial  and  trust  business,  or  not  less  than  five  hun- 
dred thousand  dollars  if  it  transacts  both  a  savings  and  trust  business,  and 
not  less  than  five  hundred  thousand  dollars  if  it  transacts  a  commercial,  sav- 
ings and  trust  business. 

Act  of  the  Legislature  of  California,  approved  June  3,  1921;  in  effect 
August  3,  1921. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  785 

(e)  One  per  centum  of  any  amount  in  excess  of  forty 
million  dollars. 

The  deposits  shall  not  be  increased  if  such  proportion 
of  paid-up  capital  and  surplus  or  reserve  fund  to  deposit 
liabilities  is  not  maintained,  and  in  no  event  shall  said 
paid-up  capital  be  less  than  the  minimum  paid-up  capital 
provided  by  this  act;  provided,  that  such  deposit  liabili- 
ties shall  be  exclusive  of  United  States  and  postal  savings 
deposits  and  deposits  of  the  State  of  California  and  of 
any  county  and  municipality  in  the  State  of  California 
which  are  secured  as  required  by  law. 

Act  of  the  Legislature,  approved  May  15,  1919 ; 
in  effect  July  '22,  1919. 

Section  1066. — TOTAL  RESERVES  OF  COMMERCIAL  BANKS. 
Every  commercial  bank  shall  maintain  total  reserves 
against  its  aggregate  deposits,  exclusive  of  United  States 
and  postal  savings  deposits  and  deposits  of  the  State  of 
California  and  of  any  county  and  municipality  in  the 
State  of  California,  which  are  secured  as  required  by  law, 
as  follows : 

1.  Eighteen  per  centum  of  such  deposits  if  such  bank 
has  its  principal  place  of  business  in  a  city  having  a  popu- 
lation of  one  hundred  thousand  or  over. 

2.  Fifteen  per  centum  of  such  deposits,  if  such  bank 
is  located  in  a  city  having  a  population  of  fifty  thousand 
or  over  and  less  than  one  hundred  thousand. 

3.  Twelve  per  centum  of  such  deposits  if  such  bank 
is  located  elsewhere  in  the  state. 

At  least  one-half  of  the  total  reserves  shall  be  main- 
tained as  reserves  on  hand  and  shall  consist  of  gold  bul- 
lion or  any  form  of  money  or  currency  authorized  by  the 
aws  of  the  United  States,  and  the  remainder  of  the  total 
reserves  required  by  the  provisions  of  this  section  shall 
'•>e  maintained  as  reserves  on  deposit  or  as  reserves  on 
iiand;  such  reserves  on  hand  to  consist  of  gold  bullion 
or  any  form  of  money  or  currency  authorized  by  the 
ws  of  the  United  States;  provided,  however,  that  all  or 


786  BUSINESS  LAW  FOB  BUSINESS  MEN. 

any  part  of  the  reserves  may  be  deposited,  subject  to  call, 
with  a  federal  reserve  bank  in  the  district  in  which  such 
bank  is  located. 

If  any  bank  shall  have  become  a  member  of  a  federal 
reserve  bank,  it  shall  comply  with  the  reserve  require- 
ments of  the  federal  reserve  act  and  its  amendments,  and 
its  compliance  therewith  shall  be  in  lieu  of,  and  shall  re- 
lieve such  bank  from  compliance  with,  the  provisions  of 
this  section. 

If  any  bank  shall  not  maintain  the  total  reserves  re- 
quired the  superintendent  of  banks  may  impose  a  penalty 
upon  it,  based  upon  the  length  of  time  such  encroachment 
upon  its  total  reserves  amounting  to  one  per  centum  or 
more  of  its  aggregate  deposits  shall  continue,  at  the  fol- 
lowing rates: 

1.  At  the  rate  of  six  per  centum  per  annum  upon 
any  such  encroachment  not  exceeding  two  per  centum 
of  such  deposits. 

2.  At  the  rate  of  eight  per  centum  per  annum  upon 
any  additional  encroachment  in  excess  of  two  and  not 
exceeding  three  per  centum  of  such  deposits. 

3.  At  the  rate  of  ten  per  centum  per  annum  upon  any 
additional  encroachment  in  excess  of  three  and  not  ex- 
ceeding four  per  centum  of  such  deposits. 

4.  At  the  rate  of  twelve  per  centum  per  annum  upon 
any  additional  encroachment  in  excess  of  four  per  centum 
of  such  deposits. 

(a)  Reserve  Depositaries. — The  superintendent  of 
banks  shall,  in  his  discretion,  upon  the  nomination  of  any 
bank,  designate  a  depositary  or  depositaries  for  the  re- 
serves on  deposit  of  such  bank  provided  for  by  this  act. 
Except  as  otherwise  provided  in  this  section,  such  deposit- 
ary shall  be  a  bank  or  national  banking  association  located 
in  this  state.  Every  reserve  depositary,  which  has  its 
principal  place  of  business  in  a  judicial  township  or  in  a 
city  located  in  this  state  in  which  the  population  is  less 
than  50,000,  shall  have  at  all  times  as  its  total  reserve  an 
amount  equal  to  the  total  reserves  required  by  the  pro- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  787 

visions  of  this  section  for  every  bank  which  has  its  prin- 
cipal place  of  business  in  a  city  having  a  population 
of  fifty  thousand  or  over  and  less  than  one  hundred 
thousand. 

(b)  Required  Capital  and  Surplus  of  Depositary — 
No  bank  or  national  banking  association  shall  hereafter 
be  designated  as  a  depositary  of  any  such  reserves  unless 
it  shall  have  a  combined  capital  and  surplus  of  not  less 
than  the  following  amounts : 

1.  Two  hundred  fifty  thousand  dollars,  if  located  in 
a  city  which  has  a  population  of  three  hundred  thousand 
or  over ; 

2.  Two  hundred  thousand  dollars,  if  located  in  a  city 
which  has  a  population  of  one  hundred  thousand  or  over 
and  less  than  three  hundred  thousand ; 

3.  One  hundred  fifty  thousand  dollars,  if  located  in  a 
city  which  has  a  population  of  fifty  thousand  or  over  and 
less  than  one  hundred  thousand; 

4.  One  hundred  thousand  dollars,  if  located  else- 
where in  the  state. 

Such  depositary  may  also  be  a  banking  corporation 
with  a  capital  and  surplus  of  one  million  dollars  or  more, 
located  in  any  city  in  the  United  States. 

(c)  Restoration  of  Reserves. — If  the  total  reserves  of 
any  bank  shall  be  less  than  the  amount  required  by  this 
section,  such  bank  shall  not  increase  its  liabilities  by 
making  any  new  loans  or  discounts,  otherwise  than  by 
discounting  bills  of  exchange  on  sight,  or  by  paying  any 
dividends  from  profits  until  the  full  amount  of  its  total 
reserves  has  been  restored.    The  superintendent  of  banks 
may  notify  any  bank  whose  total  reserves  shall  be  below 
the  amount  herein  required,  to  restore  such  total  re- 
serves ;  and,  if  it  shall  fail  for  thirty  days  thereafter  to 
restore  such  total  reserves,  such  bank  shall  be  deemed 
insolvent  and  may  be  proceeded  against  under  the  pro- 
visions of  this  act;  provided,  that  all  deposits  of  money 
herein  permitted  or  required  shall  comply  with  the  pro- 
visions of  section  forty-three  of  this  act. 


788  BUSINESS  LAW  FOB  BUSINESS  MEN. 

(d)  "Reserves  on  Hand."  —The  term,  "reserves  on 
hand,"  when  used  in  this  act,  means  the  reserves  against 
deposits  kept,  pursuant  to  the  provisions  of  this  act,  in 
the  vault  of  any  bank  or  in  any  safety  deposit  box  in  any 
other  bank  in  this  state,  said  box  to  be  under  the  exclusive 
control  of  the  depositing  bank. 

(e)  "Reserves  on  Deposit."  -The  term,  "reserves  on 
deposit,"  when  used   in  this   act,  means   the   reserves 
against  deposits  maintained  by  any  bank  pursuant  to  this 
act  in  reserve  depositaries,  or  in  a  federal  reserve  bank 
in  the  district  in  which  such  bank  is  located  and  not  in 
excess  of  the  amount  authorized  by  this  act. 

(f)  "Total  Reserves."-  -The  term;  "total  reserves," 
when  used  in  this  act,  means  the  aggregate  of  reserves 
on  hand  and  reserves  on  deposit  maintained  pursuant  to 
the  provisions  of  this  act. 

(g)  "Reserve    Depositary."  —  The    term,    "reserve 
depositary,"  when  used  in  this  act,  means  a  bank,  trust 
company  or  banking  corporation  designated  by  the  super- 
intendent of  banks  on  the  nomination  of  the  depositing 
bank  as  a  depositary  for  reserves  on  deposit. 

Act  of  the  Legislature,  approved  May  15,  1919 ; 
in  effect  July  22,  1919. 

Section  1067. — PREFERENCE  TO  DEPOSITORS.— No  bank, 
banker,  or  bank  officer,  shall  give  preference  to  any  de- 
positor or  creditor  except  as  otherwise  authorized  by 
law;  provided,  that  any  commercial  bank  or  commercial 
department  of  a  departmental  bank,  is  authorized  and 
empowered  for  temporary  purposes,  to  borrow  money,  or 
to  borrow  money  and  pledge  or  hypothecate  as  collateral 
security  therefor,  its  assets  not  exceeding  fifty  per  centum 
in  excess  of  the  amount  borrowed,  but  only  to  the  extent 
and  upon  terms  and  conditions  as  follows : 

(a)  Borr oiving  Money. — Any  amount  up  to,  but  not 
exceeding  the  amount  of  its  capital  and  surplus,  without 
consent  of  the  superintendent  of  banks;  provided,  how- 
ever, that  any  amount  borrowed,  except  as  otherwise  pro- 


BUSINESS  CONTEACTS  AND  LEGAL  OBLIGATIONS.  789 

vided  in  this  section,  in  excess  of  the  amount  of  its  capital 
and  surplus,  at  such  time  actually  paid  in  and  remaining 
undiimnished  by  losses  or  otherwise,  must  first  be  ap- 
proved in  writing  by  the  superintendent  of  banks ;  pro- 
vided, also,  that  no  excess  loan  made  to  any  such  bank 
shall  be  invalid  or  illegal  as  to  the  lender,  even  though 
made  without  the  consent  of  the  superintendent  of  banks ; 
provided,  also,  that  the  rediscounting  with  or  without 
guarantee  or  endorsement  with  a  federal  reserve  bank,  of 
notes,  drafts,  bills  of  exchange  and  loans  secured  by  obli- 
gations of  the  United  States,  is  hereby  authorized  and 
shall  not  be  limited  by  the  terms  of  this  act,  and  shall 
not  be  considered  as  borrowed  money  within  the  meaning 
of  this  section. 

Any  amount  of  California,  state,  county,  city,  city  and 
county  funds,  or  any  other  public  money,  in  the  manner 
it  is  or  may  be  authorized  by  law  to  borrow  and  receive 
such  public  money  on  deposit  without  the  approval  of  the 
superintendent  of  banks. 

Any  amount  of  the  United  States  moneys  and  postal 
savings  moneys  of  the  United  States,  and  receive  such 
moneys  on  deposit,  and  pledge  or  hypothecate  such  of  its 
securities  and  upon  such  terms  as  may  be  required  by  the 
laws  of  the  United  States  or  the  rules  and  regulations  of 
the  secretary  of  the  treasury  of  the  United  States,  without 
the  approval  of  the  superintendent  of  banks. 

Any  amount,  in  addition  to  the  amounts  authorized  to 
be  borrowed  in  this  section,  for  the  purpose  of  buying 
from  the  United  States,  United  States  bonds,  United 
States  treasury  certificates,  or  notes  or  obligations  of  the 
United  States. 

To  rediscount  with  and  sell  to  a  federal  reserve  bank 
any  and  all  such  notes,  drafts,  bills  of  exchange,  accept- 
ances and  any  other  securities,  with  no  other  restrictions, 
and  as  fully,  and  to  the  same  extent  as  this  privilege  is 
given  to  national  bank  members  under  the  terms  of  the 
federal  reserve  act,  or  by  regulations  of  the  federal  re- 
serve board  made  pursuant  thereto. 


790  BUSINESS  LAW  FOR  BUSINESS  MEN. 

(b)  Partial  Payments. — No  bank  shall  make  partial 
payments  upon  any  certificate  of  deposit. 

(c)  Overdrafts. — In  no  case  shall  an  overdraft  of 
more  than  ninety  days'  standing  be  allowed  as  an  asset  of 
any  bank. 

(d)  Bad  Debts. — Any  debt  due  to  any  commercial 
bank,  on  which  interest  is  past  due  and  unpaid  for  the 
period  of  one  year,  unless  the  same  is  well  secured,  and 
is  in  process  of  collection,  shall  be  considered  a  bad  debt 
and  shall  be  charged  off  to  the  profit  and  loss  account  at 
the  expiration  of  that  time. 

Act  of  the  Legislature,  approved  May  15,  1919 ; 
in  effect  July  22,  1919. 

Section  1068. — INVESTMENT  IN  CAPITAL  STOCK  OF  COR- 
PORATIONS.— No  bank  shall,  except  as  otherwise  provided 
in  this  act,  purchase  or  invest  its  capital  or  surplus  or 
money  of  its  depositors,  or  any  part  of  either,  in  the 
capital  stock  of  any  corporation  unless  the  purchase  or 
acquisition  of  such  capital  stock  shall  be  necessary  to 
prevent  loss  to  the  bank  on  an  obligation  owned  or  on  a 
debt  previously  contracted  in  good  faith.  Any  capital 
stock  so  purchased  or  acquired  shall  be  sold  by  such  bank 
within  six  months  thereafter  if  it  can  be  sold  for  the 
amount  of  the  claim  of  such  bank  against  it;  and  all 
capital  stock  thus  purchased  or  acquired  must  be  sold  for 
the  best  price  obtainable  by  said  bank  within  three  years 
after  such  purchase  or  acquisition  unless  the  superin- 
tendent of  banks  shall  extend  the  time  of  its  sale  for  a 
period  not  to  exceed  two  years. 

(a)  Stock  of  Trust  Company. — Any  bank,  with  the 
previous  written  consent  of  the  superintendent  of  banks, 
may  purchase  or  otherwise  acquire  and  hold  the  whole  or 
any  part  of  the  capital  stock  of  not  more  than  one  trust 
company  organized  and  existing  under  the  laws  of  this 
state,  and  doing  business  in  the  same  city  in  which  the 
principal  place  of  business  of  such  bank  is  located;  pro- 
vided, hotvever,  that  not  more  than  an  amount  equal  to 


Section  1068,  page  790,  "Business  Law  for  Business  Men" — BUYING 
STOCK  OF  TRUST  COMPANY— In  sub-division  (a),  section  1068,  in  line 
6,  change  the  words  "in  the  same  city"  so  as  to  read  "in  the  same  county." 

(a)  Section  1073,  page  797 — Add  to  section  1073  two  new  sub-divisions 
as  follows: 

"(c)  Foreign  Banking — Any  bank,  without  regard  to  the  amount  of  its 
capital  and  surplus,  may  file  application  with  the  superintendent  of  banks  for 
permission,  upon  such  conditions  and  under  such  regulations  as  may  be  pre- 
scribed by  said  superintendent  of  banks,  to  invest  an  amount  not  exceeding 
in  the  aggregate  five  per  centum  of  its  paid-in  capital  and  surplus  in  the  stock 
of  one  or  more  corporations  chartered  or  incorporated  under  the  laws  of  the 
United  States  or  of  any  state  thereof,  and,  regardless  of  its  location,  princi- 
pally engaged  in  such  phases  of  international  or  foreign  financial  operations 
as  may  be  necessary  to  facilitate  the  export  of  goods,  wares  or  merchandise 
from  the  United  States  or  any  of  its  dependencies  or  insular  possessions  to 
any  foreign  country;  provided,  however,  that  in  no  event  shall  the  total  in- 
vestments, authorized  by  this  section  by  any  bank  exceed  ten  per  centum  of 
its  paid-in  capital  and  surplus;  provided,  also,  that  such  investments  may  be 
carried  in  either  the  commercial,  savings  or  trust  department,  or  may  be  ap- 
portioned to  any  two  or  all  three  of  such  departments  of  any  departmental 
state  bank." 

Act  of  the  Legislature  of  California,  approved  June  3,  1921;  in  effect 
August  3,  1921. 

(d)  International  Banking  Corporations — When  authorized  by  the  prev- 
ious written  consent  of  the  superintendent  of  banks,  three  or  more  persons 
may  organize  a  corporation  for  the  purpose  of  engaging  in  international  or  for- 
eign banking  or  other  international  or  foreign  financial  operations,  or  in  bank- 
ing or  other  financial  operations  in  a  dependency  or  insular  possession  of  the 
United  States,  either  directly  or  through  the  agency,  ownership,  or  control 
of  local  institutions  in  foreign  countries,  or  in  such  dependencies  or  insular 
possessions  and  to  act  when  required  by  the  secretary  of  the  treasury  of  the 
United  States  as  fiscal  agents  of  the  United  States. 

Such  persons  shall  execute  articles  of  incorporation  which  shall  specify 
in  general  terms  the  objects  for  which  the  association  is  formed  and  may  con- 
tain any  other  provisions  not  inconsistent  with  law  which  the  corporation  may 
see  fit  to  adopt  for  the  regulation  of  its  business  and  the  conduct  of  its  affairs. 

No  corporation  shall  be  organized  under  the  provisions  of  this  act  with 
a  capital  stock  of  less  than  two  million  dollars,  one-quarter  of  which  must  be 
paid  in  before  the  corporation  may  be  authorized  to  begin  business,  and  the 
remainder  of  the  capital  stock  of  such  corporation  shall  be  paid  in  installments 
of  at  least  ten  per  centum  of  the  whole  amount  to  which  the  corporation  shall 
be  limited  as  frequently  as  one  installment  at  the  end  of  each  succeeding  two 
months  from  the  time  of  the  commencement  of  its  business  operations  until 
the  whole  of  the  capital  stock  shall  be  paid  in. 

Act  of  the  Legislature  of  California,  approved  June  3,  1921-  in  effect 
August  3,  1921. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  791 

twenty-five  per  centum  of  the  capital  and  surplus  of  any 

such  bank  may  be  at  any  one  time  invested  in  the  capital 

stock  of  such  trust  company  or  such  other  corporation ; 

ind  provided,  further,  that  no  such  trust  company  shall 

igage  in  or  combine  the  business  of  a  commercial  bank 

a  savings  bank  or  a  title  insurance  company. 

(b)  Stock  of  Safe  Deposit  Corporation. — Any  bank, 

ith  the  previous  written  consent  of  the  superintendent 

f  banks,  may  purchase  or  otherwise  acquire  and  hold, 

ic  whole  or  any  part  of  the  capital  stock  of  not  more 

ian  one  corporation  authorized  and  empowered  to  con- 

uct  a  safe  deposit  business,  which  such  corporation  is 

rganized  and  existing  under  the  laws  of  this  state  and 

'oing  business  in  the  same  city  in  which  the  principal 
lace  of  business  of  such  bank  is  located;  provided,  hoiv- 
ver,  that  not  more  than  an  amount  equal  to  ten  per 
entum  of  the  capital  and  surplus  of  any  such  bank  may 

•ie  at  any  one  time  invested  in  the  capital  stock  of  such 

^afe  deposit  corporation. 

Act  of  the  Legislature,  approved  May  15,  1919; 
in  effect  July  22,  1919. 

Section  1069. — DEPOSIT  OF  FUNDS  IN  ANOTHER  BANK. — 
No  bank  shall  deposit  any  of  its  funds  in  any  other  bank, 
except  a  federal  reserve  bank,  unless  such  other  bank 
has  been  nominated  as  a  depositary  for  its  funds  by  the 
/ote  of  a  majority  of  the  directors  or  trustees  of  the  bank 
making  the  deposit,  and  such  other  bank  has  been  desig- 
nated by  the  superintendent  of  banks  as  such  depositary. 

The  superintendent  of  banks  may  in  his  discretion 
revoke  such  a  designation. 

Act  of  the  Legislature,  approved  May  15,  1919 ; 
in  effect  July  22,  1919. 

Section  1070. — NATIONAL  BANKING  ASSOCIATION  UNDER 
FEDERAL  RESERVE  ACT. — Any  national  banking  associa- 
tion, whose  principal  place  of  business  is  in  this  state,  is 
hereby  authorized  to  act  in  fiduciary  capacities  in  all 
respects  as  provided  by  the  acts  of  congress,  approved 


792  BUSINESS  LAW  FOB  BUSINESS  MEN. 

December  23,  1913,  and  amendments  thereof,  commonly 
known  as  the  federal  reserve  act,  and  all  acts  herein  pro- 
vided to  be  performed  by  the  state  treasurer,  the  super- 
intendent of  banks  or  other  public  officials  for  or  in  re- 
spect of  trust  companies,  shall  be  performed  for  such 
national  banking  association  equally  with  trust  com- 
panies. Every  such  national  banking  association  which 
shall  be  authorized  to  exercise  said  fiduciary  powers,  and 
which  has  qualified  by  making  the  deposit  of  securities 
required  by  the  law  of  this  state,  may  act,  or  may  be  ap- 
pointed by  any  court  to  act  in  any  such  capacity  in  like 
manner  as  an  individual.  The  superintendent  of  banks 
shall  inspect  and  examine  the  books,  records  and  assets 
of  the  trust  department  of  each  national  banking  associa- 
tion which  conducts  a  trust  department  in  this  state  to 
the  same  extent  that  the  said  superintendent  of  banks 
exercises  visitorial  supervision  over  trust  companies  or- 
ganized and  existing  under  the  laws  of  this  state. 

(a)  Charge  by  State  Banking  Department  for  Serv- 
ices.— The  charge  by  the  state  banking  department  for  all 
services  rendered  to  any  national  banking  association  by 
the  superintendent  of  banks,  in  accordance  with  the  pro- 
vision^ of  this  section,  shall  be  paid  by  the  national  bank- 
ing association  requiring  such  services.  Such  charge  for 
services  shall  be  determined  by  the  superintendent  of 
banks,  and  shall  be  no  higher  than  the  charge  for  a  similar 
service  to  trust  companies  organized  under  the  laws  of 
this  state. 

The  cost  of  all  regular  and  ordinary  service  shall  be 
calculated  upon  the  amount  of  the  securities  deposited  by 
each  such  national  bank  with  the  treasurer  of  the  state 
for  the  due  execution  and  faithful  performance  of  its 
court  and  private  trusts  at  the  same  ratio  as  is  applied 
to  the  capital  and  surplus  of  trust  companies  organized 
under  the  laws  of  this  state  in  determining  the  cost  to 
them  for  such  services. 

Act  of  the  Legislature,  approved  May  15,  1919 ; 
in  effect  July  22,  1919. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  793 

Section  1071. — AUTHORITY  TO  BECOME  MEMBER  OF 
FEDERAL  RESERVE  BANK. — Any  bank  is  hereby  authorized 
and  empowered  to  become  a  member  of  a  federal  reserve 
bank. 

Nothing  in  this  act  shall  prohibit  any  such  bank  from 
becoming  a  member  of  a  federal  reserve  bank,  in  the 
manner  provided  in  the  federal  reserve  act,  nor  from 
investing  any  part  of  its  capital  or  surplus  or  reserve 
fund  in  the  capital  stock  of  such  federal  reserve  bank,  in 
accordance  with  the  terms  and  provisions  of  such  federal 
reserve  act;  provided,  that  such  investment  shall  in  no 
case  exceed  the  minimum  amount  required  to  join  or 
associate  itself  with  or  maintain  membership  in  such 
federal  reserve  bank;  provided,  also,  that  such  invest- 
ment may  be  carried  in  either  the  commercial,  savings,  or 
trust  department,  or  may  be  apportioned  to  any  two  or 
all  three  of  such  departments  of  any  departmental  state 
bank  member. 

Any  bank  joining  or  associating  itself  with  such  fed- 
eral reserve  bank  shall  have  and  exercise  all  powers,  not 
in  conflict  with  the  laws  of  this  state,  which  are  conferred 
upon  any  member  bank  in  any  such  federal  reserve  bank, 
by  the  provisions  of  the  federal  reserve  act  and  the  regu- 
lations of  the  federal  reserve  board.  Such  member  bank 
and  its  directors,  officers  and  stockholders  shall  continue 
to  be  subject,  however,  to  all  liabilities  and  duties  imposed 
upon  them  by  the  bank  act  and  by  any  other  law  of  this 
state. 

Any  bank  which  shall  have  become  a  member  of  a 
federal  reserve  bank  shall  be  subject  to  the  examinations 
required  under  the  terms  of  the  federal  reserve  act,  and 
the  superintendent  of  banks  may,  in  his  dfscretion,  accept 
such  examination  in  lieu  of  the  examination  required 
under  the  provisions  of  this  act,  and  he,  his  agents  and 
employees,  may  furnish  to  the  federal  reserve  board,  the 
federal  reserve  bank,  or  to  examiners  duly  appointed  by 
the  federal  reserve  board  or  the  federal  reserve  bank, 
copies  of  all  examinations  made,  and  may  disclose  to  such 


794  BUSINESS  LAW  FOB  BUSINESS  MEN. 

federal  reserve  board,  federal  reserve  bank,  or  examiner, 
any  information  with  reference  to  the  condition  or  affairs 
of  state  bank  members. 

Act  of  the  Legislature,  approved  May  15,  1919 ; 
in  effect  July  22, 1919. 

Section  1072. — BANK  CONVEBTINQ  INTO  NATIONAL, 
BANKING  ASSOCIATION. — Nothing  in  this  act  shall  prevent 
or  prohibit  any  bank  from  converting  into  a  national 
banking  association  under  the  provisions  of  section  five 
thousand  one  hundred  fifty-four  of  the  United  States  re- 
vised statutes,  or  section  eight  of  the  federal  reserve  act, 
or  any  other  federal  or  state  law;  provided,  however, 
that  no  savings  bank  and  no  departmental  bank  having  a 
savings  department,  organized  and  existing  under  the 
laws  of  the  State  of  California,  shall  convert  into  a  na- 
tional banking  association  except  upon  the  following 
conditions : 

1.  Coincident  with  its  application  to  the  comptroller 
of  the  currency,  any  such  savings  or  departmental  bank 
shall    file    with    the    superintendent    of    banks    formal 
notice  of  intention  to  convert  into  a  national  banking 
association 

2.  Prior  to  conversion,  any  such  savings  or  depart- 
mental bank  shall  place  in  the  hands  of  the  superintendent 
of  banks— 

(a)  A  constructive  notice  for  newspaper  advertise- 
ment, directed  to  its  savings  depositors,  of  the  fact  of 
conversion ; 

(b)  Actual  notice  addressed  to  each  and  every  sav- 
ings depositor,  at  his  or  her  last  known  address,  enclosed 
in  stamped  and  addressed  envelopes  ready  for  mailing, 
this  notice  to  be  as  follows : 

"You  are  hereby  notified  that  the  undersigned,  for- 
merly the ,  now  the ,  has 

converted  from  a  banking  corporation  existing  under  the 
laws  of  California  into  a  national  banking  association; 
and  has  therefore  ceased  to  be  under  the  jurisdiction  and 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  795 

the  direction  of  the  California  state  banking  department 
and  the  bank  act  of  California,  and  is  now  under  the  juris- 
diction and  control  of  the  federal  reserve  act  and  the 
national  act. ' '  No  other  matter  may  be  enclosed  with  this 
notice  unless  by  permission  of  the  superintendent  of 
banks. 

3.  Upon  conversion   said  bank   shall  file  with  the 
superintendent  of  banks  a  copy  of  its  authorization  as 
a  national  banking  association,  certified  by  the  comp- 
troller   of   the    currency;    and    shall   surrender    to    the 
superintendent  of  banks  its  license  as  a  state  banking- 
corporation. 

4.  Immediately  following  the  conversion  of  a  state 
bank,  the  superintendent  of  banks  shall  cause  the  publi- 
cation of  the  notice  provided  in  subdivision  (a)  of  para- 
graph two  of  this  section ;  same  to  be  at  least  once  a  week 
for  four  successive  weeks  in  a  newspaper  of  general  cir- 
culation, printed  and  published  in  every  town  where  said 
bank  transacts  its  business,  and  if  there  be  no  such  paper 
in  any  such  town  or  towns,  then  in  the  county  where  such 
bank  transacts  its  business,  and  the  superintendent  of 
banks  shall  cause  to  be  mailed  the  notices  provided  in  sub- 
division (b)  of  paragraph  two  of  this  section.    The  ad- 
vertisement shall  be  at  the  expense  of  the  converting 
bank,  prepaid  to  the  department. 

Act  of  the  Legislature,  approved  May  15,  1919 ; 
in  effect  July  22, 1919. 

Section  1073. — FOREIGN  BANKING. — Any  bank  possess- 
ing a  capital  and  surplus  of  one  million  dollars  or  more 
may  file  application  with  the  superintendent  of  banks  for 
permission  to  exercise,  upon  such  conditions  and  under 
such  regulations  as  he  may  prescribe,  either  or  both  of 
the  following  powers: 

First.  To  establish  branches  in  foreign  countries  or 
in  dependencies  or  insular  possessions  of  the  United 
States  for  the  furtherance  of  the  foreign  commerce  of 
this  state  and  of  the  United  States. 


796  BUSINESS  LAW  FOE  BUSINESS  MEN. 

Second.  To  invest  an  amount  not  exceeding  in  the 
aggregate  ten  per  centum  of  its  paid-in  capital  stock  and 
surplus  in  the  stock  of  one  or  more  banks  or  corporations 
chartered  or  incorporated  under  the  laws  of  the  State 
of  California,  and  principally  engaged  in  international 
or  foreign  banking  or  banking  in  a  dependency  or  insular 
possession  of  the  United  States  either  directly  or  through 
the  agency,  ownership  or  control  of  local  institutions  in 
foreign  countries,  or  in  such  dependencies  or  insular 
possessions. 

Such  application  shall  specify  the  name  and  capital  of 
the  bank  filing  it,  the  powers  applied  for  and  the  place 
or  places  where  the  banking  operations  proposed  are  to 
be  carried  on.  The  superintendent  of  banks  shall  have 
power  to  approve  or  to  reject  such  application  in  whole 
or  in  part  if  for  any  reason  the  granting  of  such  applica- 
tion is  deemed  inexpedient,  and  shall  also  have  power 
from  time  to  time  to  increase  or  decrease  the  number  of 
places  where  such  banking  operations  may  be  carried  on. 

(a)  Information    Regarding    Foreign    Branches.— 
Every  bank  operating  foreign  branches  shall  be  required 
to  furnish  information  concerning  the  condition  of  such 
branches  to  the  superintendent  of  banks  upon  demand, 
and  every  bank  investing  in  the  capital  stock  of  banks  or 
corporations  described  under  subparagraph  two  of  the 
first  paragraph  of  this  section  shall  be  required  to  fur- 
nish information  concerning  the  condition  of  such  banks 
or  corporations  to  the  superintendent  of  banks  upon  de- 
mand, and  the  superintendent  of  banks  may  order  special 
examinations  of  the  said  branches,  banks  or  corporations 
at  such  time  or  times  as  he  may  deem  best.    The  cost  of 
such  special  examinations  shall  be  paid  by  said  branches, 
banks  or  corporations. 

(b)  Regulations    by    Superintendent.  —  Before    any 
bank  shall  be  permitted  to  purchase  stock  in  any  such  cor- 
poration the  said  corporation  shall  enter  into  an  agree- 
ment or  undertaking  with  the  superintendent  of  banks  to 
restrict  its  operations  or  conduct  its  business  in  such 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  797 

manner  or  under  such  limitations  and  restrictions  as  the 
said  superintendent  of  banks  may  prescribe  for  the  place 
or  places  wherein  such  business  is  to  be  conducted.  If  at 
any  time  the  superintendent  of  banks  shall  ascertain  that 
the  regulations  by  him  are  not  being  complied  with,  said 
superintendent  of  banks  shall  be  authorized  and  shall 
have  power  to  institute  an  investigation  of  the  matter 
and  to  send  for  persons  and  papers,  subpoena  witnesses 
and  administer  oaths  in  order  to  satisfy  himself  as  to  the 
actual  nature  of  the  transactions  referred  to.  Should 
such  investigation  result  in  establishing  the  failure  of  the 
corporation  in  question,  or  of  the  bank  or  banks  which 
may  be  stockholders  therein,  to  comply  with  the  regula- 
tions laid  down  by  the  said  superintendent  of  banks,  such 
banks  may  be  required  to  dispose  of  stockholdings  in  the 
said  corporation  upon  thirty  days'  notice,  and  in  the 
event  of  their  noncompliance  with  such  order  the  super- 
intendent of  banks  may  institute  proceedings  for  for- 
feiture of  license. 

Every  such  bank  shall  conduct  the  accounts  of  each 
foreign  branch  independently  of  the  accounts  of  other 
foreign  branches  established  by  it  and  of  its  home  office, 
and  shall  at  the  end  of  each  fiscal  period  transfer  to  its 
general  ledger  the  profit  or  loss  accruing  to  each  branch 
as  a  separate  item. 

Act  of  the  Legislature,  approved  May  15,  1919 ; 
in  effect  July  22,  1919. 

Section  1074. — PURCHASE  OF  REAL  OK  PERSONAL  PROP- 
ERTY BY  SAVINGS  BANKS. — Any  savings  bank  may  pur- 
chase, hold  and  convey  real  or  personal  property  as 
follows : 

1.  The  lot  and  building  in  which  the  business  of  the 
bank  is  carried  on ;  furniture  and  fixtures,  vaults  and  safe 
deposit  vaults  and  boxes  necessary  or  proper  to  carry  on 
its  banking  business ;  such  lot  and  building,  furniture  and 
fixtures,  vaults  and  safe  deposit  vaults  and  boxes  shall 
not,  in  the  aggregate,  be  carried  on  the  books  of  such 


798  BUSINESS  LAW  FOR  BUSINESS  MEN. 

bank  as  an  asset  to  an  amount  exceeding  its  paid-up 
capital  and  surplus;  and  hereafter,  the  authority  of  a 
two-thirds  vote  of  all  of  the  directors  shall  be  necessary 
to  authorize  the  purchase  of  such  lot  and  building,  or  the 
construction  of  such  building. 

2.  Such  as  may  have  been  mortgaged,  pledged  or 
conveyed  to  it  in  trust  for  its  benefit  in  good  faith,  for 
money  loaned  in  pursuance  of  the  regular  business  of  the 
corporation. 

3.  Such  as  may  have  been  purchased  at  any  sales 
under  pledge,  mortgage  or  deed  of  trust  made  for  its 
benefit  for  money  so  loaned  and  such  as  may  be  conveyed 
to  it  by  borrowers  in  satisfaction  and  discharge  of  loans 
made  thereon. 

(a)  Limitations  on  Purchase  of  Personal  Property. — 
No  savings  bank  shall  purchase,  own,  or  sell  personal 
property,  except  such  as  may  be  requisite  for  its  imme- 
diate accommodation  for  the  convenient  transaction  of 
its  business,  notes  or  bonds  secured  by  trust  deeds  or 
mortgages  on  real  estate,  bonds,  securities  or  evidences 
of  indebtedness,  public  or  private,  gold  or  silver  bullion 
and  United  States  mint  certificates  of  ascertained  value, 
and  evidences  of  debt  issued  by  the  United  States. 

(b)  Purchase  of  Bonds. — No  savings  bank  shall  pur- 
chase, own,  hold  or  convey  bonds,  securities  or  evidences 
of  indebtedness,  public  or  private,  except  as  follows : 

(a)  Bonds  or  interest-bearing  notes  or  obligations  of 
the  United  States,  or  those  for  which  the  faith  and  credit 
of  the  United  States  are  pledged  for  the  payment  of  prin- 
cipal and  interest,  or  those  issued  under  authority  of  the 
United  States; 

(aa)  Bonds  or  interest-bearing  notes  or  obligations 
of  England  or  the  United  Kingdom  of  Great  Britain  and 
Ireland,  or  France,  or  the  Dominion  of  Canada,  or  those 
for  which  the  faith  and  credit  of  any  one  or  more  of  said 
countries  are  pledged  for  the  payment  of  principal  and 
interest ;  or  bonds  or  interest-bearing  notes  or  obligations 
of  any  other  foreign  country  or  government,  which  bonds 


Section  1074,  page  798,  "Business  Law  for  Business  Men" — (a)  Bonds 
or  interest-bearing  notes  or  obligations  of  any  foreign  country  or  government, 
or  those  for  which  the  faith  and  credit  of  any  foreign  country  are  pledged, 
for  the  payment  of  principal  and  interest,  may  be  purchased  by  a  savings  bank. 

(b)  Section  1074,  page  799 — Applying  to  bonds  or  stocks  or  notes,  speci- 
fied in  sub-division  (c)  on  page  799,  the  law  has  been  changed  to  read  "twen- 
ty-five years  previous  to  making  such  investment." 

(c)  Section  1078,  page  822 — Any  savings  bank  may  deposit  with  any  one 
bank  not  more  than  $25,000  without  the  permission  of  the  superintendent  of 
banks. 

Act  of  the  Legislature  of  California,  approved  June  3,  1921;  in  effect 
August  3,  1921. 

Section  1225,  page  936,  "Business  Law  for  Business  Men" — In  lines  4  and 
16,  change  the  words  "fifteen  hundred  dollars"  so  as  to  read  "two  thousand 
five  hundred  dollars." 

Act  of  the  Legislature  of  California,  approved  May  16,  1921,  in  effect 
July  16,  1921. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  799 

or  interest-bearing  notes  or  obligations  shall  have  first 
been  approved  by  the  superintendent  of  banks  in  writing ; 

(b)  Bonds  of  this  state,  or  those  for  which  the  faith 
and  credit  of  the  State  of  California  are  pledged  for  the 
payment  of  principal  and  interest,  or  those  of  any  county, 
city  and  county,  city  or  school  district  of  this  state ; 

(c)  Bonds   or  stocks   or  notes  of  any  state   in   the 
United  States  that  has  not,  within  five  years  previous  to 
making  such  investment  by  such  bank,  defaulted  in  the 
payment  of  any  part  of  either  principal  or  interest,  or 
those  of  any  county,  city  and  county,  city  or  town,  in  any 
state  of  the  United  States  other  than  the  State  of  Cali- 
fornia, issued  under  authority  of  any  law  of  such  state, 
which  county,  city  and  county,  city  or  town,  had,  as  shown 
by  the  federal  or  state  census  next  preceding  such  invest- 
ment, a  population  of  more  than  twenty  thousand  inhab- 
itants ;  provided,  lioivever,  that  the  entire  bonded  indebt- 
edness of  such  county,  city  and  county,  city  or  town,  in- 
cluding such  issue  of  bonds  or  stocks  or  notes,  does  not 
exceed  fifteen  per  centum  of  the  value  of  the  taxable 
property  therein  as  shown  by  its  last  equalized  assess- 
ment roll;  and  provided,  further,  that  such  county,  city 
and  county,  city  or  town,  or  the  state  in  which  it  is  located 
has  not  defaulted  in  payment  of  any  part  of  either  prin- 
cipal or  interest  due  upon  any  legally  authorized  bond  or 
stock  or  note  issue  within  five  years  next  preceding  such 
investment ; 

(d)  Bonds  of  any  district  organized  under  the  laws 
of  the  State  of  California  which  are  required  to  be  and 
are  investigated  and  approved  by  a  commission  now  or 
hereafter  authorized  by  a  law  of  this  state  to  conduct 
such  investigation  and  give  such  approval  and  by  author- 
ity of  which  approval  said  bonds  are  declared  to  be  legal 
investments  for  savings  banks ; 

(e)  Bonds  of  any  district  organized  under  the  laws  of 
the  State  of  California  not  otherwise  provided  for  in  this 
section ;  or  those  of  any  mutual  water  company  organized 
under  the  laws  of  this  state  and  operating  wholly  within 


800  BUSINESS  LAW  FOR  BUSINESS  MEN. 

this  state ;  provided,  that  all  bonds  specified  in  this  para- 
graph shall  first  be  certified  by  the  superintendent  of 
banks  after  an  investigation  in  manner  and  form  as  is 
provided  for  by  section  sixtyone  a  of  this  act;  and  pro- 
vided, further,  that  no  bonds  of  any  mutual  water  com- 
pany shall  be  certified  by  the  superintendent  of  banks 
unless  the  company  issuing  said  bonds  shall  have  been  in 
continuous  operation  for  a  period  of  five  years  next  pre- 
ceding the  application  for  said  certificate  and  shall  have 
served  not  less  than  seventy-five  per  centum  of  the  lands 
entitled  to  service  by  said  mutual  water  company  for  a 
period  of  not  less  than  three  years  next  preceding  the 
application  for  said  certificate; 

(/)  (1)  Bonds  of  any  railroad  corporation  incor- 
porated under  the  laws  of  the  State  of  California  and 
operating  exclusively  therein ;  provided,  said  corporation 
has  met  net  earnings  for  the  period  herein  fixed  amount- 
ing to  at  least  one  and  one-fourth  times  the  interest  on 
all  its  outstanding  mortgage  indebtedness ;  or, 

(2)  Bonds  of  any  railroad  corporation  incorporated 
under  the  laws  of  any  state  in  the  United  States,  oper- 
ating at  least  five  hundred  miles  of  standard  gauge  track 
exclusive  of  sidings;  provided,  said  corporation  has  had 
net  earnings  for  the  period  herein  fixed  amounting  to  at 
least  one  and  one-half  times  the  interest  on  all  its  out- 
standing mortgage  indebtedness;  or, 

(3)  Bonds  of  any  railroad  corporation,  the  payment 
of  which  has  been  guaranteed,  both  as  to  principal  and 
interest,  by  a  railroad  corporation  meeting  the  require- 
ments of  either  subdivision  (1)  or  (2)  of  paragraph  (/) 
of  this  section ;  provided,  that  such  guaranteeing  corpora- 
tion has  had  for  the  period  herein  fixed  net  earnings 
amounting  to  at  least  one  and  one-half  times  the  interest 
on  all  its   outstanding  mortgage  indebtedness   and,  in 
addition  thereto,  sufficient,  taken  with  the  earnings  of  all 
corporations  whose  bonds  it  has  guaranteed,  to  qualify 
as  investments  for  savings  banks,  as  in  this  section  pro- 
vided, all  such  guaranteed  bonds;  provided,  that  the 


BUSINESS  CONTKACTS  AND  LEGAL  OBLIGATIONS.  801 

excess  of  income  of  any  corporation  whose  bonds  have 
been  so  guaranteed,  over  the  amount  required  by  this 
section  for  such  corporation,  shall  not  apply  to  or  be  in- 
cluded in  determining  the  income  so  required ;  provided, 
further,  that  the  guarantee  of  such  bonds  hereafter  guar- 
anteed must  establish  a  lien  upon  all  the  operating  prop- 
erties of  the  guaranteeing  corporation,  which  lien  must 
take  precedence  over  any  subsequent  issues  of  mortgage 
obligations  by  said  guaranteeing  corporation. 

In  determining  the  income  of  any  corporation  specified 
in  paragraph  (/)  of  subdivision  three  of  this  section, 
there  shall  be  included  the  income  of  any  corporation  or 
corporations  out  of  which  it  shall  have  been  formed 
through  consolidation  or  merger,  and  of  any  corporation 
or  corporations,  the  entire  business  and  income  pro- 
ducing property  of  which  the  corporation  issuing  such 
bonds  has  wholly  acquired. 

(c)  Security. — All  bonds  authorized  for  investment 
by  paragraph  (/)  of  subdivision  three  of  this  section  must 
be  secured  by  a  mortgage  or  deed  of  trust  which  is,  at  the 
time  of  making  such  investment,  either 

I.  A  closed  first  mortgage  or  deed  of  trust ;  or, 

II.  A  first  mortgage  or  deed  of  trust  containing  pro- 
visions restricting  the  issuance  of  further  bonds  until 
such  time  as  the  income  of  said  corporation  shall  have 
been  at  least  sufficient,  during  the  twelve  months  next 
preceding  the  issuance  of  any  additional  bonds,  to  meet 
the  earning  requirements  specified  in  the  respective  sub- 
divisions of  this  paragraph  applicable  to  such  corpora- 
tion after  including  the  additional  bonds  then  proposed 
to  be  issued;  or, 

III.  A  refunding  mortgage  or  deed  of  trust  providing 
for  the  retirement  of  all  prior  lien  mortgage  debts  of  said 
corporation,  and  restricting  the  issuance  of  further  bonds 
until  such  time  as  the  income  of  said  corporation  shall 
have  been  at  least  sufficient,  during  the  twelve  months 
next  preceding  the  issuance  of  any  additional  bonds,  to 
meet  the  earning  requirements  specified  in  the  respective 


802  BUSINESS  LAW  FOR  BUSINESS  MEN. 

subdivisions  of  this  paragraph  applicable  to  such  cor- 
poration after  including  the  additional  bonds  then  pro- 
posed to  be  issued ;  or, 

IV.  An  underlying  or  divisional  closed  mortgage  or 
deed  of  trust  of  property  which  forms  a  part  of  the 
operating  system  of  the  corporation  then  owning  said 
property.  In  the  case  of  bonds  secured  by  an  underlying 
or  divisional  closed  mortgage  or  deed  of  trust,  the  net 
income  required  by  this  section  shall  be  based  exclusively 
upon  the  income,  maintenance  charges,  operating  ex- 
penses, taxes,  and  mortgage  indebtedness  of  or  against 
the  property  covered  by  such  underlying  or  divisional 
closed  mortgage  or  deed  of  trust,  or,  if  such  income, 
maintenance  charges  or  operating  expenses  can  not  be 
definitely  ascertained,  on  the  proper  proportionate  share 
of  such  property  in  the  general  income,  maintenance 
charges,  operating  expenses,  and  taxes  of  the  corporation 
then  owning  such  property  and  on  the  mortgage  indebt- 
edness of  or  against  the  property  covered  by  such  under- 
lying or  divisional  closed  mortgage  or  deed  of  trust; 
provided,  hoivever,  that  if  the  payment  of  the  bonds 
secured  by  such  underlying  or  divisional  closed  mortgage 
or  deed  of  trust  shall  be  guaranteed  or  assumed  by  the 
corporation  then  owning  the  property  securing  the  same, 
such  bonds  shall  be  legal  investments  for  savings  banks, 
if  the  net  income  of  such  corporation  from  all  sources 
shall  equal  the  amount  herein  required,  notwithstanding 
any  insufficiency  of  the  income  derived  from  the  prop- 
erty covered  by  such  underlying  or  divisional  closed 
mortgage  or  deed  of  trust  to  meet  the  requirements  of 
this  section. 

No  savings  bank  shall  purchase  the  bonds  of  any  rail- 
road corporation  deriving  less  than  twenty  per  centum  of 
its  gross  receipts  from  passenger  revenues. 

(g)  Bonds  of  any  street  railroad  corporation;  or  of 
any  gas ;  water ;  pipe  line ;  light ;  power ;  light  and  power ; 
gas,  light  and  power ;  electrical ;  telephone ;  telegraph ;  or 
telephone  and  telegraph  corporation  or  of  any  other 


BUSINESS  CONTKACTS  AND  LEGAL  OBLIGATIONS.  803 

"public  utility"  incorporated  under  the  laws  of  the  State 
of  California;  and 

(1)  Operating  exclusively  in  the  State  of  California, 
provided  said  corporation  has  had,  for  the  period  herein 
fixed,  net  earnings  amounting  to  one  and  one-half  times 
the  interest  on  all  its  outstanding  mortgage  indebted- 
ness; or, 

(2)  Operating  its  property  in  part  within  the  State 
of  California,  provided  said  corporation  has  had,  for  each 
of  its  two  fiscal  years  next  preceding  such  investment,  net 
earnings  amounting  to  one  and  one-half  times  the  interest 
on  all  its  outstanding  mortgage  indebtedness ;  or, 

(3)  The  payment  of  which  is  guaranteed,  both  as  to 
principal  and  interest,  by  a  public  utility  corporation 
meeting  the  requirements  of  either  subdivision  (1)  or  (2) 
of  paragraph  (g)  of  this  section,  provided  that  such  guar- 
anteeing corporation  has  had  for  the  period  required  in 
the  respective  subdivisions  of  this  paragraph  relating 
thereto,  net  earnings  amounting  to  at  least  one  and  one- 
half  times  the  interest  on  all  of  said  guaranteeing  cor- 
poration's outstanding  mortgage  indebtedness,  and,  in 
addition  thereto,  sufficient,  taken  with  tKe  earnings  of  all 
corporations  whose  bonds  it  has  guaranteed,  to  qualify 
as  investments  for  savings  banks,  as  in  this  section  pro- 
vided,  all  such  guaranteed  bonds;   provided,  that  the 
excess  of  income  of  any  corporation  whose  bonds  have 
been  so  guaranteed,  over  the  amount  required  by  this 
section  for  such  corporation,  shall  not  apply  to  or  be 
included  in  determining  the  income  so  required ;  provided, 
further,  that  the  guarantee  of  such  bonds  hereafter  guar- 
anteed must  establish  a  lien  upon  all  the  operating  prop- 
erties of  the  guaranteeing  corporation  which  lien  must 
take  precedence  over  any  subsequent  issues  of  mortgage 
obligations  by  said  guaranteeing  corporation. 

In  determining  the  income  of  any  corporation  specified 
in  paragraph  (g)  of  subdivision  three  of  this  section, 
there  shall  be  included  the  income  of  any  corporation  or 
corporations  out  of  which  it  shall  have  been  formed 


804  BUSINESS  LAW  FOB  BUSINESS  MEN. 

through  consolidation  or  merger,  and  of  any  corporation 
the  entire  business  and  income  producing  property  of 
which  the  corporation  issuing  such  bonds  has  wholly 
acquired. 

All  bonds  authorized  for  investment  by  paragraph  (g) 
of  subdivision  three  of  this  section  must  be  secured  by  a 
mortgage  or  deed  of  trust  which  is  at  the  time  of  making 
such  investment;  either 

I.  A  closed  first  mortgage  or  deed  of  trust ;  or, 

II.  A  first  mortgage  or  deed  of  trust  containing  pro- 
visions restricting  the  issuance  of  further  bonds  until 
such  time  as  the  income  of  said  corporation  shall  have 
been  at  least  sufficient,  during  the  twelve  months  next 
preceding  the  issuance  of  any  additional  bonds,  to  meet 
the  earning  requirements  specified  in  the  respective  sub- 
divisions of  this  paragraph  applicable  to  such  corporation 
after  including  the  additional  bonds  then  proposed  to  be 
issued;  or, 

III.  A'refunding  mortgage  or  deed  of  trust  providing 
for  the  retirement  of  all  prior  lien  mortgage  debts  of  said 
corporation  and  restricting  the  issuance  of  further  bonds 
until  such  time  as  the  income  of  said  corporation  shall 
have  been  at  least  sufficient,  during  the  twelve  months 
next  preceding  the  issuance  of  any  additional  bonds,  to 
meet  the  earning  requirements  of  such  corporation  after 
including   the   additional   bonds   then   propose'd    to    be 
issued;  or, 

IV.  An  underlying  or  divisional  closed  mortgage  or 
deed  of  trust  of  property  which  forms  a  part  of  the 
operating  system  of  the  corporation  then  owning  said 
property.    In  the  case  of  bonds  secured  by  an  underlying 
or  divisional  closed  mortgage  or  deed  of  trust,  the  net 
income  required  by  this  section  shall  be  based  exclusively 
upon   the  income,   maintenance  charges,   operating   ex- 
penses, taxes  and  mortgage  indebtedness  of  or  against 
the  property  covered  by  such  underlying  or  divisional 
closed  mortgage  or  deed  of  trust,  or,  if  such  income, 
maintenance  charges  or  operating  expenses  can  not  be 


BUSINESS  CONTKACTS  AND  LEGAL  OBLIGATIONS.  805 

definitely  ascertained,  on  the  proper  proportionate  share 
of  such  property  in  the  general  income,  maintenance 
charges,  operating  expenses  and  taxes  of  the  corporation 
then  owning  such  property  and  on  the  mortgage  indebt- 
edness of  or  against  the  property  covered  by  such  under- 
lying or  divisional  closed  mortgage  or  deed  of  trust; 
provided,  however,  that  if  the  payment  of  the  bonds 
secured  by  such  underlying  or  divisional  closed  mortgage 
or  deed  of  trust  shall  be  guaranteed  or  assumed  by  the 
corporation  then  owning  the  property  securing  the  same, 
such  bonds  shall  be  legal  investments  for  savings  banks, 
if  the  net  income  of  such  corporation  from  all  sources 
shall  equal  the  amount  herein  required,  notwithstanding 
any  insufficiency  of  the  income  derived  from  the  prop- 
erty covered  by  such  underlying  or  divisional  closed 
mortgage  or  deed  of  trust  to  meet  the  requirements  of 
this  section. 

(h)  Notes  or  bonds  secured  by  first  mortgage  or  deed 
of  trust  or  other  first  lien  upon  real  estate,  improved  or 
unimproved ;  provided,  that  the  entire  note  or  bond  issue 
shall  not  exceed  sixty  per  centum  of  the  market  value  of 
such  real  estate,  or  such  real  estate  with  improvements, 
taken  as  security ;  and  provided,  further,  in  case  the  said 
note  or  bond  issue  is  created  for  a  building  loan  on  real 
estate,  that  at  no  time  shall  the  entire  outstanding  note 
or  bond  issue  exceed  sixty  per  centum  of  the  market 
value  of  the  real  estate  and  the  actual  cost  of  the  im- 
provements thereon  taken  as  security. 

In  determining  the  market  value  of  any  real  estate 
under  the  provisions  of  paragraph  (h),  subdivision  three 
of  this  section,  where  such  real  estate,  improved  or  un- 
improved, consists  of  oil  or  other  mineral  or  timber  land, 
the  value  represented  by  such  oil  or  other  mineral  or 
timber  shall  not  be  included  in  fixing  such  market  value. 
Nothing  herein  contained  shall  prevent  savings  banks 
from  making  loans  secured  by  mortgage  or  deed  of  trust 
upon  lands  wherein  redwood  timber  is  included  in  fixing 
the  market  value  thereof. 


806  BUSINESS  LAW  FOR  BUSINESS  MEN. 

(i)  Collateral  trust  bonds  or  notes  when  secured  by 
either : 

(1)  Deposit  of  bonds  authorized  for  investment  by 
this  section  of  a  market  value  at  least  fifteen  per  centum 
in  excess  of  the  par  value  of  the  collateral  trust  bonds 
or  notes  issued ;  or, 

(2)  Deposit  of  bonds  authorized  for  investment  by 
this  section  and  other  securities  of  a  combined  market 
value  at  least  twenty  per  centum  in  excess  of  the  par 
value  of  the  collateral  trust  bonds  or  notes  issued;  pro- 
vided, that  the  par  value  of  said  collateral  trust  bonds  or 
notes  shall  in  no  case  exceed  the  market  value  of  that 
portion  of  the  security  represented  by  bonds  authorized 
for  investment  by  this  section. 

(3)  Deposit  of  any  notes  or  bonds  authorized  for  in- 
vestment by  this  section  and  other  securities  of  a  com- 
bined market  value  of  at  least  thirty  per  centum  in  excess 
of  the  par  value  of  the  collateral  trust  bonds  or  notes 
issued;  provided,  that  the  par  value  of  such  collateral 
trust  bonds  or  notes  issued  shall  in  no  case  exceed  the 
market  value  of  that  portion  of  the  security  represented 
by  notes  or  bonds  authorized  for  investment  by  this  sec- 
tion ;  provided,  further,  that  the  collateral  pledged  consist 
of  bonds  authorized  for  investment  by  this  section  of  the 
market  value  of  at  least  seventy-five  per  centum  of  the 
par  value  of  such  collateral  trust  bonds  or  notes  issued. 

(j)  Bonds  legal  for  investment  by  savings  banks  in 
the  states  of  New  York  or  Massachusetts ;  provided,  'how- 
ever, that  as  to  bonds  of  the  character  specified  in  para- 
graph (c)  of  subdivision  three  of  this  section,  such  bonds 
shall  also  conform  to  the  requirements  of  such  paragraph. 

(k)  Notes  or  bonds  secured  by  mortgage  or  deed  of 
trust,  payment  of  which  is  guaranteed  by  a  policy  of 
mortgage  insurance,  and  mortgage  participation  certifi- 
cates, issued  by  a  mortgage  insurance  company. 

"Net  earnings"  as  used  in  this  section  shall  be  deemed 
to  mean  the  amount  remaining  after  deducting  from  the 
gross  earnings  all  taxes,  maintenance  charges  and  oper- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  807 

ating  expenses  except  depreciation  charges,  sinking  fund 
charges  and  interest  on  indebtedness. 

Unless  herein  otherwise  expressly  provided  the  period 
for  which  any  corporation  must  have  "net  earnings" 
sufficient  to  qualify  its  bonds  as  an  investment  for  sav- 
ings banks  under  this  section  shall  be  either  the  fiscal 
year  of  such  corporation  next  preceding  the  investment 
therein  by  any  savings  bank  or  twelve  consecutive  months 
in  the  fourteen  months  next  preceding  such  investment. 

(d)  Bonds,    Etc.,    Certified    ~by    Superintendent    of 
Banks. — No  notes,  bonds,  or  other  securities  shall  be 
deemed  to  come  within  or  conform  to  the  requirements 
of  either  of  paragraphs  (/),  (#),  (h),  or  (i)  of  subdivision 
three  of  this  section,  unless  such  notes,  bonds  or  other 
securities  shall,  in  the  manner  provided  in  this  act,  have 
been  certified  by  the  superintendent  of  banks  to  come 
within  and  fully  conform  to  the  requirements  of  one  or 
the  other  of  said  paragraphs;  provided,  however,  that 
any  bank  may,  without  such  certification  by  the  superin- 
tendent of  banks,  purchase  any  note  or  bond  or  issue  of 
notes  or  bonds  provided  for  in  said  paragraph  (h),  when- 
ever such  purchase  constitutes  the  entire  amount  of  notes 
or  bonds  executed  by  the  makers  thereof  and  secured  by 
the  same  real  estate ;  provided,  also,  that  no  savings  bank 
shall  hold  any  such  notes  or  bonds  unless  such  holding 
constitutes  the  entire  issue  thereof  at  any  time  outstand- 
ing; and  provided,  also,  that  nothing  in  this  paragraph 
shall  be  construed  to  permit  savings  banks  to  invest  in 
notes  or  certificates  evidencing  participation  in  any  mort- 
gage on  real  estate  unless  in  this  act  specifically  author- 
ized or  in  or  on  any  form  of  obligation  secured  by  any 
undivided  interest  in  real  estate  designed  to  distribute 
the  obligation  so  secured. 

(e)  Legality  of  Previous  Investments  Not  Affected.— 
The  legality  of  investments  heretofore  lawfully  made 
pursuant  to  the  provisions  of  this  section,  or  of  any  law 
of  this  state  as  it  existed  on  and  subsequent  to  July  1, 
1909,  shall  not  be  affected  by  any  amendments  to  this 


808  BUSINESS  LAW  FOR  BUSINESS  MEN. 

section  or  this  act;  nor  shall  any  such  amendments  re- 
quire the  changing  of  investments  once  lawfully  made 
under  this  act. 

(f )  Investment  Value  of  Bonds. — Any  bonds  author- 
ized by  this  section  as  a  legal  investment  for  savings 
banks  may  be  carried  on  the  books  of  said  bank  at  their 
investment  value,  based  on  their  market  value  at  the  time 
they  were  originally  bought,  unless  the  superintendent  of 
banks  shall  require  any  or  all  of  the  bonds  which  may 
thereafter  have  a  market  value  less  than  the  original  in- 
vestment value  to  be  written  down  to  such  new  market 
value,  which  shall  be  done  gradually  if  practicable  and  in 
such  manner  as  he  may  determine ;  or  he  may,  by  a  plan 
of  amortization  to  be  determined  by  him,  require  such 
gradual  extinction  of  premium  as  will  bring  such  bonds 
to  par  at  maturity. 

When  it  shall  be  necessary  to  prevent  loss  to  any  sav- 
ings bank  on  an  obligation  owned  or  on  a  debt  previously 
contracted  in  good  faith,  it  may,  with  the  previous  written 
consent  of  the  superintendent  of  banks,  purchase  or 
acquire  bonds  of  any  railroad  corporation  incorporated 
under  the  laws  of  the  state  of  California  and  operated 
exclusively  therein,  notwithstanding  such  bonds  do  not 
conform  to  the  requirements  in  this  section  contained; 
provided,  any  bonds  so  purchased  or  acquired  must  be 
sold  for  the  best  price  obtainable  by  any  bank  within  five 
years  after  such  purchase  or  acquisition. 

(g)  Bonds  of  Public  Utilities. — No  savings  bank  shall 
hereafter  purchase  or  loan  money  upon  any  bond,  note 
or  other  evidence  of  indebtedness,  issued  by  any  "public 
utility,"  subject  to  the  jurisdiction,  regulation  or  control 
of  the  railroad  commission  of  this  state  under  the  pro- 
visions of  the  "public  utilities  act,"  approved  December 
23,  1911,  and  acts  amendatory  thereof  or  supplemental 
thereto,  unless  each  such  bond,  note  or  other  evidence  of 
indebtedness  was  either: 

(a)  Issued  prior  to  the  taking  effect  of  the  "public 
utilities  act;"  or, 


BUSINESS  CONTKACTS  AND  LEGAL  OBLIGATIONS.  809 

(b)  Issued  under  authority  of  the  railroad  commis- 
sion, in  accordance  with  the  provisions  of  said  act ;  or, 

(c)  A  note  issued  for  a  period  not  exceeding  twelve 
months,  in  accordance  with  the  provisions  of  subdivision 
(b)  of  section  fifty-two  of  said  act. 

(h)  State  Does  Not  Guarantee  Validity  of  Bonds.— 
No  provision  of  this  act,  and  no  act  or  deed,  done  or  per- 
formed under  or  in  connection  therewith,  and  no  finding 
made  or  certificate  issued  under  any  provision  thereof, 
shall  be  held  or  construed  to  obligate  the  State  of  Cali- 
fornia to  pay,  or  be  liable  for  the  payment  of,  or  to  guar- 
antee in  any  manner  whatsoever,  the  regularity  or  the 
validity  of  the  issuance  of  any  stock  or  bond  certificate, 
or  bond,  note,  or  other  evidence  of  indebtedness  certified 
under  any  provision  of  this  act,  by  the  superintendent 
of  banks. 

(i)  Advertisement  of  Bonds  as  Legal  Investment. — • 
It  shall  not  be  lawful  for  any  individual,  firm,  associa- 
tion, bank,  trust  company,  stock  company,  copartnership 
or  corporation  to  advertise  by  newspaper  or  circular  or 
in  any  other  manner  that  any  securities  are  legal  invest- 
ments for  savings  banks  in  this  state,  or  to  use  any  adver- 
tisement which  might  lead  the  public  to  believe  that  any 
securities  conform  to  the  requirements  of  law  relating  to 
investments  by  savings  banks,  unless  such  securities  are 
such  as  are  specified  in  this  act,  or  shall,  in  the  manner 
provided  in  this  act,  have  been  certified  by  the  superin- 
tendent of  banks  to  come  within  and  fully  conform  to  the 
requirements  of  one  or  the  other  of  paragraphs  (/),  (#), 
(h),  or  (i),  or  unless  such  advertisement  shall  have  been 
approved  in  writing  by  the  superintendent  of  banks 
prior  to  publishing,  circulating  or  otherwise  issuing  the 
same.  Any  individual,  firm,  association,  bank,  trust  com- 
pany, stock  company,  copartnership  or  corporation  who 
shall  advertise  any  securities  in  violation  of  the  pro- 
visions of  this  paragraph  shall  be  guilty  of  a  mis- 
demeanor and  shall  be  punishable  by  a  fine  not  exceeding 
one  thousand  dollars  or  by  imprisonment  in  a  county  jail 


810  BUSINESS  LAW  FOE  BUSINESS  MEN, 

not  exceeding  one  year  or  by  both  such  fine  and  im- 
prisonment, 

(j)  Superintendent  of  Banks  May  Investigate  Bonds. 
The  superintendent  of  banks  shall  have  power,  when 
any  issue  of  bonds  or  securities  is  presented  to  him  for 
that  purpose,  to  investigate  and  ascertain  whether  such 
bonds  or  securities  come  within  and  fully  conform  to  all 
the  requirements  of  this  act.  He  may  also  investigate  and 
ascertain  for  what  period  of  time,  and  upon  what  con- 
ditions, any  franchise  granted  to  or  held  by  any  corpora- 
tion issuing  any  such  bonds  or  securities  will  remain  in 
force,  and  any  other  facts  or  conditions  bearing  upon  the 
value  or  sufficiency  of  such  bonds.  The  superintendent  of 
banks  may  accept  and  act  upon  the  opinions  and  appraise- 
ments of  any  attorneys,  engineers,  or  appraisers  which 
may  be  presented  by  such  person  or  corporation,  so  ap- 
plying, and  the  reports  of  any  of  the  executive  officers  of 
the  corporation  issuing  such  bonds  or  securities,  on  any 
question  of  fact  concerning  or  affecting  such  bonds  or 
securities,  the  security  thereof,  the  franchise  conditions 
herein  mentioned,  or  the  financial  condition  of  the  cor- 
poration issuing  the  same.  In  lieu  of  or  in  addition  to 
such  opinions,  appraisements  and  reports,  the  superin- 
tendent of  banks  may,  if  he  deems  proper,  have  any  or 
all  such  matters  passed  upon  and  certified  to  him  by 
attorneys,  engineers,  appraisers  or  accountants  of  his 
own  selection  at  the  expense  of  the  applicant.  If  the 
superintendent  of  banks  shall  find  from  such  investiga- 
tion that  the  bonds  or  securities  so  presented  come  within 
and  fully  conform  to  all  the  requirements  of  this  act, 
and  is  satisfied  from  such  investigation  as  to  such  fran- 
chise conditions,  he  shall  so  certify  unless  for  any  reason 
he  shall  be  of  the  opinion  that  such  bonds  are  not  a 
safe  or  proper  investment  for  savings  banks,  and  in  such 
event  or  if  such  bonds  shall  fail  to  meet  the  require- 
ments of  this  act  such  certificate  must  be  refused.  The 
superintendent  of  banks  also  shall  have  power  to  investi- 
gate and  ascertain  the  status  and  sufficiency  as  invest- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  811 

ments  for  savings  banks  of  any  bonds  specified.  If  upon 
such  investigation  it  shall  be  determined  in  the  opinion 
of  the  superintendent  of  banks  that  any  bond  specified 
constitutes  a  proper  investment  for  savings  banks  he 
shall  so  certify. 

(k)  Certificates  Revoked. — Any  certificate  issued  by 
the  superintendent  of  banks  under  authority  of  the  pro- 
visions of  this  section  may  be  revoked  at  any  time  in  his 
discretion.  Any  certificate  issued  in  relation  to  notes  or 
bonds  specified  in  paragraphs  (/),  (g)  or  (i)  shall  expire 
not  later  than  three  months  after  the  end  of  the  then 
current  fiscal  year  of  the  corporation  issuing  such  notes 
or  bonds. 

(1)  Renewal  or  Extension  of  Certificate. — Any  such 
certificate  so  expiring  may  be  renewed  or  extended  by 
the  superintendent  of  banks  without  application  therefor 
from  such  corporation  or  other  interested  parties  if  he 
shall  be  satisfied  that  the  notes  or  bonds  referred  to  in 
said  certificate  are  in  conformity  with  the  then  require- 
ments of  this  act. 

(m)  Expenses. — The  actual  expense  of  investigating 
any  issue  of  bonds  or  securities  so  presented  shall  be 
paid  by  the  person,  district  or  corporation  presenting  the 
same  for  investigation,  and  the  superintendent  of  banks, 
before  making  such  investigation,  may  require  a  cash 
deposit  of  such  amount  as  he  may  deem  necessary  to 
cover  such  expense.  The  superintendent  of  banks  shall 
keep  an  official  list  of  all  bonds  and  securities  certified 
by  him. 

Act  of  the  Legislature,  approved  May  15,  1919 ; 
in  effect  July  22,  1919. 

Section  1075. — SAVINGS  BANKS  NOT  TO  TRADE  IN  EEAL 
PROPERTY. — No  savings  banks  shall,  directly  or  indirectly, 
deal  or  trade  in  real  or  personal  property  in  any  other 
case  or  for  any  other  purpose  than  is  authorized  by  this 
act,  and  shall  not  contract  any  debt  or  liability  for  any 
purpose  whatever  other  than  for  deposits,  except  as  in 


812  BUSINESS  LAW  FOR  BUSINESS  MEN. 

this  section  provided. 

(a)  Drafts. — Savings   banks   may   pay    regular    de- 
positors, when  requested  by  them,  by  draft  upon  deposits 
to  their  credit  with  their  banks,  and  charge  current  rate 
of  exchange  for  such  drafts. 

(b)  Savings  Banks  Borrowing  Money. — No  savings 
bank  shall  borrow  money,  or  pledge  or  hypothecate  any 
of  its  securities,  except  to  meet  the  immediate  demands 
of  its  own  depositors,  and  then  only  in  pursuance  of  a 
resolution  adopted  by  a  vote  of  a  majority  of  its  board 
of  directors,  duly  entered  upon  their  minutes,  wherein 
shall  be  recorded  the  ayes  and  nays  upon  each  vote ;  also 
with  the  written  approval  of  the  superintendent  of  banks, 
and  he  shall  have  the  authority  to  fix  the  amount  to  be 
borrowed,  the  amount  and  character  of  the  securities  to 
be  pledged  or  hypothecated,  and  the  term  and  rate  of 
interest  thereon;  provided,  that  any  savings  bank  may, 
for  the  purpose  of  performing  its  functions  and  trans- 
acting its  business  as  authorized  by  this  act,  rediscount, 
with   or   without  guarantee   or   endorsement,   with   the 
federal  reserve  bank,  its  acceptances,  notes  or  any  other 
securities,  available  for  rediscount  with  a  federal  reserve 
bank,  in  any  amount  up  to  but  not  exceeding  its  capital 
and  surplus  or  reserve  without  consent  of  the  superin- 
tendent of  banks,  and  shall  not  be  considered  as  borrowed 
money  within  the  meaning  of  this  section ;  provided,  also, 
that  savings  banks  may,  in  the  manner  authorized  by 
law,  and  without  the  previous  approval  of  the  superin- 
tendent of  banks,  borrow  the  public  moneys  of  the  United 
States,  the  State  of  California,  the  counties,  cities  and 
counties,  and  towns  of  said  State  of  California  and  re- 
ceive such  public  moneys  on  deposit ;  provided,  also,  that 
savings  banks  may,  in  the  manner  authorized  by  law, 
and  without  the  previous  approval  of  the  superintendent 
of  banks,  borrow  postal  savings  moneys  of  the  United 
States,    and    receive    such   postal    savings    moneys    on 
deposit;  and  provided,  further,  savings  banks  may  bor- 
row any  amount,  in  addition  to  the  amounts  authorized 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  813 

to  be  borrowed  in  this  section,  for  the  purpose  of  buying 
from  the  United  States,  United  States  bonds,  United 
States  treasury  certificates,  or  notes  or  obligations  of 
the  United  States,  but  only  in  pursuance  of  a  resolution 
of  a  majority  of  its  board  of  directors,  duly  entered  upon 
their  minutes,  and  without  the  previous  approval  of  the 
superintendent  of  banks,  but  the  fact  of  such  transaction 
shall  forthwith  be  reported  in  writing  to  the  superin- 
tendent of  banks.  No  excess  loan  made  to  any  savings 
bank  with  or  without  pledge  of  assets  shall  be  invalid  or 
illegal  as  to  the  lender. 

Section  1076. — LOAN  TO  DIRECTOR  OR  OFFICER. — No 
loan  shall  be  made,  for  himself  or  as  agent  or  partner  of 
another,  directly  or  indirectly,  to  any  director  or  officer 
of  any  savings  bank  by  such  bank,  or  on  the  endorsement, 
surety  or  guaranty  of  any  such  officer  or  director,  except 
that  loans  may  be  made  to  any  corporation  in  which  any 
director  or  officer  of  such  savings  bank  may  own  or  hold 
a  minority  number  of  shares  of  stock,  upon  authorization 
of  a  majority  of  all  the  directors  of  such  savings  bank 
and  the  affirmative  vote  of  all  directors  of  such  savings 
bank  present  at  the  meeting  authorizing  such  loan;  pro- 
vided, however,  that  such  loan  shall  in  all  other  respects 
conform  to  and  comply  with  all  other  provisions  of  this 
act.  Such  interested  director  or  officer  shall  not  vote  or 
participate  in  any  manner  in  the  action  of  the  board  on 
such  loan;  provided,  also,  that  by  and  with  the  consent 
of  the  superintendent  of  banks  previously  obtained  in 
writing,  all  directors  may  vote  upon  such  a  loan  made 
by  one  bank  to  another  bank  where  the  entire  capital 
stock  of  one  is  owned  by  or  held  in  trust  for  the  stock- 
holders of  the  other  bank  and  where  all  or  a  majority  of 
the  board  of  directors  of  each  of  said  banks  are  com- 
posed of  the  same  persons.  Such  authorization  shall  be 
entered  upon  the  records  or  minutes  of  such  savings  oanK. 
The  fact  of  making  such  loan,  the  names  of  the  directors 
authorizing  such  loan,  the  corporate  name  of  the  bor- 


814  BUSINESS  LAW  FOB  BUSINESS  MEN. 

rower,  the  name  of  each  director  or  officer  of  such  bank 
who  is  a  member,  stockholder,  officer,  or  director  of  the 
corporation  to  which  such  loan  is  made,  the  amount  of 
stock  held  by  him  in  such  borrowing  corporation,  the 
amount  of  such  loan,  the  rate  of  interest  thereon,  the 
time  when  the  loan  will  become  due,  the  amount,  char- 
acter and  value  of  security  given  therefor  and  the  fact 
of  final  payment,  when  made,  shall  be  forthwith  reported 
in  writing  by  the  cashier  or  secretary  of  such  savings 
bank  to  the  superintendent  of  banks.  No  loan  may  be 
made  to  any  corporation,  a  majority  of  the  stock  of  which 
is  owned  or  controlled  by  any  one  or  more  of  the  directors 
or  officers  of  such  savings  bank,  except  with  the  previous 
consent  of  the  superintendent  of  banks. 

(a)  Loan  to  Agent  or  Employee. — A  loan  may  be 
made  to  any  agent  or  employee,  other  than  an  officer  or 
director,  of  any  savings  bank  by  such  bank  upon  authori- 
zation of  a  majority  of  all  the  directors  of  such  savings 
bank  and  an  affirmative  vote  of  all  directors  of  such  sav- 
ings bank  present  at  the  meeting  authorizing  such  loan ; 
provided,  however,  that  such  loan  shall  in  all  respects 
conform  to  and  comply  with  all  other  provisions  of  this 
act.  Such  authorization  shall  be  entered  upon  the  records 
or  minutes  of  such  savings  bank.  The  fact  of  making- 
such  loan,  the  names  of  the  directors  authorizing  such 
loan,  the  name  of  the  borrower,  the  nature  of  his  employ- 
ment, the  amount  of  such  loan,  the  rate  of  interest  there- 
on, the  time  when  the  loan  will  become  due,  the  amount, 
character  and  value  of  the  security  given  therefor,  and 
the  fact  of  final  payment,  when  made,  shall  be  forthwith 
reported  in  writing  by  the  cashier  or  secretary  of  such 
savings  bank  to  the  superintendent  of  banks.  Any  officer 
or  director  of  any  savings  bank,  who  knowingly  procures 
a  loan  from  such  savings  bank,  contrary  to  the  provisions 
of  this  section,  shall  be  guilty  of  a  felony.  In  case  of  the 
neglect  or  failure  of  the  secretary  or  cashier  of  any  such 
bank  to  report  to  the  superintendent  of  banks,  as  herein 
provided,  any  of  the  facts  so  required  to  be  reported,  or 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  81.5 

in  case  of  the  neglect  or  failure  of  the  secretary  or  cashier 
of  any  such  bank  to  report  to  the  superintendent  of  banks 
any  loan  made  contrary  to  the  provisions  of  this  section, 
the  bank  shall  be  liable  therefor  and  shall  forfeit  to  the 
people  of  the  State  of  California  twenty-five  dollars  per 
day  for  each  day,  or  part  thereof,  during  which  such 
neglect  or  failure  continues. 

This  section  shall  not  apply  to  any  loan  made  to  a 
religious  corporation,  club,  or  other  membership  corpora- 
tion of  which  one  or  more  directors,  officers,  agents  or 
employees  of  such  savings  bank  may  be  members  or 
officers,  but  in  which  they  have  no  financial  interest. 

(b)  Loans  to  Director  on  Security. — Loans  may  be 
made  to  any  director,  other  than  an  officer,  directly  or 
indirectly,  or  to  any  agent  or  employee  of  a  savings  bank 
on  the  security  of  United  States  bonds,  United  States 
treasury  certificates,  or  interest-bearing  notes,  or  obliga- 
tions of  the  United  States,  or  those  for  which  the  faith 
and  credit  of  the  United  States  are  pledged  for  repay- 
ment of  principal  or  interest,  or  those  issued  under 
authority  of  the  United  States,  notwithstanding  anything 
in  this  section  contained,  and  such  loans  may  be  made  in 
the  usual  manner  of  making  loans  in  which  no  director  of 
such  bank  is  interested. 

Section  1077. — LIMITATION  ON  LOANS. — 1.  No  savings 
bank  shall  loan  money  except  on  adequate  security  of 
real  or  personal  property,  and  no  such  loan  shall  be  made 
for  a  period  longer  than  ten  years.  No  such  loan  shall 
be  made  on  unsecured  notes;  provided,  that  a  savings 
bank  may  discount  or  purchase  bankers'  or  trade  ac- 
ceptances, notes,  drafts  and  bills  of  exchange  of  the  kind 
and  character  and  maturities  defined  and  made  eligible 
for  rediscount  with  a  federal  reserve  bank;  provided, 
also,  that  the  same  are  accepted  or  endorsed  without 
qualification  by  a  bank  or  trust  company,  which  bank  or 
trust  company  has  a  paid-in  capital  of  at  least  one  million 
dollars ;  and  provided,  also,  that  a  savings  bank  may  dis- 


816  BUSINESS  LAW  FOE  BUSINESS  MEN. 

count  or  purchase  a  bill  which  must  comply  with  the 
following  requirements : 

(a)  Requirements  for  Bill  of  Exchange. — It  must  be 
a  bill  issued  by  a  solvent  individual  or  firm  or  corporation 
engaged  in  mercantile  or  manufacturing  business  in  the 
United  States  that  makes  statements  of  its  condition  duly 
ascertained  and  certified  to  by  a  public  accountant.    Copy 
of  such  a  certified  statement  shall  be  on  file  in  the  office 
of  the  savings  bank  discounting  or  purchasing  such  bill 
in  a  file  maintained  for  such  purpose.     Said  statement 
shall  have  been  issued  within  the  preceding  fourteen 
months  and  shall  be  the  latest  issued  by  said  individual 
or  firm  or  corporation.    Said  statement  shall  consist  of 
a  balance  sheet  showing  quick  assets,  slow  assets,  per- 
manent or  fixed  assets,  current  liabilities  and  accounts, 
short  term  loans,  long  term  loans,  capital  and  surplus. 
Accompanying  said  balance  sheet  shall  be  a  copy  of  a 
statement  from  the  borrower  or  public  accountant  con- 
cerning the  following: 

(1)  The  nature  of  the  business. 

(2)  All  contingent  liabilities  such  as  endorsements  or 
guarantees. 

(3)  Particulars  respecting  any  mortgage  debts  and 
whether  there  is  any  lien  on  current  assets. 

(4)  The  maximum  and  minimum  liabilities  of  the  in- 
dividual, firm  or  corporation  during  the  twelve  months 
previous  to  the  date  of  audit. 

(b)  It  must  be  issued  by  an  individual,  firm  or  cor- 
poration whose  net  worth  is  not  less  than  two  times  the 
amount  of  its  outstanding  liabilities,  including  any  con- 
tingent liabilities  arising  from  the  rediscount  of  bills  re- 
ceivable or  other  accommodation  endorsements,  nor  less 
than  three  hundred  thousand  dollars.    The  quick  assets 
of  said  individual,  firm  or  corporation,  consisting  of  mer- 
chandise, finished,  raw,  and  in  the  process  of  manufac- 
ture, accounts  receivable,  bills  receivable,  bonds  or  obli- 
gations of  the  government  of  the  United  States  at  the 
then  market  value  of  said  bonds  or  obligations  and  cash, 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  817 

shall  not  be  less  than  two  times  its  outstanding  quick 
liabilities  including  any  contingent  liabilities  arising 
from  the  rediscount  of  bills  receivable  or  other  accom- 
modation endorsements,  as  shown  by  said  statement. 

(c)  It  must  have  a  maturity  of  not  more  than  six 
months. 

(d)  It  must  have  arisen  out  of  actual  commercial 
transactions;  that  is,  be  a  bill  which  has  been  issued  or 
drawn  for  industrial  or  commercial  purposes  or  the  pro- 
ceeds of  which  have  been  or  are  to  be  used  for  such 
purposes. 

(b)  Bills  Not  Eligible  for  Discount  or  Purchase.— 
No  bill  shall  be  eligible  for  discount  or  purchase  by  a 
savings  bank,  the  proceeds  of  which  have  been  used  or 
are  to  be  used  for  any  of  the  following  purposes : 

(1)  For  investments  of  a  merely  speculative  charac- 
ter whether  made  in  goods  or  otherwise. 

(2)  Must  not  have  been  issued  for  carrying  or  trading 
in  stocks,  bonds  or  other  investment  securities,  except 
bonds  of  the  government  of  the  United  States,  and  must 
not  cover  merely  investments. 

(3)  Must  not  be  a  bill  of  any  individual,  firm  or  cor- 
poration which  has  under  pledge  or  hypothecation  any  of 
its  personal  assets. 

The  word  "bill,"  when  used  in  this  section,  shall  be 
construed  to  include  notes,  drafts,  or  bills  of  exchange, 
and  the  word  "goods"  shall  be  construed  to  include 
goods,  wares  or  merchandise. 

(c)  Credit  Reports. — Any  savings  bank  purchasing 
or  discounting  such  paper  shall  have  a  file  maintained  for 
the  purpose,  letters  from  banks  and  merchants  or  mer- 
cantile reports  bearing  upon  the  credit  and  standing  of 
the  person,   firm,   copartnership   or   corporation   whose 
paper  is  under  discount. 

(d)  Limitation  on  Amount. — No  savings  bank  shall 
at  any  time  acquire  or  hold,  directly  or  indirectly,  by 
discount    or    purchase,    a    combined    total    amount    of 
bankers'  and  trade  acceptances,  drafts  and  bills  of  ex- 


818  BUSINESS  LAW  FOR  BUSINESS  MEN. 

change  and  bills  of  the  character  defined  and  limited  by 
this  section,  greater  than  twenty  per  centum  of  the  de- 
posits of  such  bank,  nor  shall  any  savings  bank  at  any 
time  acquire  or  hold,  directly  or  indirectly,  by  discount 
or  purchase,  an  amount  of  bills,  of  the  character  defined 
and  limited  by  this  section,  greater  than  twelve  and  one- 
half  per  centum  of  the  deposits  of  such  bank.  No  savings 
bank  shall  at  any  time  acquire  or  hold,  directly  or  in- 
directly, by  discount  or  purchase,  any  such  bankers  or 
trade  acceptances,  drafts  and  bills  of  exchange  from  any 
one  acceptor  in  an  amount  which  shall  exceed  five  per 
centum  of  the  capital  and  surplus  or  reserve  of  such  sav- 
ings bank,  nor  shall  any  savings  bank  at  any  time  acquire 
or  hold,  directly  or  indirectly,  by  discount  or  purchase, 
any  such  bills  of  any  one  person,  firm,  copartnership  or 
corporation  in  an  amount  which  shall  exceed  five  per 
centum  of  the  capital  and  surplus  or  reserve  of  such 
savings  bank. 

(e)  Loans  on  Bonds. — 2.  No  savings  bank  shall  invest 
or  loan  an  amount  greater  than  fifty  per  centum  of  its 
actual  paid-up  capital  and  surplus  on  any  one  note  or 
bond  issue  of  the  class  specified  in  paragraph  (/&),  or  on 
the  securities  issued  by  any  one  mortgage  insurance  com- 
pany of  the  class  specified  in  paragraph  (&),  nor  more 
than  five  per  centum  of  its  assets  on  any  one  bond  issue 
of  any  other  class,  except  bonds  of  the  United  States,  or 
interest-bearing  notes  or  obligations  of  the  United  States, 
or  bonds  of  the  State  of  California,  bonds  for  which  the 
faith  and  credit  of  the  United  States  or  of  the  State  of 
California  are  pledged,  or  bonds  of  any  county,  city  and 
county,  city  or  school  district  in  this  state,  or  bonds  of 
any  irrigation  district  such  as  are  legal  for  investment 
by  savings  banks. 

3.     No  savings  bank  shall  loan  money : 

(a)  On  bonds  of  the  character  specified  in  paragraphs 
(a),  (aa),  (b),  (c)  and  (d),  or  on  bonds  of  the  character 
specified  in  paragraph  (e),  the  principal  and  interest  of 
which  are  to  be  paid  in  whole  or  in  part  by  taxes  levied 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  819 

upon  the  property  in  the  district  issuing  such  bonds, 
unless  such  bonds  shall  have  a  market  value  at  least  ten 
per  centum  in  excess  of  the  amount  loaned  thereon;  or, 

(b)  On  bonds  of  the  character  specified  in  paragraphs 
(/),  and  (g)  or  on  bonds  or  notes  of  the  character  speci- 
fied in  paragraph  (i)  of  this  act,  when  eligible  as  invest- 
ments for  savings  banks  pursuant  to  said  section,  or  on 
bonds  of  the  character  specified  in  paragraph  (e)  other 
than  those  specified  in  the  preceding  paragraph  of  this 
section,  unless  such  bonds  or  notes  shall  have  a  market 
value  at  least  fifteen  per  centum  in  excess  of  the  amount 
loaned  thereon;  or, 

(c)  On  bonds  legal  for  investment  by  savings  banks 
in  the  states  of  New  York  or  Massachusetts,  unless  such 
bonds  shall  have  a  market  value  at  least  fifteen  per 
centum  in  excess  of  the  amount  loaned  thereon ;  or, 

(d)  On  notes  or  bonds  of  the  character  specified  in 
paragraph  (h)  when  certified  as  legal  investments  for 
savings  banks,  or  on  securities  of  the  character  specified 
in  paragraph   (k)   of  subdivision  three  of  said  section 
eligible  for  investment  by  savings  banks,  unless  such 
bonds,  notes  or  securities  shall  have  a  market  value  at 
least  ten  per  centum  in  excess  of  the  amount  loaned 
thereon;  or, 

(e)  On  personal  property  unless  such  personal  prop- 
erty shall  have  a  market  value  at  least  fifty  per  centum  in 
excess  of  the  amount  loaned  thereon ;  or, 

(/)  On  other  bonds,  or  on  capital  stock  of  any  cor- 
poration, unless  such  bonds  or  stock  shall  have  a  market 
value  at  least  fifty  per  centum  in  excess  of  the  amount 
loaned  thereon ;  provided,  however,  that  no  loan  shall  be 
made  upon  the  capital  stock  of  any  bank  unless  such  bank 
has  been  in  existence  at  least  two  years  and  has  earned 
and  paid  a  dividend  on  its  capital  stock. 

(f )  Loans  on  Real  Estate. — 4.    No  savings  bank  shall 
make  any  loan  on  security  of  real  estate,  except  it  be  a 
first  lien,  and  in  no  event  to  exceed  sixty  per  centum  of 
the  market  value  of  any  real  estate  taken  as  security 


820  BUSINESS  LAW  FOR  BUSINESS  MEN. 

except  for  the  purpose  of  facilitating  the  sale  of  property 
owned  by  such  savings  bank;  provided,  that  a  second 
lien  may  be  accepted  to  secure  the  repayment  of  a  debt 
previously  contracted  in  good  faith;  and  provided,  also, 
that  any  savings  bank  holding  a  first  mortgage  or  deed 
of  trust  on  real  estate  may  take  or  purchase  and  hold  or 
loan  upon  another  and  immediately  subsequent  mortgage 
or  deed  of  trust  thereon,  but  all  such  loans  shall  not 
exceed  in  the  aggregate  sixty  per  centum  of  the  market 
value  of  the  real  estate  securing  the  same;  provided, 
further,  that  a  savings  bank  may  loan  not  to  exceed  ninety 
per  centum  of  the  face  value  of  a  mortgage  which  con- 
stitutes a  first  lien  upon  real  estate,  but  in  no  event  shall 
any  such  loan  exceed  ninety  per  centum  of  sixty  per 
centum  of  the  market  value  of  the  real  estate  covered  by 
said  mortgage  or  deed  of  trust. 

(g)  Loans  on  Capital  Stock  of  Corporations. — 5.  No 
savings  bank  shall  loan  to  any  one  borrower  on  the  se- 
curity of  the  capital  stock  of  any  corporation  an  amount 
exceeding  ten  per  centum  of  the  capital  stock  and  surplus 
of  such  savings  bank;  provided,  that  all  loans  on  the 
capital  stock  of  any  one  corporation  shall  not  exceed  in 
the  aggregate  twenty-five  per  centum  of  the  capital  stock 
and  surplus  of  such  savings  bank. 

(h)  No  Loans  on  Mining  Stock. — 6.  No  savings  bank 
shall  purchase,  invest  or  loan  its  capital,  surplus  or  the 
money  of  its  depositors,  or  any  part  of  either,  in  mining 
shares  or  stock,  and  any  president  or  managing  officer 
who  knowingly  consents  to  a  violation  of  any  provision 
of  this  paragraph  shall  be  guilty  of  a  felony. 

Section  1078. — TOTAL  RESERVES  OF  SAVINGS  BANKS.— 
Every  savings  bank  or  savings  department  of  a  bank  shall 
at  all  times  maintain  total  reserves  equivalent  to  five  per 
centum  of  the  aggregate  amount  of  its  deposits,  exclusive 
of  United  States,  postal  savings  ban^,  state,  county  and 
municipal,  and  other  public  money  deposits,  which  are 
secured  as  is  required  by  law;  at  least  two  and  one-half 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  821 

per  centum  of  such  deposits  shall  be  maintained  as 
reserves  on  hand,  which  shall  consist  of  gold  bullion  or 
any  form  of  money  or  currency  authorized  by  the  laws  of 
the  United  States,  and  two  and  one-half  per  centum  of 
such  deposits  may  be  maintained  as  reserves  on  hand, 
which  shall  consist  of  bonds,  or  interest  bearing  obliga- 
tions of  the  United  States,  of  gold  bullion,  or  any  form  of 
money  or  currency  authorized  by  the  laws  of  the  United 
States,  or  may  be  maintained  as  reserves  on  deposit  sub- 
ject to  call  with  any  reserve  depositary;  provided,  hoiv- 
ever,  that  all  or  any  part  of  the  reserves  may  be  de- 
posited, subject  to  call,  with  a  federal  reserve  bank  in  the 
district  in  which  such  bank  is  located;  provided,  also, 
that  no  savings  bank  or  savings  department  shall  be 
required  to  maintain  reserves  on  hand  in  excess  of  four 
hundred  thousand  dollars,  and  when  such  reserves  on 
hand  reach  that  amount,  the  balance  of  total  reserves 
necessary  to  make  up  the  five  per  centum  may  be  kept  as 
reserves  on  deposit,  subject  to  call,  with  any  reserve 
depositary. 

(a)  Reserves  of  Member  of  Federal  Reserve  Bank.— 
If  any  bank  shall  have  become  a  member  of  a  federal 
reserve  bank,  it  shall  at  all  times  maintain  the  reserves 
required  by  the  federal  reserve  act  for  time  deposits,  and 
in  addition  thereto  shall  be  required  to  maintain  a  reserve 
of  at  least  two  per  centum  of  its  aggregate  deposits,  ex- 
clusive of  United  States,  postal  savings,  state,  county  and 
municipal,  and  other  public  money  deposits,  which  are 
secured  as  is  required  by  law,  which  two  per  centum  shall 
consist  of  gold  bullion,  or  any  form  of  money  or  currency 
authorized  by  the  laws  of  the  United  States. 

(b)  Failure  to  Maintain  Reserves. — If  any  savings 
bank  shall  fail  to  maintain  its  total  reserves  in  the  manner 
authorized  by  this  section,  it  shall  be  subject  to  the  pen- 
alty provided  for  commercial  banks. 

(c)  Dealings  with  Commercial  Banks. — No  new  loan 
shall  be  made  during  any  deficiency  in  the  total  reserves. 
Deposits    with    any    commercial    bank,    or    commercial 


822  BUSINESS  LAW  FOB  BUSINESS  MEN. 

department  of  a  bank,  on  open  account,  as  provided  in 
this  section,  shall  be  permitted  and  shall  not  be  construed 
as  loans.  Not  more  than  five  per  centum  of  the  deposits 
of  any  savings  bank  shall  be  deposited  with  any  one  bank, 
except  with  the  consent  of  the  superintendent  of  banks. 
Not  more  than  fifteen  per  centum  of  the  deposits  of  any 
savings  banks  shall  be  deposited  with  all  commercial 
banks,  except  with  the  consent  of  the  superintendent  of 
banks.  No  savings  bank  or  savings  department  shall 
receive  deposits  of  other  banks  other  than  savings  de- 
posits and  such  deposits  shall  not  be  treated  or  considered 
as  a  part  of  the  reserves  on  deposits  of  such  depositing 
bank;  provided,  the  sum  so  deposited  shall  not  exceed 
thirty  per  centum  of  the  paid-in  capital  and  surplus  of  the 
depositing  bank  nor  more  than  fifteen  per  centum  of  the 
paid-in  capital  and  surplus  of  the  depositary  bank. 

(d)  Power  to  Receive  Liberty  Bonds. — Every  sav- 
ings bank  shall  have  power  to  receive  as  depositary,  or 
as  bailee  for  safe  keeping  and  storage,  Liberty  bonds  or 
other  bonds  or  securities  issued  by  the  United  States 
government  for  war  purposes  or  otherwise. 

Act  of  the  Legislature,  approved  May  15,  1919 ; 
in  effect  July  22,  1919. 

Section  1079. — LOANS  OF  COMMERCIAL,  BANKS. — No 
commercial  banks  shall  make  any  loans,  directly  or  indi- 
rectly, to  any  person,  firm,  copartnership  or  corporation, 
in  an  amount  which,  including  therein  any  extension  of 
credit  to  such  person,  firm,  copartnership  or  corporation, 
by  means  of  letters  of  credit,  or  by  acceptance  of  drafts 
for,  or  the  discount  or  purchase  of  the  notes,  bills  of  ex- 
change or  other  obligations  of,  such  person,  firm,  copart- 
nership or  corporation,  shall  exceed  the  following  per- 
centage of  its  capital  and  surplus : 

1.  Ten  per  centum  without  security,  except  where  such 
capital  stock  and  surplus  is  not  more  than  twenty-five 
thousand  dollars,  in  which  event  an  amount  not  to  exceed 
twenty  per  centum  of  such  capital  stock  and  surplus  may 


Section  1079,  page  822,  "Business  Law  for  Business  Men" — FOREIGN 
DRAFTS  OR  BILLS  OF  EXCHANGE— Any  commercial  bank  may  accept 
drafts  or  bills  of  exchange  drawn  upon  it  having  not  more  than  three  months 
sight  to  run,  exclusive  of  days  of  grace,  drawn  under  regulations  to  be  pre- 
scribed by  the  superintendent  of  banks  by  banks  or  bankers  in  foreign  coun- 
tries or  dependencies  or  insular  possessions  of  the  United  States  for  the  pur- 
pose of  furnishing  dollar  exchange  as  required  by  the  usages  of  trade  in  the 
respective  countries,  dependencies,  or  insular  possessions;  provided,  however, 
that  no  commercial  bank  shall  accept  such  drafts  or  bills  of  exchange  referred 
to  in  this  paragraph  for  any  one  bank  to  any  amount  exceeding  in  the  aggre- 
gate ten  per  centum  of  the  paid-up  and  unimpaired  capital  and  surplus  of  the 
accepting  bank  unless  the  draft  or  bill  of  exchange  is  accompanied  by  docu- 
ments conveying  or  securing  title  or  by  some  other  adequate  security;  pro- 
vided, further,  that  no  commercial  bank  shall  accept  such  drafts  or  bills  in  an 
amount  exceeding  at  any  time  the  aggregate  of  one-half  of  its  paid-up  and  un- 
impaired capital  and  surplus. 

Act  of  the  Legislature  of  California,  approved  June  3,  1921;  in  effect 
August  3,  1921. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  823 

be  loaned  without  security,  and  where  such  capital  stock 
and  surplus  is  greater  than  twenty-five  thousand  dollars 
and  does  not  exceed  fifty  thousand  dollars,  a  sum  not 
exceeding  five  thousand  dollars  may  be  loaned  without 
security.  Nothing  herein  shall  prohibit  any  commercial 
bank  from  taking  or  receiving  any  kind,  character,  or 
amount  of  security  whatsoever,  either  real  or  personal, 
for  the  protection  of  any  loan  made  under  the  provisions 
of  this  subdivision,  but  no  such  loan  or  any  part  thereof 
shall  be  considered  or  construed  as  a  secured  loan  unless 
the  whole  thereof  is  loaned  upon  security  worth  at  least 
fifteen  per  centum  more  than  the  amount  of  such  loan ;  or, 

2.  Fifteen  per  centum,  in  addition  to  the  amount  that 
may  be  loaned  under  the  provisions  of  subdivision  one  of 
this   section,  upon  security  worth  at  least  fifteen  per 
centum  more  than  the  amount  of  such  loan  so  secured; 
provided,  the  total  amount  which  can  be  loaned  under 
subdivisions  one  and  two  hereof  cannot  exceed  twenty-five 
per  centum  in  all;  provided,  however,  that  a  separate  note 
or  notes  shall  be  taken  for  the  unsecured  loans  and  a 
separate  note  or  notes  shall  be  taken  for  the  secured 
loans,  and  the  secured  and  unsecured  loans  shall  not  be 
combined  in  any  way  within  one  note,  or  notes ;  or, 

3.  Twenty-five  per  centum  upon  security  worth  at 
least  fifteen  per  centum  more  than  the  amount  of  its  loans 
so  secured;  provided,  hotvever,  that  when  secured  loans 
to  this  amount  or  any  amount  in  excess  of  fifteen  per 
centum  are  made,  then  no  unsecured  loans  shall  be  per- 
mitted in  addition  to  such  secured  loans;  or, 

4.  Forty  per  centum,  provided  such  loans  are  upon 
commercial  or  business  paper  actually  owned  by  the  per- 
son negotiating  the  same  to  such  bank,  and  are  endorsed 
by  such  person  without  limitation;  provided,  however, 
that  in  addition  to  the  amounts  permitted  to  be  loaned  by 
subdivisions  one,  two  or  three  of  this  section,  an  amount 
may  be  loaned  on  the  securities  fixed  by  subdivision  four 
of  this  section,  which  taken  with  the  amounts  so  permitted 
by  said  subdivisions  one,  two  or  three  will  not  exceed 


824  BUSINESS  LAW  FOB  BUSINESS  MEN. 

forty  per  centum;  provided,  also,  that  the  restrictions 
under  this  section  shall  not  apply  to  bills  of  exchange  or 
drafts,  with  bills  of  lading  attached,  drawn  in  good  faith 
against  actual  existing  values;  provided,  further,  that 
any  commercial  bank,  having  first  obtained  in  writing 
the  consent  of  the  superintendent  of  banks  so  to  do  and 
under  such  conditions  and  regulations  as  may  be  pre- 
scribed by  him,  may  accept  drafts  or  bills  of  exchange 
drawn  upon  it  running  for  a  period  of  not  longer  than  six 
months,  but  no  commercial  bank  shall  accept  such  drafts 
or  bills  of  exchange  in  an  amount  greater  at  any  time  in 
the  outstanding  aggregate  than  one-half  of  its  capital  and 
surplus;  but  such  acceptance  or  acceptances  must  be 
drawn  by  a  person,  firm,  copartnership  or  corporation 
engaged  in  agricultural,  industrial  or  commercial  busi- 
ness directly  connected  with  the  production,  manufacture, 
purchase,  sale  or  consignment  of  the  goods  involved  in 
the  transaction  in  which  such  acceptance  originated; 
provided,  however,  that  no  such  acceptance  or  accept- 
ances to  any  one  person,  firm,  copartnership  or  corpora- 
tion shall  exceed  ten  per  centum  of  the  capital  and  sur- 
plus of  such  bank. 

None  of  the  limitations  or  restrictions  contained  in  the 
previous  subdivisions  of  this  section  shall  apply  to  loans, 
discounts  or  other  extensions  of  credit  secured  by  Liberty 
bonds  or  by  other  bonds  or  securities  issued  by  the  United 
States  government,  if  the  market  value  of  such  Liberty 
bonds  or  other  securities  exceeds  by  ten  per  centum  the 
amount  of  any  such  loan,  discount  or  other  extension  of 
credit. 

Loans  which  are  made  upon  security  available  for 
loans  in  a  savings  bank  may  be  made  in  a  commercial 
bank  upon  the  same  margin  of  security  as  is  permitted 
to  savings  banks,  anything  in  this  section  to  the  contrary 
notwithstanding,  and  all  such  loans  shall  be  deemed  to 
be  secured  loans  within  the  meaning  of  this  section. 

(a)  Computing  Liabilities  to  Commercial  Banks. — In 
computing  the  total  liabilities  of  any  person  to  a  commer- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  825 

cial  bank  there  shall  be  included  all  liabilities  to  the  bank 
of  any  copartnership  or  unincorporated  association  of 
which  he  is  a  member,  and  any  loans  made  for  his  benefit 
or  for  the  benefit  of  such  copartnership  or  unincorporated 
association ;  of  any  firm,  copartnership  or  unincorporated 
association  to  a  commercial  bank  there  shall  be  included 
all  liabilities  of  its  individual  members  and  all  loans  made 
for  the  benefit  of  such  copartnership  or  unincorporated 
association  or  any  member  thereof;  and  of  any  corpora- 
tion to  a  commercial  bank  there  shall  be  included  all  loans 
made  for  the  benefit  of  the  corporation. 

Section  1080. — LOANS  TO  OFFICER  OF  COMMERCIAL 
BANK. — No  loan  shall  be  made  for  himself  or  as  agent 
or  partner  of  another,  directly  or  indirectly,  to  any  officer 
of  any  commercial  bank  by  such  bank  or  on  the  endorse- 
ment, surety,  or  guaranty  of  any  such  officer;  provided, 
that  a  loan  may  be  made  to  a  corporation  of  which  any 
officer  of  a  commercial  bank,  proposing  to  make  such 
loan,  is  a  minority  stockholder,  director,  officer,  agent  or 
employee. 

(a)  Loans  to  Director,  Agent  or  Employee. — Loans 
to  any  director,  agent  or  employee  other  than  an  officer, 
or  to  any  firm,  copartnership  or  corporation  of  which  any 
director,  agent  or  employee  other  than  an  officer  is  a  mem- 
ber, stockholder,  director,  officer,  agent  or  other  employee, 
or  to  any  person,  firm,  copartnership  or  corporation  on 
the  endorsement,  surety,  or  guaranty  of  any  such  direc- 
tor other  than  an  officer,  agent  or  other  employee,  can  be 
made  by  any  commercial  bank;  and  provided,  further, 
that  a  loan  may  be  made  or  a  line  of  credit  may  be  given 
to  any  member  of  an  advisory  board  or  body  of  a  com- 
mercial bank,  not  otherwise  an  officer  of  such  bank,  or  a 
loan  may  be  made  to  any  firm,  copartnership  or  corpora- 
tion of  which  any  member  of  such  advisory  board  or  body 
is  a  member,  stockholder,  director,  officer,  agent  or  other 
employee,  or  to  any  person,  firm,  copartnership,  or  cor- 
poration on  the  endorsement,  surety,  or  guaranty  of  any 


826  BUSINESS  LAW  FOR  BUSINESS  MEN. 

such  member  of  such  advisory  board  or  body  upon  such 
conditions  as  are  herein  fixed  for  a  loan,  directly  or  indi- 
rectly, or  a  line  of  credit  and  the  report  thereof  to  any 
director  of  such  bank.  Loans  herein  authorized  can  be 
made  only  on  authorization  of  or  confirmation  within 
thirty  days  after  making  such  loan,  by  a  majority  of  all 
the  directors  of  such  bank  and  the  affirmative  vote  of  all 
directors  of  such  bank  present  at  the  meeting  authorizing 
or  confirming  such  loan.  Such  interested  director  shall 
not  vote  or  participate  in  any  manner  in  the  action  of  the 
board  on  such  loan ;  provided,  that  by  and  with  the  con- 
sent of  the  superintendent  of  banks  previously  obtained 
in  writing,  all  directors  may  vote  upon  such  a  loan  made 
by  one  bank  to  another  bank  where  the  entire  capital 
stock  of  one  is  owned  by  or  held  in  trust  for  the  stock- 
holders of  the  other  bank  and  where  all  or  a  majority  of 
the  board  of  directors  of  each  of  said  banks  are  composed 
of  the  same  persons. 

(b)  Credit  to  Directors. — The  board  of  directors  of 
any  such  bank  may  fix  the  total  amount  of  credit  that  may 
at  any  one  time  during  the  twelve  months  next  succeeding 
be  given  to  any  director,  agent,  or  other  employee,  other 
than  an  officer,  or  to  any  firm,  copartnership,  or  corpora- 
tion in  which  any  director,  agent,  or  other  employee  other 
than  an  officer  is  a  member,  stockholder,  director,  officer, 
agent  or  other  employee,  or  to  any  corporation  of  which 
any  officer  of  a  commercial  bank,  proposing  to  fix  such 
total  amount  of  credit,  is  a  minority  stockholder,  director, 
officer,  agent  or  employee,  and  any  or  all  loans  made  with- 
in or  up  to  the  total  amount  of  such  authorized  credit 
may  at  any  time  during  said  twelve  months  be  renewed 
from  time  to  time,  in  whole  or  in  part,  by  the  officers  of 
the  bank  without  any  further  vote  or  action  on  the  part 
of  the  board  of  directors.  Each  such  authorization  shall 
be  entered  upon  the  records  or  minutes  of  said  bank.  No 
director  shall  vote  or  participate  in  any  manner  in  such 
action  of  the  board  fixing  the  total  amount  of  credit  that 
may  at  any  one  time  be  given  to  himself  or  to  any  firm, 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  827 

copartnership  or  corporation  in  which  he  is  a  member, 
stockholder,  director,  officer,  agent  or  other  employee. 
The  fact  of  making  such  loan,  the  names  of  the  directors 
authorizing  such  loan,  the  name  of  the  director,  agent 
or  employee,  obtaining  such  loan,  or  the  name  of  the  firm, 
copartnership  or  corporation  in  which  such  director, 
agent  or  employee  is  interested,  or  the  name  of  the  cor- 
poration, of  which  any  officer  of  a  commercial  bank  is 
a  minority  stockholder,  director,  officer,  agent  or  em- 
ployee, obtaining  such  loan,  the  amount  of  such  loan,  the 
rate  of  interest  thereon,  the  time  when  the  loan  will  be- 
come due,  the  amount,  character  and  value  of  security 
given  therefor,  if  any,  and  the  fact  of  final  payment  when 
made  shall  forthwith  be  reported  in  writing  by  the  cashier 
or  secretary  of  such  bank  to  the  superintendent  of  banks. 
In  case  a  loan  is  made  to  a  corporation  there  shall  be  re- 
ported in  the  same  manner  the  name  of  each  director  and 
officer  of  such  bank  who  is  a  member,  stockholder,  director, 
officer  or  employee  of  such  borrowing  corporation,  and  the 
amount  of  stock  held  by  him  in  such  borrowing  corpora- 
tion. All  the  provisions  of  this  section  relating  to  reports 
shall  apply  to  the  granting  of  credit  and  all  loans  made 
under  any  credit  given  and  payment  made  thereon  shall 
also  be  reported  immediately  after  the  same  is  made.  In 
case  of  a  loan  made  without  the  previous  authorization  of 
the  directors,  the  fact  of  making  such  loan  shall  forth- 
with be  reported  and  the  action  of  the  board  of  directors, 
in  confirming  or  refusing  to  confirm  such  loan  within 
thirty  days  thereafter,  and  the  fact  of  final  payment  when 
made  shall  be  reported  in  the  same  manner  as  herein 
required  for  loans  made  under  previous  authorization. 

(c)  Penalty. — Any  officer,  director,  agent,  or  em- 
ployee of  a  commercial  bank,  who  knowingly  procures  a 
loan  from  such  commercial  bank  contrary  to  the  pro- 
visions of  this  section,  shall  be  guilty  of  a  felony.  In  case 
of  the  neglect  or  failure  of  the  secretary  or  cashier  of 
any  such  bank  to  report  to  the  superintendent  of  banks, 
as  herein  provided,  any  of  the  facts  so  required  to  be 


828  BUSINESS  LAW  FOE  BUSINESS  MEN. 

reported,  or  in  case  of  the  neglect  or  failure  of  the  secre- 
tary or  cashier  of  any  such  bank  to  report  to  the  superin- 
tendent of  banks  any  loan  made  contrary  to  the  pro- 
visions of  this  section,  the  bank  shall  be  liable  therefor 
and  shall  forfeit  to  the  people  of  the  state  of  California 
twenty-five  dollars  per  day  for  each  day,  or  part  thereof, 
during  which  such  neglect  or  failure  continues. 

This  section  shall  not  apply  to  any  loan  made  to  a 
religious  corporation,  club,  or  other  membership  corpora- 
tion of  which  one  or  more  directors,  officers,  agents  or 
employees  of  such  commercial  bank  may  be  members  or 
officers  but  in  which  they  have  no  financial  interest. 

(d)  Loan  to  Corporation  Owned  or  Controlled  by 
Directors. — No  loan  may  be  made  to  any  corporation,  a 
majority  of  the  stock  of  which  is  owned  or  controlled  by 
any  one  or  more  of  the  directors  or  officers  of  such  com- 
mercial bank,  except  with  the  previous  consent  of  the 
superintendent  of  banks. 

(e)  Loans  to  Directors  on  Security. — Loans  may  be 
made  to  any  director,  other  than  an  officer,  directly  or 
indirectly,  or  to  any  agent  or  employee  of  a  commercial 
bank,  on  the  security  of  United  States  bonds,  United 
States  treasury  certificates  or  interest-bearing  notes  or 
obligations  of  the  United  States,  or  those  for  which  the 
faith  and  credit  of  the  United  States  are  pledged  for 
repayment  of  principal  or  interest,  or  those  issued  under 
authority  of  the  United  States,  notwithstanding  anything 
in  this  section  contained,  and  such  loans  may  be  made  in 
the  usual  manner  of  making  loans  in  which  no  director  of 
such  bank  is  interested. 

Act  of  the  Legislature,  approved  May  15,  1919, 
in  effect  July  22,  1919. 

Section  1081. — TRUST  COMPANIES. — Any  corporation 
which  has  been  or  shall  be  incorporated  under  the  laws  of 
this  state,  which  is  authorized  by  its  articles  of  incorpora- 
tion to  act  as  executor,  administrator,  guardian  of  estates, 
assignee,  receiver,  depositary  or  trustee,  under  appoint- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  829 

ment  of  any  court  or  by  authority  of  any  law  of  this  state, 
or  as  trustee  for  any  purpose  permitted  by  law,  which 
has  its  principal  place  of  business  in  a  city  in  which  the 
population  does  not  exceed  one  hundred  thousand  persons 
and  which  has  a  capital  of  not  less  than  one  hundred 
thousand  dollars  actually  paid  in,  in  cash,  assigned  to  or 
available  for  the  purpose  of  conducting  business  in  any 
such  capacity,  or  trust  business  of  any  character  permit- 
ted by  law,  and  which  has  made  with  the  state  treasurer 
the  deposit  of  money  or  securities  of  the  character  and  in 
the  amount  required  by  law,  and  which  has  received  from 
the  superintendent  of  banks  the  certificate  of  authority 
to  transact  such  business,  and  any  corporation  which 
has  been  or  shall  be  incorporated  under  the  laws  of  this 
state,  which  is  authorized  by  its  articles  of  incorporation 
to  act  as  executor,  administrator,  guardian  of  estates, 
assignee,  receiver,  depositary  or  trustee,  under  appoint- 
ment of  any  court  or  by  authority  of  any  law  of  this  state, 
or  as  trustee  for  any  purpose  permitted  by  law,  which  has 
its  principal  place  of  business  in  a  city  in  which  the  popu- 
lation exceeds  one  hundred  thousand  persons  and  which 
has  a  capital  of  at  least  two  hundred  thousand  dollars 
actually  paid  in,  in  cash,  assigned  to  or  available  for  the 
purpose  of  conducting  business  in  any  such  capacity,  or 
trust  business  of  any  character  permitted  by  law,  and 
which  has  made  with  the  state  treasurer  the  deposit  of 
money  or  securities  of  the  character  and  in  the  amount 
required  by  law,  and  which  has  received  from  the  super- 
intendent of  banks  the  certificate  of  authority  to  transact 
such  business,  may  act,  or  may  be  appointed  by  any  court 
to  act,  in  any  such  capacity  in  like  manner  as  an  indi- 
vidual, and  when  so  qualified  shall  be  known  as  a  trust 
company. 

(a)  May  Receive  Deposits. — Any  such  trust  company 
may  accept  or  receive  any  deposit  of  money  or  personal 
property  authorized,  directed  or  permitted  to  be  made 
with  any  such  corporation  by  any  court  or  law  of  this 
state,  and  may  accept  and  execute  any  trust  provided  for 


830  BUSINESS  LAW  FOB  BUSINESS  MEN. 

in  this  act,  or  permitted  by  any  law  of  this  state,  to  be 
taken,  accepted  or  executed  by  an  individual. 

(b)  Segregation  of  Capital  and  Surplus  in  Cities  of 
Less  Than  100,000. — Any  such  trust  company,  if  located 
in  a  city  the  population  of  which  does  not  exceed  one  hun- 
dred thousand  persons  must  segregate  that  portion  of 
its  capital  and  surplus  assigned  to  or  available  for  its 
trust  business  and  must  apportion  and  set  aside  at  least 
fifty  thousand  dollars  of  such  paid-up  capital  as  security 
for  the  faithful  performance  and  execution  of  all  private 
trusts  accepted  by  it,  and  must  also  apportion  and  set 
aside  at  least  fifty  thousand  dollars  of  such  paid-up  capi- 
tal as  security  for  the  faithful  performance  and  execution 
of  all  court  trusts  accepted  by  it,  and  whenever  such  trust 
company  shall  be  required  to  make  the  first  additional 
deposit  of  securities  with  the  state  treasurer,  such  trust 
company  must  also  apportion  and  set  aside  an  additional 
fifty  thousand  dollars  of  paid-up  capital  as  security  for  the 
faithful  performance  and  execution  of  all  private  trusts 
accepted  by  it,  and  must  also  apportion  and  set  aside  an 
additional  fifty  thousand  dollars  of  paid-up  capital  as 
security  for  the  faithful  performance  and  execution  of  all 
court  trusts  accepted  by  it. 

(c)  In  Cities  of  More  Than  100,000. — Any  such  trust 
company,  if  located  in  a  city,  the  population  of  which 
exceeds  one  hundred  thousand  persons,  must  segregate 
that  portion  of  its  capital  and  surplus  assigned  to  or 
available  for  its  trust  business  and  must  apportion  and 
set  aside  at  least  one  hundred  thousand  dollars  of  such 
paid-up  capital  as  security  for  the  faithful  performance 
and  execution  of  all  private  trusts  accepted  by  it,  and 
must  also  apportion  and  set  aside  at  least  one  hundred 
thousand  dollars  of  such  paid-up  capital  as  security  for 
the  faithful  performance  and  execution  of  all  court  trusts 
accepted  by  it ;  provided,  that  no  such  trust  company  shall 
at  any  time  be  required  to  apportion  and  set  aside  any 
portion  of  its  surplus  as  security  for  the  faithful  per- 
formance and  execution  of  such  private  trusts,  nor  shall 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  831 

it  be  prohibited  from  so  doing;  and  provided,  further, 
that  the  respective  amounts  of  capital  or  capital  and  sur- 
plus so  apportioned  and  set  aside  shall  be  treated  in  all 
respects  as  the  separate  capital  or  capital  and  surplus  of 
each  respective  kind  or  class  of  business,  as  though  the 
same  were  conducted  by  separate  and  distinct  corpora- 
tions, and  each  shall  be  kept,  held,  used  and  disposed  of 
wholly  for  the  exclusive  benefit,  protection  and  security  of 
the  respective  classes  of  trust  business  to  which  the  same 
were  respectively  so  apportioned  and  set  aside. 

(d)  Oath  May  Be  Taken  by  Officer.— In  all  cases  in 
which  it  is  required  that   an  executor,  administrator, 
guardian  of  estates,   assignee,   receiver,   depositary   or 
trustee,  shall  qualify  by  taking  and  subscribing  an  oath, 
or  in  which  an  affidavit  is  required,  it  shall  be  a  sufficient 
qualification  by  such  corporation  if  such  oath  be  taken 
and  subscribed  or  such  affidavit  be  made  by  the  president, 
vice  president,  secretary,  manager,  trust  officer,  assistant 
trust  officer  or  regularly  employed  attorney  thereof,  and 
such  officer  or  employee  shall  be  liable  for  the  failure  of 
such  trust  company  to  perform  any  of  the  duties  required 
by  law  to  be  performed  by  an  individual  acting  in  like 
capacity  and  subject  to  like  penalties ;  provided,  any  such 
appointment  as  guardian  shall  apply  to  the  estate  only, 
and  not  to  the  person. 

(e)  Trust  Company  as  Member  of  Federal  Reserve 
Bank. — Any  trust  company  upon  becoming  a  member  of 
a  federal  reserve  bank  is  authorized  and  empowered : 

To  continue  to  administer,  execute,  enjoy  and  exercise 
all  court  and  private  trusts  as  defined  in  the  bank  act, 
powers,  rights,  privileges,  and  other  fiduciary  relations, 
appointments  and  business  it  may  have  at  the  time  of 
becoming  such  trust  company  member,  and  also  to  take, 
execute  and  administer  all  new  court  and  private  trusts 
as  defined  in  said  bank  act,  including  the  right  to  the 
appointment  of  all  fiduciary  capacities  in  which  it  may 
be  named  in  wills  theretofore  and  thereafter  executed 
and  probated,  and  other  appointments,  powers,  privileges 


832  BUSINESS  LAW  FOR  BUSINESS  MEN. 

and  business,  of  every  kind  and  nature,  as  may  be  then  or 
thereafter  permitted  to,  but  subject  to  the  same  require- 
ments and  limitations  as  may  be  imposed  upon  any  cor- 
poration under  all  of  the  provisions  of  the  bank  act. 

To  hold,  administer,  execute,  and  in  all  respects  gen- 
erally handle,  manage  and  dispose  of,  without  charge, 
restriction,  limitation  or  impairment  of  any  nature,  all 
of  its  investments,  rights,  interests,  titles  to  property, 
contractual,  legal  and  other  rights,  obligations  or  liabili- 
ties, of  every  kind  or  nature,  court  and  private  trusts  as 
denned  in  the  bank  act,  and  other  powers  which  it  may 
be  then  permitted  to  exercise  by  law. 

(f)  Authority  of  Foreign  Corporation  as  Trustee. — A 
foreign  corporation  may  be  authorized  to  act  in  this  state 
as  trustee  for  the  following  purposes : 

(1)  To  deliver  bonds,  and  receive  payment  therefor. 

(2)  To  deliver  permanent  bonds  in  exchange  for  tem- 
porary bonds  of  the  same  issue. 

(3)  To  deliver  refunding  bonds  in  exchange  for  those 
of  a  prior  issue  or  issues. 

(4)  To   register   bonds,   or   to   exchange   registered 
bonds  for  coupon  bonds,  or  coupon  bonds  for  registered 
bonds. 

(5)  To  pay  interest  on  such  bonds,  and  to  take  up  and 
cancel  coupons  representing  such  interest  payments. 

(6)  To   redeem   and  cancel  bonds   when   called   for 
redemption,  or  to  pay  and  cancel  bonds  when  due. 

(7)  The  certification  of  registered  bonds  for  the  pur- 
pose of  exchanging  registered  bonds  for  coupon  bonds. 

(8)  To  act  as  trustee  under  any  mortgage,  deed  of 
trust,  or  other  instrument  securing  notes  or  bonds  issued 
by  any  corporation. 

Act  of  the  Legislature,  approved  May  15,  1919 ; 
in  effect  July  22,  1919. 

Section  1082. — INSPECTION  OF  BANKS. — Every  bank 
and  the  trust  department  of  every  title  insurance  com- 
pany doing  a  trust  business  shall  be  subject  to  the  inspec- 


BUSINESS  CONTEACTS  AND  LEGAL  OBLIGATIONS.    '         833 

tion  of  the  superintendent  of  banks.  The  superintendent 
of  banks,  or  his  examiners,  shall  visit  and  examine  every 
bank  at  least  once  each  fiscal  year.  On  every  such  exam- 
ination inquiries  shall  be  made  by  him  as  to  the  condi- 
tion and  resources  of  the  bank,  the  mode  of  conducting 
and  managing  its  affairs,  the  action  of  its  directors,  the 
investment  and  disposition  of  its  funds,  the  safety  and 
prudence  of  its  management,  the  security  afforded  to 
those  by  whom  its  engagements  are  held  and  whether  the 
requirements  of  its  articles  of  incorporation  and  the  law 
have  been  complied  with  in  the  administration  of  its 
affairs,  and  as  to  such  other  matters  as  the  superintend- 
ent may  prescribe. 

(a)  Extra  Examinations. — Whenever,  in  the  judg- 
ment of  the  superintendent  of  banks,  the  condition  of  any 
bank  renders  it  necessary  or  expedient  to  make  an  extra 
examination  or  to  devote  any  extraordinary  attention  to 
its  affairs  the  superintendent  of  banks  shall  have  author- 
ity to  make  any  and  all  necessary  extra  examinations  and 
to  devote  any  necessary  extra  attention  to  the  conduct  of 
its  affairs;  and  such  bank  shall  pay  for  all  such  extra 
services  rendered  by  the  superintendent  of  banks  at  a 
price  to  be  fixed  by  the  superintendent  of  banks,  but  not 
to  exceed  twenty  dollars  per  day  for  the  examination  of 
the  principal  office  of  such  bank  and  twenty  dollars  a  day 
for  the  examination  of  each  branch  office  of  each  bank. 
The  superintendent  of  banks  shall  also  have  power  to 
examine,  or  cause  to  be  examined,  every  agency  located 
in  this  state  of  any  foreign  bank  or  banking  corporation, 
for  the  purpose  of  ascertaining  whether  it  has  complied 
with  the  laws  of  this  state,  and  for  such  other  purposes 
and  as  to  such  other  matters  as  the  superintendent  may 
prescribe.  The  superintendent,  chief  deputy,  and  every 
such  examiner  shall  have  the  power  to  administer  an  oath 
to  any  person  whose  testimony  he  may  require  on  the 
examination  of  any  bank,  or  on  the  examination  of  any 
agency  of  any  foreign  bank  or  banking  corporation,  and 
to  compel  appearance  and  attendance  of  any  such  person 


834  BUSINESS  LAW  FOR  BUSINESS  MEN. 

for  the  purpose  of  any  such  examination.  When  a  bank 
shall  have  been  examined  by  any  examiner,  and  he  finds 
securities  therein  which  are,  in  his  judgment,  of  doubtful 
value,  he  shall  report  the  same  to  the  superintendent  of 
banks,  who  thereupon  shall  be  authorized  to  employ 
appraisers  at  the  expense  of  such  bank  to  appraise  said 
securities,  at  a  compensation  to  be  fixed  by  the  superin- 
tendent of  banks.  The  superintendent  of  banks  shall, 
whenever  required  to  do  so  by  any  bank,  provide  an  audi- 
tor to  make  an  audit  of  the  affairs  of  such  bank.  The 
compensation  for  making  such  audit  shall  be  paid  by  the 
bank  direct  to  the  person  making  the  audit.  Nothing 
herein  shall  be  deemed  to  authorize  or  require  the  super- 
intendent of  banks  to  inspect  or  supervise  the  private 
trust  business  or  title  insurance  business  of  any  corpora- 
tion doing  a  trust  business. 

(b)  Three  Reports  Each  Tear. — The  superintendent 
of  banks  shall  call  for  the  reports  at  least  three  times  each 
year.  The  ''past  day  designated  by  the  superintendent" 
of  banks  shall  for  at  least  three  times  be  the  day  desig- 
nated by  the  comptroller  of  currency  of  the  United  States 
for  reports  of  national  banking  associations. 

Act  of  the  Legislature,  approved  May  15,  1919 ; 
in  effect  July  22,  1919. 

Section  1083. — BRANCH  BANKS. — No  bank  in  this  state, 
or  any  officer  or  director  thereof,  shall  hereafter  open  or 
keep  an  office  other  than  its  principal  place  of  business, 
Avithout  first  having  obtained  the  written  approval  of  the 
superintendent  of  banks  to  the  opening  of  such  branch 
office,  which  written  approval  may  be  given  or  withheld  in 
his  discretion,  and  shall  not  be  given  by  him  until  he  has 
ascertained  to  his  satisfaction  that  the  public  convenience 
and  advantage  will  be  promoted  by  the  opening  of  such 
branch  office ;  and,  provided  further,  that  no  bank  or  any 
officer  or  director  thereof,  shall  open  or  maintain  such 
branch  unless  the  capital  of  such  bank,  actually  paid  in 
cash,  shall  exceed  the  amount  required  by  this  act  by  the 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  835 

sum  of  twenty -five  thousand  dollars  for  each  branch  office 
opened  and  maintained.  Every  bank,  and  every  such 
officer  or  director  violating  the  provisions  of  this  section 
shall  be  guilty  of  a  misdemeanor. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  1084. — MEETINGS  OF  BANK  DIRECTORS. — The 
board  of  directors  of  a  bank  must  hold  a  meeting  at  least 
once  a  month,  in  its  banking  premises. 

Act  of  the  Legislature,  in  effect  August  8,  1915. 

Section  1085. — OATH  OF  DIRECTORS. — Each  director, 
when  appointed  or  elected,  shall  take  an  oath  that  he  will, 
so  far  as  duty  devolves  on  him,  diligently  and  honestly 
administer  the  affairs  of  such  bank,  and  will  not  know- 
ingly violate  or  wilfully  permit  to  be  violated  any  of  the 
provisions  of  law  applicable  to  such  bank,  and  that  he  is 
the  owner  in  good  faith  and  in  his  own  right  of  the  shares 
of  stock  of  the  actual  market  value  required  by  this  act, 
subscribed  by  him  or  standing  in  his  name  oh  the  books 
of  the  bank,  and  that  the  same  is  not  hypothecated  or  in 
any  way  pledged  as  security  for  any  loan  or  debt;  and, 
in  case  of  re-election  or  re-appointment,  that  such  stock 
was  not  hypothecated  or  in  any  way  pledged  as  security 
for  any  loan  or  debt  during  his  previous  term.  Such  oath 
shall  be  subscribed  by  the  director  making  it,  and  certified 
by  the  officer  before  whom  it  is  taken ;  and  shall  be  imme- 
diately transmitted  to  the  superintendent  of  banks,  and 
filed  and  preserved  in  his  office. 

Act  of  the  Legislature,  approved  April  21,  1911. 

Section  1086. — ADVERTISING  BY  BANK. — Every  person, 
firm,  company,  copartnership  or  corporation  advertising 
that  he  or  it  is  transacting  the  business  of  a  bank,  savings 
bank,  or  trust  company,  or  making  use  of  any  office  sign 
at  the  place  where  such  business  is  transacted,  having 
thereon  any  artificial  or  corporate  name,  or,  in  other 
words,  indicating  that  such  place  or  office  is  the  place  or 


836  BUSINESS  LAW  FOE  BUSINESS  MEN. 

office  of  a  bank,  or  that  deposits  are  received  there  or  pay- 
ments made  on  check,  or  that  interest  is  paid  on  deposits, 
or  that  certificates  of  deposit,  either  with  or  without  inter- 
est, are  being  issued,  or  that  any  other  form  of  banking 
business  is  transacted,  and  every  person,  firm,  company, 
copartnership  or  corporation  making  use  of  or  circulat- 
ing any  letter-heads,  bill-heads,  blank  notes,  blank  re- 
ceipts, certificates  or  circulars,  or  any  written  or  printed, 
or  partly  written  and  partly  printed,  paper,  whatever, 
having  thereon  any  artificial  or  corporate  name,  or  ad- 
vertising that  such  business  is  the  business  of  a  bank, 
savings  bank  or  trust  company,  must  have  the  proper 
capital  stock  paid  in  and  set  aside  for  the  purpose  of 
transacting  such  business,  as  provided  for  in  this  act. 
And  every  person,  firm,  company,  co-partnership  or  cor- 
poration doing  any  of  the  things  or  transacting  any  of 
the  business  defined  in  this  section,  must  transact  such 
business  according  to  the  provisions  of  the  bank  act. 

Nothing  in  this  section  contained  shall  prohibit  build- 
ing and  loan  associations  from  receiving  deposits  of 
money  and  executing  certificates  therefor  in  accordance 
with  the  laws  governing  such  associations,  but  all  such 
certificates  other  than  certificates  of  stock  must  designate 
on  the  face  thereof  the  terms  under  which  such  certificates 
are  issued. 

Any  violation  of  this  law  is  a  misdemeanor. 

Act  of  the  Legislature,  approved  April  21,  1911. 

No  bank,  or  any  officer  thereof,  shall  advertise  in  any 
manner,  or  publish  any  statement  of  the  capital  author- 
ized or  subscribed,  unless  it  or  he  advertise  and  publish, 
in  connection  therewith,  the  amount  of  capital  actually 
paid  up.  Any  bank,  or  any  officer  thereof,  advertising  in 
any  manner,  or  publishing  any  statement  of  such  capital, 
authorized  or  subscribed,  without  a  statement  in  connec- 
tion therewith  of  the  capital  actually  paid  up,  shall  be 
guilty  of  a  misdemeanor. 

Act  of  the  Legislature,  approved  March  1,  1909. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  837 

Section  1087. — EEPOETS  ON  DEAD  PERSONS. — The  presi- 
dent or  managing  officer  of  every  bank  must,  within  fif- 
teen days  after  the  first  day  of  January  of  every  odd  num- 
bered year,  return  to  the  superintendent  of  banks,  a  sworn 
statement  showing  the  names  of  depositors  known  to  be 
dead,  or  who  have  not  made  further  deposits,  or  with- 
drawn any  moneys  during  the  preceding  ten  years.  Such 
statements  shall  show  the  amount  of  the  account,  the 
depositor's  last  known  place  of  residence  or  postoffice 
address,  and  the  fact  of  death,  if  known  to  such  president 
or  managing  officer.  Such  president  or  managing  officer 
must  give  notice  of  these  deposits  in  one  or  more  news- 
papers published  in  or  nearest  to  the  town  or  city  where 
such  bank  has  its  principal  place  of  business,  at  least  once 
a  week  for  four  consecutive  weeks,  the  cost  of  such  publi- 
cation to  be  paid  pro  rata  out  of  such  unclaimed  deposits. 
This  section  does  not  apply  to  any  deposit  made  by  or  in 
the  name  of  a  person  known  to  the  president  or  managing- 
officer  to  be  living,  or  which,  with  the  accumulation  there- 
on, is  less  than  fifty  dollars.  The  superintendent  of  banks 
must  incorporate  in  his  subsequent  report  such  returns 
made  to  him  as  provided  in  this  section.  Any  president 
or  managing  officer  of  any  bank  who  neglects  or  refuses 
to  make  the  sworn  statement  required  by  this  section 
shall  be  guilty  of  a  misdemeanor. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  1088. — DEPOSITS  OF  MARRIED  WOMEN  OR 
MINORS. — When  any  deposit  with  a  bank  shall  be  made 
by  or  in  the  name  of  any  married  woman  or  minor,  the 
same  shall  be  held  for  the  exclusive  right  and  benefit  of 
such  depositor,  and  free  from  the  control  or  lien  of  all 
other  persons,  except  creditors,  and  shall  be  paid,  to- 
gether with  the  dividends,  if  any,  and  interest,  if  any, 
thereon  to  the  person  in  whose  name  deposits  shall  have 
been  made,  and  the  receipt  or  acquittance  of  such  minor 
shall  be  a  valid  and  sufficient  release  and  discharge  for 
such  deposit,  or  any  part  thereof,  to  the  bank.  When 


838  BUSINESS  LAW  FOR  BUSINESS  MEN. 

any  deposit  with  a  bank  shall  be  made  by  any  person  in 
trust  for  another,  and  no  other  or  further  notice  of  the 
existence  and  terms  of  a  legal  and  valid  trust  shall  have 
been  given  in  writing  to  such  bank,  in  the  event  of  the 
death  of  the  trustee,  the  same  or  any  part  thereof,  to- 
gether with  the  dividends  or  interest,  if  any,  thereon, 
may  be  paid  to  the  person  for  whom  the  deposit  was 
made.  When  a  deposit  with  a  bank  shall  be  made  by  any 
person  in  the  names  of  such  depositor  and  another  person 
or  persons,  and  in  form  to  be  paid  to  either  or  the  sur- 
vivor or  survivors  of  them,  such  deposit  thereupon,  and 
any  additions  thereto  made  by  either  of  such  persons 
upon  the  making  thereof,  shall  become  the  property  of 
such  persons  as  joint  tenants,  and  the  same,  together  with 
all  interest  thereon,  shall  be  held  for  the  exclusive  use  of 
the  persons  so  named,  and  may  be  paid  to  either  during 
the  lifetime  of  all  or  any  or  to  the  survivor  or  survivors 
after  the  death  of  one  or  more  of  them,  and  such  pay- 
ments and  the  receipt  or  acquittance  of  the  one  to  whom 
such  payment  is  made  shall  be  valid  and  sufficient  release 
and  discharge  to  said  bank  for  all  payments  made  on 
account  of  such  deposit. 

(a)  Deposits  of  Dead  Persons. — The  surviving  hus- 
band or  wife  of  any  deceased  person,  or,  if  no  husband 
or  wife  is  living,  then  the  children  of  said  decedent,  or, 
if  no  children  are  living,  then  the  father  or  mother  of 
such  decedent,  and  if  neither  the  father  or  mother  is 
living,  then  the  brothers  and  sisters  of  such  decedent, 
may,  without  procuring  letters  of  administration,  col- 
lect of  any  bank  any  sum  which  said  deceased  may  have 
left  on  deposit  in  such  bank  at  the  time  of  his  or  her 
death;  provided,  such  deposit  shall  not  exceed  the  sum 
of  one  thousand  dollars.  Any  bank,  upon  receiving  an 
affidavit  stating  that  said  depositor  is  dead,  and  that 
affiant  is  the  surviving  husband  or  wife,  as  the  case  may 
be,  or  stating  that  decedent  left  no  husband  or  wife,  and 
that  affiant  is,  or  affiants  are,  the  children,  or  stating  that 
decedent  left  neither  husband,  wife  or  children,  and  that 


BUSINESS  CONTKACTS  AND  LEGAL  OBLIGATIONS.  839 

affiant  is  the  father  or  mother,  as  the  case  may  be,  of  said 
decedent,  or  stating  that  the  decedent  left  neither  hus- 
band, wife,  children,  father  or  mother,  and  that  affiants 
are  brothers  and  sisters,  as  the  case  may  be,  and  that 
the  whole  amount  that  decedent  left  on  deposit  in  any  and 
all  banks  of  deposit  in  this  state,  does  not  exceed  the  sum 
of  one  thousand  dollars,  may  pay  to  said  affiant  or 
affiants,  any  deposit  of  said  decedent,  if  the  same  does 
not  exceed  the  sum  of  one  thousand  dollars,  and  the 
receipt  of  such  affiant  is  sufficient  acquittance  therefor. 
Act  of  the  Legislature,  in  effect  August  8,  1915. 

Section  1089. — LIST  OF  STOCKHOLDERS. — Every  bank 
now  in  existence  or  hereafter  organized  shall  keep  in  its 
offices,  in  a  place  accessible  to  the  stockholders,  depos- 
itors, and  creditors  thereof,  and  for  their  use,  a  book  con- 
taining a  list  of  stockholders  in  such  corporation,  and  the 
number  of  shares  of  stock  held  by  each ;  and  every  such 
bank  shall  keep  posted  in  its  office,  in  a  conspicuous  place, 
accessible  to  the  public  generally,  a  notice  signed  by  the 
president  or  secretary,  showing: 

1.  The  names  of  the  directors  of  such  bank. 

2.  The  number  and  par  value  of  the  shares  of  stock 
held  by  each  director. 

The  entries  on  such  book  and  such  notice  shall  be 
made  and  posted  within  twenty-four  hours  after  any 
transfer  of  stock,  and  shall  be  prima  facie  evidence 
against  each  director  and  stockholder  of  the  number  of 
shares  of  stock  held  by  each. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  1090. — PARTNERSHIP  LIST. — Every  copartner- 
ship doing  a  banking  business  shall  keep  in  its  office,  in  a 
place  accessible  to  the  partners  and  depositors  and  the 
creditors  thereof,  a  list  of  the  partners  and  the  capital 
paid  into  the  co-partnership  of  each  partner. 

Act  of  the  Legislature,  approved  March  1,  1909. 


840  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Section  1091. — DEPARTMENTAL  BANKING. — Any  corpo- 
ration authorized  by  its  articles  of  incorporation  so  to 
do,  may  combine  the  business  of  a  commercial  bank,  sav- 
ings bank  and  trust  company,  or  any  or  all  of  them. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  1092. — UNINCORPORATED  BANKERS. — Every  per- 
son or  number  of  persons,  not  being  incorporated,  en- 
gaged in  the  business  of  banking  or  publicly  receiving 
money  on  deposit,  must  conduct  such  business  under  a 
name  which  shows  the  true  name  of  all  persons  engaged 
therein,  unless  such  person  or  persons  are  doing  business 
as  a  special  partnership. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  1093. — DIVIDENDS. — The  directors  of  banks 
having  a  capital  stock  may,  at  such  time  and  in  such  man- 
ner as  the  by-laws  prescribe,  declare  and  pay  dividends 
to  depositors  and  stockholders  of  so  much  of  the  profits 
of  the  bank,  and  of  the  interest  arising  from  the  capital 
and  deposits,  as  may  be  appropriated  for  that  purpose 
under  the  by-laws  or  under  their  agreements  with  de- 
positors, but  every  such  bank  shall,  before  the  declara- 
tion of  such  dividend,  carry  at  least  one-tenth  (1/10)  part 
of  the  net  profits  of  the  stockholders  for  the  preceding 
half-year  to  its  surplus  or  reserve  fund  until  the  same 
shall  amount  to  twenty-five  per  centum  of  its  paid-up 
capital  stock.  But  the  whole  or  any  part  of  such  surplus 
or  reserve  fund,  if  held  as  the  exclusive  property  of  stock- 
holders, may  at  any  time  be  converted  into  paid-up  capi- 
tal stock,  in  which  event  such  surplus  or  reserve  fund 
shall  be  restored  in  manner  as  above  provided  until  it 
amounts  to  twenty-five  per  centum  of  the  aggregate  paid- 
up  capital  stock.  A  larger  surplus  or  reserve  fund  may 
be  created,  and  nothing  herein  contained  shall  be  con- 
strued as  prohibitory  thereof.  The  capital  and  the  assets 
of  the  bank  are  a  security  to  depositors  and  stockhold- 
ers, depositors  having  the  priority  of  tJie  security  over  the 


Section  1091,  page  840,  "Business  Law  for  Business  Men" — MERGER 
OF  TWO  OR  MORE  BANKS— The  respective  boards  of  directors  of  such 
banks  may  by  a  majority  vote  of  all  of  the  members  of  each  board,  at  a  meet- 
ing duly  called  and  held,  make  or  authorize  to  be  made  between  such  banks  a 
written  agreement  in  duplicate  for  the  merger  of  such  banks.  Such  agree- 
ment shall  specify  each  bank  to  be  merged  and  the  bank  which  is  to  receive 
into  itself  the  merging  bank  or  banks,  and  it  shall  prescribe  the  terms  and 
conditions  of  the  merger  and  the  mode  of  carrying  it  into  effect. 

Act  of  the  Legislature  of  California,  approved  June  3,  1921;  in  effect 
August  3,  1921. 


BUSINESS  CONTBACTS  AND  LEGAL  OBLIGATIONS.  841 

stockholders,  but  the  by-laws  may  provide  that  the  same 
security  shall  extend  to  deposits  made  by  stockholders. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  1094. — CHANGE  TO  CAPITAL  STOCK. — Every 
corporation  heretofore  created  under  the  laws  of  this 
state,  doing  a  banking  business  therein,  and  which  has  no 
capital  stock,  may  elect  to  have  a  capital  stock,  and  may 
issue  certificates  of  stock  therefor ;  provided,  that  no  such 
corporation  shall  use  or  convert  any  moneys  or  funds 
theretofore  belonging  to  it,  or  under  its  control,  into  capi- 
tal stock ;  but  such  funds  or  moneys  must  be  held  and  man- 
aged only  for  the  purposes  and  in  the  manner  for  which 
they  were  created.  Before  such  change  is  made,  a  major- 
ity of  the  members  of  such  corporation  present  at  a  meet- 
ing called  for  the  purpose  of  considering  the  proposition 
whether  it  is  best  to  have  a  capital  stock,  its  amount,  and 
the  number  of  shares  into  which  it  shall  be  divided,  must 
vote  in  favor  of  having  a  capital  stock,  fix  the  amount 
thereof,  and  the  number  of  shares  into  which  it  shall  be 
divided.  Notice  of  the  time  and  place  of  holding  such 
meeting,  and  its  object,  must  be  given  by  the  president 
of  such  corporation  by  mailing  notice  of  such  meeting 
to  each  member  of  such  corporation  at  his  last  known 
postoffice  address  at  least  ten  days  prior  to  the  day  fixed 
for  such  meeting,  and  by  publication  in  some  newspaper 
printed  and  published  in  the  county,  or  city  and  county, 
in  which  the  principal  place  of  business  of  the  corpora- 
tion is  situated,  at  least  once  a  week  for  three  successive 
weeks  prior  to  the  holding  of  such  meeting.  A  copy  of 
the  proceedings  of  this  meeting,  giving  the  number  of 
persons  present,  the  votes  taken,  the  notice  calling  the 
meeting,  the  proof  of  its  publication,  the  amount  of  capi- 
tal actually  subscribed,  and  by  whom,  all  duly  certified 
by  the  president  and  secretary  of  the  corporation,  must 
be  filed  in  the  office  of  the  secretary  of  state  and  clerk 
of  the  county  where  the  articles  of  incorporation  are  filed. 
Thereafter  such  corporation  is  possessed  of  all  the  righto 


842  BUSINESS  LAW  FOB  BUSINESS  MEN. 

and  powers,  and  is  subject  to  all  the  obligations,  restric- 
tions, and  limitations,  as  if  it  had  been  originally  created 
with  a  capital  stock. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  1095. — SAFE  DEPOSIT  DEPARTMENT. — Any  bank 
may  conduct  a  safe  deposit  department,  but  shall  not 
invest  more  than  one-tenth  of  its  capital  and  surplus  in 
such  safe  deposit  department. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  1096. — SALE  OF  ASSETS. — Any  bank  may  sell 
the  whole  or  any  portion  of  its  assets  to  any  other  bank 
which  may  purchase  its  assets  after  obtaining  the  con- 
sent of  the  stockholders  of  the  selling  and  of  the  purchas- 
ing bank  holding  of  record  at  least  two-thirds  of  the 
issued  capital  stock  of  each  of  such  corporations;  such 
consent  to  be  expressed  either  in  writing  executed  and 
acknowledged  by  such  stockholders  and  attached  to  the 
instrument  of  sale,  or  to  a  copy  thereof,  or  by  vote  at  a 
stockholders'  meeting  of  such  banks  called  for  that  pur- 
pose. 

The  selling  and  purchasing  banks  may  for  such  pur- 
poses enter  into  an  agreement  of  sale  and  purchase,  which 
agreement  shall  contain  all  the  terms  and  conditions  con- 
nected with  the  sale  and  purchase  of  its  assets. 

Such  agreement  shall  contain  proper  provision  for 
the  payment  of  liabilities  of  the  selling  bank,  and  in  this 
particular  shall  be  subject  to  the  approval  of  the  super- 
intendent of  banks ;  and  shall  not  be  valid  until  such  ap- 
proval is  obtained.  Such  agreement  may  contain  pro- 
visions for  the  transfer  of  all  deposits  to  the  purchasing 
bank,  subject,  however,  to  the  right  of  every  depositor  of 
the  selling  bank  to  withdraw  his  deposit  in  full  on  demand 
after  such  transfer,  irrespective  of  the  terms  under  which 
it  was  deposited  with  the  selling  bank. 

Act  of  tne  Legislature,  approved  March  1,  1909. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  843 

Section  1097. — PUKCHASE  OF  ITS  OWN  CAPITAL  STOCK. 
No  bank  shall  purchase  or  invest  its  capital  or  money  of 
its  depositors,  or  any  part  of  either,  in  the  shares  of  its 
own  capital  stock ;  nor  loan  its  capital  or  the  money  of  its 
depositors,  or  any  part  of  either,  on  the  shares  of  its  own 
capital  stock,  unless  such  purchase  or  loan  shall  be  neces- 
sary to  prevent  loss  on  debts  previously  contracted  in 
good  faith. 

Stock  thus  purchased  or  carried  shall,  within  six 
months  from  the  time  of  its  purchase,  be  sold  or  disposed 
of  at  public  or  private  sale. 

The  officers  of  any  bank  who  knowingly  violate  or  con- 
sent to  the  violation  of  this  provision  shall  be  guilty  of  a 
felony. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  1098. — UNLAWFULLY  ADVERTISING  AS  SAVINGS 
BANK. — It  shall  not  be  lawful  for  any  commercial  bank, 
individual  banker,  trust  company,  association,  firm,  stock 
company  or  corporation,  to  advertise  or  put  forth  a  sign 
as  a  savings  bank,  either  directly  or  indirectly,  or  in  any 
way  to  solicit  or  receive  deposits  as  a  savings  bank,  or  in 
any  way  which  might  lead  the  public  to  believe  that  such 
deposits  are  received  or  invested  under  the  same  condi- 
tions or  in  the  same  manner  as  deposits  in  savings  banks, 
except  in  the  case  of  savings  banks  or  banks  having  a  sav- 
ings department,  subject  to  the  provisions  of  this  act. 

Act  of  the  Legislature,  approved  April  21,  1911. 

Section  1099. — DUTY  AS  TO  CERTIFIED  CHECKS. — When- 
ever a  check  drawn  on  any  bank  is  certified  by  any  officer 
or  employee  of  such  bank,  the  amount  thereof  shall  be 
immediately  charged  against  the  account  of  the  person, 
firm  or  corporation  drawing  the  same. 

It  shall  be  unlawful  for  any  officer  or  employee  of  any 
bank  to  certify  any  check  drawn  upon  such  bank  unless 
the  person,  firm  or  corporation  drawing  the  check  has  on 
deposit  with  the  bank  at  the  time  such  check  is  certified, 


844  BUSINESS  LAW  FOB  BUSINESS  MEN. 

an  amount  of  money  subject  to  the  payment  of  such 
check,  equal  to  the  amount  specified  in  such  check. 

Any  officer  or  employee  of  any  bank  who  shall  wilfully 
violate  the  provisions  of  this  section,  or  shall  resort  to 
any  device,  or  receive  any  fictitious  obligations,  directly 
or  indirectly,  in  order  to  evade  the  provisions  hereof,  or 
who  shall  certify  checks  before  the  amount  thereof  shall 
have  been  regularly  entered  to  the  credit  of  the  drawer, 
shall  be  guilty  of  a  felony. 

Act  of  the  Legislature,  approved  April  21,  1911. 

Section  1100. — EXAMINATION  OF  NATIONAL  BANKS.— 
Any  national  bank  of  this  state  receiving  the  deposits  of 
banks  organized  and  conducting  business  under  this  act, 
must,  at  the  request  of  the  superintendent  of  banks,  sub- 
mit to  an  examination  by  him,  or  his  duly  appointed 
examiners,  should  the  superintendent  of  banks  in  his  dis- 
cretion deem  it  necessary  or  desirable  that  such  examina- 
tion be  made ;  and  the  expense  of  such  examination"  shall 
be  paid  by  such  national  bank;  and  if  any  such  national 
bank  shall  refuse  to  permit  such  examination  to  be  made 
by  the  superintendent  of  banks,  then  the  superintendent 
of  banks  shall  notify  in  writing  any  and  all  banks  deposit- 
ing its  funds  with  such  national  bank,  to  withdraw  its 
deposits  therefrom,  and  such  bank  shall  comply  with  such 
order,  and  failure  so  to  do  shall  be  a  misdemeanor. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  1101. — POSTING  OF  CEKTIFICATE. — Every  bank 
shall  post  in  a  conspicuous  place  in  its  banking-room  the 
last  certificate  obtained  from  the  superintendent  of  banks. 
Every  bank  that  fails  to  comply  with  the  provisions  of 
this  section  is  guilty  of  a  misdemeanor. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  1102. — DEPOSITS  BY  OKDEK  OF  COUKT. — Any 
tourt  having  appointed  and  having  jurisdiction  of  any 
^xecutor,  administrator,  guardian,  assignee,  receiver, 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  845 

depositary  or  trustee,  upon  the  application  of  such  execu- 
tor, administrator,  guardian,  assignee,  receiver,  deposi- 
tary or  trustee,  or  upon  the  application  of  any  person 
having  an  interest  in  the  estate  administered  upon  by  such 
officer  or  trustee,  after  notice  to  other  parties  in  interest 
as  the  court  may  direct,  and  after  a  hearing  upon  such 
application,  may  authorize  such  officer  or  trustee  to 
deposit  any  money  then  in  his  hands  as  such  officer  or 
trustee  or  which  may  thereafter  come  into  his  hands,  and 
until  the  further  order  of  the  court,  in  any  bank  organized 
under  the  laws  of  the  State  of  California ;  and  upon  such 
deposit  being  made,  the  officer  or  trustee  so  depositing 
the  same  shall  thereafter  and  while  such  moneys  remain 
on  deposit  in  such  bank,  be  relieved  and  discharged  from 
all  liability  or  responsibility  therefor,  and  the  bond  re- 
quired of  such  officer  or  trustee  given  upon  his  appoint- 
ment shall  be  thereupon  by  said  court  reduced  to  such 
an  amount  as  the  court  may  deem  reasonable;  such  de- 
posit shall  be  repaid  only  upon  the  orders  of  said  court, 
and  shall  be  a  preferred  claim  against  such  bank  and  be 
paid  in  full  before  any  other  depositor  of  such  bank  shall 
have  been  paid. 

Section  1103.— ESTATE  MONEYS. — Where  a  decedent, 
at  the  time  of  his  or  her  death,  left  moneys  on  deposit 
with  a  savings  bank,  it  shall  be  lawful  for  any  public  ad- 
ministrator, who  shall  become  the  administrator  of  the 
estate,  to  allow  such  deposit  to  remain  in  said  savings 
bank,  and  also,  it  shall  be  lawful  for  him  to  deposit 
therein  to  the  account  of  said  decedent,  any  and  all 
moneys  of  said  estate  not  required  for  the  current  ex- 
penses of  administration.  Such  deposit,  whether  made 
by  the  decedent  or  a  public  administrator,  shall  relieve 
the  public  administrator  from  depositing  the  same  with 
the  county  treasurer.  Moneys  so  deposited,  whether  by 
the  decedent  or  by  a  public  administrator,  may  be  drawn 
upon  demand  without  notice,  upon  the  order  of  .said  ad- 
ministrator, countersigned  by  a  judge  of  a  superior 


846  BUSINESS  LAW  FOR  BUSINESS  MEN. 

court  when  required  for  tlie  purpose  of  administration  or 
otherwise. 

Act  of  the  Legislature,  approved  April  21,  1911. 

Section  1104. — CERTIFICATES  OF  DEPOSIT  AND  TIME 
CERTIFICATES. — Savings  banks  may  issue  general  certifi- 
cates of  deposit,  which  are  transferable,  as  in  other  cases, 
by  indorsement  and  delivery ;  may  issue,  when  requested 
by  the  depositor,  special  certificates,  acknowledging  the 
deposit  by  the  person  therein  named  of  a  specified  sum 
of  money,  and  expressly  providing  on  the  face  of  such 
certificate  that  the  sum  so  deposited  and  therein  named 
may  be  transferred  only  on  the  books  of  the  bank;  pay- 
ment thereafter  made  by  the  bank  to  the  depositor  named 
in  such  certificate,  or  to  his  assignee  named  upon  the 
books  of  the  bank,  or  in  case  of  death,  to  the  legal  repre- 
sentative of  such  person,  of  the  sum  for  which  such 
special  certificate  was  issued,  shall  discharge  the  bank 
from  all  further  liability  on  account  of  the  money  so  paid. 

All  time  certificates  of  deposit  issued  by  a  savings 
bank  shall  be  subject  to  the  same  limitations  and  condi- 
tions as  applied  to  other  deposits,  and  notice  thereof 
shall  be  given  by  the  words  "Subject  to  conditions  of 
agreement  with  depositors"  printed  on  the  face  of  the 
certificate  issued. 

Act  of  the  Legislature,  approved  March  1,  1909. 

(a)  Conditions  of  Payment  to  Depositors. — Savings 
banks  may  prescribe  by  their  by-laws,  or  by  contract  with 
depositors,  the  time  and  conditions  on  which  repayment 
is  to  be  made  to  depositors,  except  as  in  this  act  otherwise 
prohibited ;  but  whenever  there  is  any  call  by  depositors 
for  repayment  of  a  greater  amount  than  the  bank  may 
have  disposable  for  that  purpose,  the  directors  or  officers 
thereof  must  not  make  any  new  loans  or  investments  ol 
the  funds  of  the  depositors,  or  of  earnings  thereof,  until 
such  excess  of  call  has  ceased.  The  directors  of  any  such 
bank,  having  no  capital  stock,  must  retain,  on  each 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  847 

dividend-day,  at  least  ten  per  centum  of  the  net  profits  of 
the  bank,  to  constitute  a  reserve  fund,  which  must  be 
invested  in  the  same  manner  as  other  funds  of  the  bank, 
and  must  be  used  toward  paying  any  losses  which  the 
bank  may  sustain  in  pursuing  its  lawful  business.  The 
bank  may  provide  by  its  by-laws  for  the  disposal  of  any 
excess  in  the  reserve  fund,  as  provided  for  in  this  act, 
and  the  final  disposal,  upon  the  dissolution  of  tho  bank, 
of  the  reserve  fund,  or  of  the  remainder  thereof,  after 
payment  of  losses. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  1105. — USE  OF  WORD  "TRUST."  -The  use  of 
the  word  " trust"  in  combination  with  or  in  connection 
with  the  word  "company,"  "corporation,"  "incorpora- 
tion," "association,"  "society,"  "organization,"  or 
"syndicate,"  is  hereby  prohibited  to  all  persons,  firms, 
associations,  companies  or  corporations  other  than  cor- 
porations provided  for  by  this  act.  Every  person,  firm, 
association,  company  or  crporation  which  uses  the  word 
"trust"  in  combination  with  or  in  connection  with  the 
word  "company,"  "corporation,"  "incorporation,"  "as- 
sociation," "society,"  "organization,"  or  "syndicate," 
as  the  name  under  which  business  is  done  or  transacted, 
shall  be  subject  to  the  provisions  of  this  act  and  to  the 
supervision  of  the  superintendent  of  banks.  Any  person, 
firm,  association,  company,  or  corporation  making  use  of 
the  word  "trust"  in  combination  or  in  connection  with 
the  word  "company,"  "corporation,"  "incorporation," 
"association,"  "society,"  "organization,"  or  "syndi- 
cate," in  the  manner  hereinabove  mentioned,  in  the 
transaction  of  business,  and  not  subject  to  the  provisions 
of  this  act  and  the  supervision  of  the  superintendent  of 
banks,  shall  be  guilty  of  a  misdemeanor. 

No  corporation  hereafter  formed  shall  use  the  word 
"trust"  or  "trustee"  as  a  part  of  its  corporate  name 
unless  it  shall  be  authorized  by  its  articles  of  incorpora- 
tion to  act  as  executor,  administrator,  guardian,  as- 


848  BUSINESS  LAW  FOR  BUSINESS  MEN. 

signee,  receiver,  depositary  or  trustee ;  nor  shall  any  cor- 
poration hereafter  formed  accept  or  execute  any  trust 
mentioned  in  this  act,  unless  it  shall  have  complied  with 
the  provisions  of  this  act. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  1106. — IMPAIRMENT  OF  CAPITAL. — Whenever 
the  superintendent  of  banks  shall  have  reason  to  believe 
that  the  capital  of  any  bank  is  reduced  by  impairment  or 
otherwise  below  the  amount  required  by  law  or  by  its 
articles  of  incorporation,  he  shall  require  such  bank  to 
make  good  the  deficiency  within  sixty  days  after  the  date 
of  such  requisition.  He  shall  examine  or  cause  to  be 
examined  any  such  bank  to  ascertain  the  amount  of  such 
impairment  or  reduction  of  capital  and  whether  the 
deficiency  has  been  made  good  as  required  by  him. 

Act  of  the  Legislature,  approved  April  21,  1911. 

Section  1107. — BANK  REPORTS. — Every  bank  doing  a 
departmental  business  shall  render  to  the  superintendent 
of  banks  for  each  department  conducted  by  it,  a  separate 
report  showing  in  detail  the  actual  financial  condition  of 
such  department,  and  shall  at  the  time  of  furnishing  said 
report  separately  publish  the  statement  for  each  depart- 
ment as  provided  in  this  act. 

Every  bank  doing  business  in  this  state  shall,  when- 
ever required  by  the  superintendent  of  banks,  make  a 
report  in  writing  to  him,  verified  by  the  oath  of  its  presi- 
dent and  its  secretary  or  cashier,  or  two  principal  officers. 
Such  reports  shall  show  the  actual  financial  condition  of 
the  bank  making  the  report,  at  the  close  of  any  past  day 
specified  by  the  superintendent,  and  shall  specify  the 
following : 

1.  The  amount  of  its  capital  stock  and  the  number  of 
shares  into  which  it  is  divided,  or,  if  not  incorporated, 
the  amount  of  capital  actually  paid  in,  and  by  whom. 

2.  The  names  of  the  directors  and  the  number  of 
shares  of  stock  held  by  each,  or,  if  not  incorporated,  the 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  849 

names  of  each  member  of  the  firm  and  the  amount  of 
capital  paid  in  by  each. 

3.  The  total  amount  of  capital  actually  paid  up  m 
money,  and  the  total  amount  of  contingent  and  other 
reserve  funds,  if  any. 

4.  The  total  amount  due  the  depositors. 

5.  The   total   amount  and  character   of  any   other 
liabilities  it  may  have. 

6.  The  amount  at  which  the  lot  and  building  occu- 
pied by  the  bank  for  the  transaction  of  its  regular  busi- 
ness stands  debited  on  its  books,  together  with  the  market 
value  of  all  other  real  estate  held,  whether  acquired  in 
settlement  of  loans  or  otherwise ;  the  amount  at  which  it 
stands  debited  on  the  bank  books,  in  what  county  situated, 
and  in  what  name  the  title  is  vested,  if  not  in  the  name  of 
the  bank  itself. 

7.  The  amount  loaned  on  real  estate,  specifying  the 
amount  secured  on  real  estate  in  each  county  separately ; 
also  specifying  the  name  of  the  person  in  whose  name  the 
property  is  held  in  trust  or  as  security,  in  case  it  is  held 
in  any  name  other  than  that  of  the  bank  and  the  instru- 
ment creating  the  security  does  not  itself  disclose  the 
name  of  the  bank. 

8.  The  amount  invested  in  bonds,  designating  the 
name  and  amount  of  each  particular  kind. 

9.  The  amount  loaned  on  stocks  and  bonds,  desig- 
nating each  particular  class  and  the  amount  thereof. 

10.  The  amount  of  money  loaned  on  other  securities, 
with  a  particular  designation  of  each  class  and  the  amount 
loaned  on  each. 

11.  The  actual  amount  of  money  on  hand  or  deposited 
in  any  other  bank  or  place,  with  the  name  of  the  place 
where  deposited  and  the  amount  in  each  place. 

12.  Any   other   property   held,   or   any   amount   of 
money  loaned,  deposited,  invested  or  placed,  not  other- 
wise herein  enumerated,  and  the  place  where  situate  and 
the  value  of  said  property,  and  the  amount  so  loaned, 


BUSINESS  LAW  FOR  BUSINESS  MEN. 

deposited  or  placed,  and  any  other  information  lie  may 
request  relative  to  the  conduct  and  affairs  of  such  bank. 

The  oaths  of  the  officers  and  the  statements  above 
required  shall  state  that  they  and  each  of  them  have  a 
personal  knowledge  of  the  matters  therein  contained,  and 
that  they  believe  every  allegation,  statement,  matter,  and 
thing  therein  contained  is  true.  Any  wilful  false  state- 
ment in  the  premises  shall  be  perjury  and  shall  be 
punished  as  such. 

The  superintendent  of  banks  shall  call  for  reports 
specified  by  the  previous  section,  at  least  three  times,  each 
year,  and  shall  call  for  such  reports  as  near  as  possible 
upon  the  same  days  as  those  designated  by  the  comp- 
troller of  the  currency  of  the  United  States  for  reports 
of  national  banking  associations. 

Act  of  the  Legislature,  approved  March  1,  1909. 

(a)  Publication  of  Statement. — At  the  time  of  fur- 
nishing such  report  to  the  superintendent  of  banks,  every 
bank  shall  also  publish  a  condensed  statement  of  its 
financial  condition,  at  least  once,  in  some  newspaper  of 
general  circulation,  published  in  the  city  or  town  where 
its  principal  place  of  business  is  located,  and,  if  no  paper 
is  published  in  such  town,  then  in  some  newspaper  of 
general  circulation  in  the  county  where  its  principal  place 
of  business  is  located.  Such  published  statement  shall 
show  the  total  amount  of  loans,  the  total  amount  of  over- 
drafts, the  total  amount  invested  in  bonds  and  other 
securities,  the  total  amount  due  from  banks,  the  total 
amount  of  checks  and  other  cash  items,  the  total  amount 
of  cash  on  hand,  capital  paid  in,  surplus  funds ;  undivided 
profits,  less  expenses  and  taxes  paid ;  due  to  other  banks 
and  bankers,  due  to  trust  companies  and  savings  banks ; 
individual  deposits  subject  to  checks ;  demand  certificates 
of  deposit;  time  deposits;  certified  checks;  cashier's 
checks  outstanding ;  and  such  other  items  as  will  show  the 
actual  financial  condition  of  the  bank  making  the  report. 
Act  of  the  Legislature,  approved  March  1,  1909. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  851 

Section  1108. — CONDUCT  OF  BUSINESS  IN  UNSAFE  MAN- 
NER.— If  it  shall  appear  to  the  superintendent  of  banks 
that  any  bank  has  violated  its  articles  of  incorporation, 
or  any  law  binding  upon  it,  he  must,  by  an  order  under 
his  hand  and  official  seal,  which  seal  must  be  adopted  by 
him,  addressed  to  such  bank,  direct  the  discontinuance 
of  such  violation;  or,  if  it  shall  appear  to  the  superin- 
tendent of  banks  that  such  bank  is  conducting  business 
in  an  unsafe  or  injurious  manner,  he  must  in  like  manner 
direct  the  discontinuance  of  such  unsafe  or  injurious 
practices.  Such  order  shall  require  such  bank  to  show 
cause,  before  the  superintendent  of  banks,  at  a  time  and 
place  to  be  fixed  by  him,  why  said  order  should  not  be 
observed.  If  upon  such  hearing  it  shall  appear  to  the 
superintendent  of  banks  that  such  bank  is  conducting 
business  is  an  unsafe  or  injurious  manner,  or  is  violating 
its  articles  of  incorporation,  or  any  law  of  this  state,  then 
the  superintendent  of  banks  shall  make  such  order  of 
discontinuance  final,  and  such  bank  shall  immediately 
discontinue  all  practices  named  in  such  order  by  the 
superintendent  of  banks.  Such  bank  shall  have  ten  days 
after  any  such  order  is  made  final  in  which  suit  may  be 
commenced  to  restrain  enforcement  of  such  order,  and 
unless  such  action  be  so  commenced  and  enforcement  of 
said  order  be  enjoined  within  ten  days,  by  the  court  in 
which  such  suit  is  brought,  then  such  bank  shall  comply 
with  such  order ;  and,  in  the  event  of  its  failure  so  to  do, 
then  the  superintendent  of  banks  shall  have  power  to 
take  immediate  charge  and  control  of  said  bank,  and 
liquidate  its  affairs  in  the  manner  provided  in  this  act 
for  the  liquidation  of  banks. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  1109. — WHEN  SUPERINTENDENT  MAY  TAKE 
POSSESSION  OF  BANK. — Whenever  the  superintendent  of 
banks  shall  have  reason  to  conclude  that  any  bank  is  in  an 
unsound  or  unsafe  condition  to  transact  the  business  for 
which  it  is  organized,  or  that  it  is  unsafe  or  inexpedient 


852  BUSINESS  LAW  FOR  BUSINESS  MEN. 

for  it  to  continue  business,  the  superintendent  of  banks 
may  forthwith  take  possession  of  the  property  and  busi- 
ness of  such  bank,  and  retain  such  possession  until  such 
bank  shall  resume  business,  or  its  affairs  be  finally 
liquidated,  as  herein  provided. 

On  taking  possession  of  the  property  and  business  of 
any  such  bank,  the  superintendent  of  banks  shall  forth- 
with give  notice  in  writing  of  such  fact  to  any  and  all 
corporations  and  individuals  holding  or  in  possession  of 
any  of  the  assets  of  such  bank. 

No  bank,  corporation  or  individual,  knowing  of  such 
taking  possession  by  the  superintendent  of  banks,  or 
notified  as  aforesaid,  shall  have  a  lien  or  charge  for  any 
payment,  advance  or  clearance  thereafter  made,  or  lia- 
bility thereafter  incurred  against  any  of  the  assets  of 
the  bank  of  whose  property  and  business  the  superin- 
tendent of  banks  shall  have  taken  possession  as  aforesaid. 
Such  bank  may,  with  the  consent  of  the  superintendent 
of  banks,  resume  business  upon  such  conditions  as  may 
be  approved  by  him. 

Upon  taking  possession  of  the  property  and  business 
of  such  bank,  the  superintendent  of  banks  is  authorized 
to  collect  moneys  due  to  such  bank,  and  to  do  such  other 
acts  as  are  necessary  to  conserve  its  assets  and  business, 
and  shall  proceed  to  liquidate  the  affairs  thereof  as  here- 
inafter provided. 

The  superintendent  of  banks  shall  collect  all  debts  due 
and  claims  belonging  to  it,  and  upon  the  order  of  the 
superior  court  may  sell  or  compound  all  bad  or  doubtful 
debts,  and  on  like  order  may  sell  all  real  and  personal 
property  of  such  bank  on  such  terms  as  the  court  shall 
direct;  and  may,  if  necessary  to  pay  the  debts  of  such 
bank,  enforce  individual  liability  of  the  stockholders  by 
action  to  be  brought  within  three  years  after  the  date  of 
his  taking  possession  of  the  affairs  of  such  bank. 

The  superintendent  of  banks  may,  under  his  hand  and 
official  sealj  appoint  one  or  more  special  deputy  super- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  853 

intendents  of  banks,  as  agent  or  agents,  to  assist  him  in 
the  duty  of  liquidation  and  distribution,  the  certificate  of 
appointment  to  be  filed  in  the  office  of  the  superintendent 
of  banks,  and  a  certified  copy  in  the  office  of  the  clerk  of 
the  county  in  which  the  principal  office  of  such  bank  is 
located. 

The  superintendent  of  banks  may,  from  time  to  time, 
authorize  a  special  deputy  superintendent  to  perform 
such  duties  connected  with  such  liquidations  and  dis- 
tribution as  the  superintendent  of  banks  may  deem 
proper.  The  superintendent  of  banks  may  employ  such 
counsel,  and  procure  such  expert  assistance  and  advice 
as  may  be  necessary  in  the  liquidation  and  distribution  of 
the  assets  of  such  bank,  and  may  retain  such  officers  or 
employees  of  such  bank  as  he  may  deem  necessary.  The 
superintendent  of  banks  shall  require,  from  a  special 
deputy  superintendent  and  from  such  assistants,  such 
security  for  the  faithful  discharge  of  their  duties  as  he 
may  deem  proper. 

The  superintendent  of  banks  shall  cause  notice  to  be 
given  by  advertisement  in  such  newspapers  as  he  may 
direct,  weekly,  for  three  consecutive  months,  calling  on 
all  persons  who  may  have  claims  against  such  bank,  to 
present  the  same  to  the  superintendent  of  banks,  and 
make  legal  proof  thereof,  at  a  place  and  within  a  time  not 
more  than  six  months  after  the  last  day  of  publication, 
to  be  therein  specified. 

The  superintendent  of  banks  shall  mail  a  copy  of  such 
notice  to  all  persons  whose  names  appear  as  creditors 
upon  the  books  of  the  bank.  If  the  superintendent  of 
banks  doubts  the  justice  and  validity  of  any  claim,  he 
may  reject  the  same  and  serve  notice  of  such  rejection 
upon  the  claimant,  either  by  mail  or  personally.  An 
affidavit  of  the  service  of  such  notice  shall  be  prima  facie 
evidence  thereof,  and  shall  be  filed  with  the  superin- 
tendent of  banks.  An  action  upon  a  claim  so  rejected 
must  be  brought  within  six  months  after  such  service. 
Claims  presented  after  the  expiration  of  the  time  fixed  in 


854  BUSINESS  LAW  FOE  BUSINESS  MEN. 

the  notice  to  creditors  shall  be  entitled  to  share  ratably  in 
the  distribution  to  the  extent  of  the  assets  in  the  hands 
of  the  superintendent  of  banks,  equitably  applicable 
thereto. 

Upon  taking  possession  of  the  property  and  assets  of 
such  bank,  the  superintendent  of  banks  shall  make  an 
inventory  of  the  assets  of  such  bank  in  duplicate,  one  to 
be  filed  in  the  office  of  the  superintendent  of  banks,  and 
one  in  the  office  of  the  clerk  of  the  county  in  which  the 
principal  office  of  such  bank  is  located ;  upon  the  expira- 
tion of  the  time  fixed  for  the  presentation  of  claims,  the 
superintendent  of  banks  shall  make  in  duplicate  a  full  and 
complete  list  of  the  claims  presented,  including  and  speci- 
fying such  claims  as  have  been  rejected  by  him,  one  to 
be  filed  in  the  office  of  the  superintendent  of  banks,  and 
one  in  the  office  of  the  clerk  of  the  county  in  which  the 
principal  office  of  such  bank  is  located;  such  inventory 
and  list  of  claims  shall  be  open  at  all  reasonable  times  for 
inspection. 

The  compensation  of  the  special  deputy  superintend- 
ents, counsel,  and  other  officers  and  assistants,  and  all 
expenses  of  supervision  and  liquidation,  shall  be  fixed 
by  the  superintendent  of  banks  on  notice  to  such  bank, 
and  shall  upon  his  certificate  be  paid  out  of  the  funds  of 
such  bank  in  his  hands. 

The  sums  collected  by  the  superintendent  of  banks 
shall,  from  time  to  time,  be  deposited  in  one  or  more 
banks  in  this  state,  subject  to  examination  by  the  super- 
intendent of  banks. 

At  any  time  after  the  expiration  of  the  date  fixed  for 
the  presentation  of  claims,  the  superintendent  of  banks 
may,  out  of  the  funds  remaining  in  his  hands  after  the 
payment  of  expenses,  declare  one  or  more  dividends,  and 
after  the  expiration  of  one  year  from  the  date  of  first 
publication  of  notice  to  creditors  he  may  declare  a  final 
dividend. 

Objection  to  any  claim  not  rejected  by  the  superin- 
tendent of  banks  may  be  made  by  any  party  interested, 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  855 

by  filing  a  copy  of  such  objection  with  the  superintendent 
of  banks,  who  shall  present  the  same  to  the  superior  court 
of  the  county  in  which  such  bank  has  its  principal  place 
of  business,  with  a  petition  that  said  court  pass  upon  the 
validity  of  such  claims;  and  such  court  shall  thereupon, 
upon  such  notice  to  the  party  presenting  the  same,  and 
to  the  superintendent  of  banks,  as  the  court  may  deem 
proper,  accept  or  reject  said  claim,  and  the  superin- 
tendent of  banks  shall  observe  the  order  of  the  court  in 
that  regard ;  provided,  however,  that  should  the  claim  be 
rejected,  such  rejection  shall  not  conclude  the  claimant 
from  bringing  an  action  upon  such  claim  within  six 
months  after  such  rejection. 

Upon  the  petition  of  the  superintendent  of  banks, 
such  court  may  make  proper  provisions  for  unclaimed 
deposits. 

Whenever  any  such  bank,  of  whose  property  and 
business  the  superintendent  of  banks  has  taken  posses- 
sion as  aforesaid,  deems  itself  aggrieved  thereby,  it  may 
at  any  time  within  ten  days  after  such  taking  possession, 
and  not  thereafter,  apply  to  the  superior  court  in  the 
county  in  which  the  principal  office  of  such  bank  is  located, 
to  enjoin  further  proceedings ;  and  said  court,  after  citing 
the  superintendent  of  banks  to  show  cause  why  further 
proceedings  should  not  be  enjoined,  and  upon  hearing  the 
allegations  and  proofs  of  the  parties,  and  determining 
the  facts,  may,  upon  the  merits,  dismiss  such  application, 
or  enjoin  the  superintendent  of  banks  from  further  pro- 
ceedings, and  direct  him  to  surrender  such  business  and 
property  to  such  bank. 

Either  party  aggrieved  by  the  judgment  rendered 
thereon  may  appeal  therefrom  to  the  supreme  court,  as 
in  other  cases  of  appeal  thereto  from  the  judgment  of  a 
superior  court. 

An  appeal  as  above  provided  shall  operate  as  a  stay 
of  the  judgment  of  the  superior  court,  and  no  bond  need 
be  given  if  the  appeal  be  taken  by  the  superintendent  of 
banks;  but  if  the  appeal  be  taken  by  such  bank,  a  bond 


856  BUSINESS  LAW  FOE  BUSINESS  MEN. 

shall  be  given,  as  required  by  section  nine  hundred  and 
forty-three  of  the  Code  of  Civil  Procedure. 

Whenever  the  superintendent  of  banks  shall  have  paid 
to  each  and  every  depositor  and  creditor  of  such  corpora- 
tion (not  including  stockholders)  whose  claim  or  claims 
as  such  creditor  or  depositor  shall  have  been  duly  ap- 
proved and  allowed,  the  full  amount  of  such  claim,  and 
shall  have  made  proper  provisions  for  unclaimed  and 
unpaid  deposits  or  dividends,  and  shall  have  paid  all  ex- 
penses of  the  liquidation,  the  superintendent  of  banks 
shall  call  a  meeting  of  the  stockholders  of  such  corpora- 
tion by  giving  notice  thereof  for  thirty  days,  in  one  or 
more  newspapers  published  in  the  county  where  the  prin- 
cipal office  of  such  corporation  is  located.  At  such  meet- 
ing, the  superintendent  of  banks  shall  appear  and  deliver 
to  the  stockholders  all  the  property,  effects  and  records 
of  such  bank,  and  upon  such  transfer  and  delivery  he 
shall  be  discharged  from  any  and  all  further  liability  to 
such  bank  and  its  creditors.  And  thereupon  the  bank 
shall  be  in  the  same  position  as  though  it  had  never  been 
authorized  to  transact  a  banking  business,  and  such  bank, 
by  fulfilling  the  requirements  of  this  act,  and  of  the 
superintendent  of  banks,  can  thereafter  be  authorized  to 
resume  the  conduct  of  its  business  as  a  bank. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  1110. — FAILURE  TO  MAKE  EEPOETS. — If  any 
bank  shall  fail  to  make  the  report  required  by  law  or  by 
the  superintendent  of  banks,  within  ten  days  from  the 
day  designated  for  the  making  thereof,  or  to  include 
therein  any  matter  required  by  law  or  by  the  superin- 
tendent of  banks,  every  such  delinquent  bank  shall  forfeit 
to  the  people  of  the  state  the  sum  of  one  hundred  dollars 
for  each  day  that  such  report  shall  be  delayed  or  with- 
held, and  for  every  day  it  shall  fail  to  report  any  such 
omitted  matter.  In  the  event  of  the  failure  of  any  such 
bank  to  make  the  report  required  from  it  by  law,  or  by 
the  superintendent  of  banks,  he  shall  immediately  cause 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  857 

the  books,  papers  and  affairs  of  such  bank  to  be  thor- 
oughly examined. 

Section  1111. — REPORT  OF  DIRECTORS. — It  shall  be  the 
duty  of  the  board  of  directors  of  every  bank  to  examine 
fully  into  the  books,  papers  and  affairs  of  the  bank  of 
which  they  are  directors,  and  particularly  into  the  loans 
and  discounts  thereof,  with  a  special  view  to  ascertaining 
the  value  and  security  thereof,  and  of  the  collateral  se- 
curity, if  any  given,  in  connection  therewith,  and  into 
such  other  matters  as  the  superintendent  of  banks  may 
require ;  such  examination  to  be  made  at  least  once  a  year, 
but  no  such  subsequent  yearly  examinations  shall  be 
made  within  three  months  of  the  next  preceding  examina- 
tion. Such  directors  shall  have  power  to  employ  such 
assistance  in  making  such  examination  as  they  may  deem 
necessary.  Within  ten  days  after  the  completion  of  such 
examination,  a  report  in  writing  thereof,  sworn  to  by  the 
directors  making  the  same,  shall  be  made  by  the  board  of 
directors  of  such  bank,  and  placed  on  file  with  the  records 
of  said  bank,  and  shall  be  subject  to  examination  by  the 
superintendent  of  banks. 

Such  report  shall  particularly  contain  a  statement  of 
the  assets  and  liabilities  of  the  bank  examined,  as  shown 
by  its  books,  together  with  any  deductions  from  the 
assets,  or  additions  to  liabilities,  which  such  directors  or 
committee,  after  such  examination,  may  determine  to 
make.  It  shall  also  contain  a  statement,  in  detail,  of 
loans,  if  any,  which  in  their  opinion  are  worthless  or 
doubtful,  together  with  their  reasons  for  so  regarding 
them;  also  a  statement  of  loans  made  on  collateral  se- 
curity, which  in  their  opinion  are  insufficiently  secured, 
giving  in  each  case  the  amount  of  the  loan,  the  name  and 
market  value  of  the  collateral,  if  it  has  any  market  value, 
and,  if  not,  a  statement  of  that  fact,  and  its  actual  value 
as  nearly  as  possible.  Such  report  shall  also  contain  a 
statement  of  overdrafts,  of  the  names  and  amounts  of 
such  as  they  consider  worthless  or  doubtful,  and  a  full 


BUSINESS  LAW  FOR  BUSINESS  MEN. 

statement  of  such  other  matters  as  affect  the  solvency 
and  soundness  of  the  bank.  If  the  directors  of  such  bank 
shall  fail  to  make,  or  cause  to  be  made,  and  file  such  re- 
port of  examination  in  the  manner  and  within  the  time 
specified,  the  directors  of  such  bank  shall  be  guilty  of  a 
misdemeanor. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  1112. — PAR  VALUE  OF  CAPITAL  STOCK. — The 
capital  stock  of  any  bank  having  a  capital  stock,  shall 
have  a  par  value  of  at  least  one  hundred  dollars  and  the 
paid  up  value  shall  be  endorsed  on  the  face  of  each  cer- 
tificate issued,  which  paid  up  value  shall  be  the  same  on 
all  certificates  issued. 

Act  of  the  Legislature,  approved  April  21,  1911. 

Section  1113. — LIEN  OF  BANK. — A  bank  has  a  general 
lien,  dependent  on  possession,  upon  all  property  in  its 
hands  belonging  to  a  customer,  for  the  balance  due  the 
bank  from  such  customer  in  the  course  of  their  business 
together. 

Civil  Code,  Section  3053. 

Section  1114. — DEPOSIT  OF  STATE  MONEY. — All  moneys 
under  the  control  of  the  state  treasurer,  belonging  to  the 
state,  may  be  deposited  by  the  state  treasurer  to  the 
credit  of  the  state  in  such  state  or  national  bank,  or 
banks,  in  the  state  as  the  treasurer,  with  the  approval  of 
the  governor  and  state  controller,  shall  select  for  the  safe- 
keeping of  such  deposits,  and  any  sum  so  deposited  shall 
be  deemed  to  be  in  the  state  treasury;  provided  that  the 
bank  or  banks  in  which  such  money  is  deposited  shall 
furnish  security  as  hereinafter  provided;  and  provided 
further,  that  such  depositary  bank  or  banks  be  selected 
from  those  agreeing  to  pay  the  highest  rate  of  interest, 
not  less  than  two  per  cent  per  annum,  for  such  deposits, 
as  may  be  determined  by  bids  to  be  submitted  at  such 
times  and  in  such  manner  as  the  treasurer,  with  the  ap- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  859 

proval  of  the  governor  and  the  state  controller,  shall 
direct;  provided,  that  not  more  than  one-tenth  of  the 
aggregate  amount  of  state  moneys  available  for  deposit 
and  on  deposit  shall  be  deposited  in  any  one  bank;  and 
provided,  further,  that  such  deposit  shall  not  exceed  fifty 
per  cent  of  the  paid-up  capital,  exclusive  of  reserve  and 
surplus,  of  any  depositary  bank.  Any  and  all  bids  may 
be  rejected  by  the  treasurer,  with  the  approval  of  the 
governor  and  state  controller,  and  new  bids  asked  for. 
The  expense  of  transportation  of  moneys  to  and  from  the 
state  treasury  to  such  depositaries  shall  be  borne  by  such 
depositaries.  Said  deposits,  with  interest  thereon,  shall 
be  subject  to  withdrawal  at  any  time  upon  the  demand 
of  the  state  treasurer,  unless  the  treasurer,  with  the  con- 
sent of  the  governor  and  controller,  shall  deposit  any 
part  of  such  moneys  upon  different  terms ;  provided  that 
no  agreement  for  the  deposit  of  said  money  shall  be  for 
a  longer  period  than  one  year. 

For  the  security  of  the  funds  deposited  by  the  state 
treasurer  under  the  provisions  of  this  act,  there  shall  be 
deposited  with  the  treasurer  bonds  of  the  United  States, 
or  of  this  state,  or  of  any  county,  municipality  or  school 
district  within  this  state,  which  bonds  shall  be  approved 
by  the  governor,  controller  and  treasurer,  to  an  amount 
in  value  at  least  ten  per  cent  in  excess  of  the  amount  of 
the  deposit  with  such  bank  or  banks ;  and  if,  in  any  case, 
or  at  any  time,  such  bonds  are  not  deemed  satisfactory 
security  to  the  governor,  controller  and  treasurer,  they 
may  require  such  additional  security  as  may  be  satis- 
factory to  them.  Said  bonds,  or  any  part  thereof,  may 
be  withdrawn  on  the  written  consent  of  the  governor,  con- 
troller and  treasurer,  provided  that  a  sufficient  amount 
of  said  bonds  to  secure  said  deposits  shall  always  be  kept 
in  the  treasury ;  and  in  the  event  that  said  bank  or  banks 
of  deposit  shall  fail  to  pay  such  deposits  or  any  part 
thereof  on  the  demand  of  the  state  treasurer,  then  it  shall 
be  the  duty  of  the  state  treasurer  to  forthwith  convert 


860  BUSINESS  LAW  FOE  BUSINESS  MEN. 

said  bonds  into  money  and  to  disburse  the  same  according 
to  law. 

At  the  time  of  depositing  state  moneys  in  any  bank, 
designated  as  a  depositary,  the  state  treasurer  shall  take 
and  preserve  a  receipt  therefor,  stating  the  amount  de- 
posited and  referring  to  the  contract  made  between  the 
depositary  banks  and  the  treasurer.  The  moneys  so 
deposited  may  be  drawn  out  by  the  check  or  order  of  the 
state  treasurer. 

Act  of  the  Legislature,  approved  March  24, 1911. 

Section  1115. — DEPOSIT  OF  COUNTY  OK  CITY  MONEY.— 
County  or  city  moneys  may  be  deposited  in  banks  by  the 
public  officer  having  the  legal  custody  of  such  funds. 
When  such  funds  are  so  deposited,  the  bank  must  fur- 
nish as  security  bonds  of  the  United  States,  or  bonds  of 
California,  or  bonds  of  any  county,  municipality,  or 
school  district  within  this  state,  which  must  be  approved 
by  the  officer  making  the  deposit  and  the  district  attorney 
of  a  county  or  city  attorney  of  a  city.  The  market  value 
of  the  bonds  furnished  as  security  must  be  at  least  ten 
per  cent  in  excess  of  the  amount  of  the  deposit ;  provided, 
the  amount  of  the  deposit  cannot  in  any  case  exceed  the 
face  value  of  the  bonds.  The  bank  receiving  such  deposit 
must  pay  a  reasonable  amount  of  interest,  which  must  not 
be  less  than  two  per  cent  per  annum  on  the  daily  balances 
deposited.  The  rate  of  interest  must  be  fixed  annually  in 
the  month  of  January,  in  the  case  of  counties  by  the  treas- 
urer, auditor  and  chairman  of  the  board  of  supervisors, 
or  in  the  case  of  cities  by  the  treasurer,  auditor  (or  clerk 
in  cities  having  no  auditor),  and  chairman  of  the  council 
or  other  governing  body  of  the  municipality.  Interest  on 
deposits  must  be  paid  quarterly.  Deposits  are  subject  to 
withdrawal  at  any  time  on  demand.  The  bank  may  also 
return  deposits  at  any  time.  The  total  amount  deposited 
in  any  bank  cannot  at  any  one  time  exceed  fifty  per  cent 
of  its  capital  stock.  No  officer  can  have  on  deposit  at  any 
one  time  more  than  ten  per  cent  of  the  public  moneys 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  861 

under  his  control,  and  available  for  deposit,  in  any  bank, 
while  there  are  other  qualified  banks  requesting  deposits. 
Money  must  be  deposited  in  banks  within  the  county  or 
city,  and  no  officer  can  be  required  to  deposit  money  in 
outside  banks. 

Act  of  the  Legislature,  approved  March  23, 1907. 

Section  1116. — NATIONAL  BANK  CANNOT  DEAL  IN 
STOCKS. — A  national  bank  has  no  power  to  deal  in  stocks 
of  another  corporation;  and  it  cannot  purchase  or  sub- 
scribe for  the  stock  of  another  corporation.  As  incidental 
to  the  power  to  loan  money  on  personal  security,  how- 
ever, a  national  bank  may,  in  the  usual  course  of  doing 
such  business,  accept  stock  of  another  corporation  as 
collateral ;  and  by  the  enforcement  of  its  rights  as  pledgee 
it  may  become  the  owner  of  the  collateral ;  but  it  cannot, 
in  the  ordinary  course  of  business,  buy  or  sell  stocks  of 
another  corporation.  (Decided  by  the  Supreme  Court 
in  the  case  of  Chemical  National  Bank  vs.  Havermale, 
which  decision  is  printed  in  Volume  120  of  the  California 
Reports,  page  53.) 

Section  1117. — TAKING  OF  STOCK  IN  SATISFACTION  OF 
PLEDGE. — While  a  bank  organized  under  the  act  of  con- 
gress as  a  national  bank  is  not  given  the  power  to  deal 
in  stocks  or  bonds,  such  bank  may  take  title  to  stocks  or 
bonds  in  compromise  of  a  disputed  or  doubtful  claim,  or 
take  them  in  pledge,  or  purchase  them  with  a  view  to 
protecting  or  satisfying  a  claim  secured  by  such  pledge. 

Where  a  national  bank  buys  stock  pledged  to  it,  it 
should  dispose  of  such  stock  as  soon  as  a  sale  can,  to 
proper  advantage,  be  made.  (Decided  by  the  Supreme 
Court  of  California,  in  the  case  of  McBoyle  vs.  Union 
National  Bank,  which  decision  is  printed  in  Volume  42, 
California  Decisions,  page  499.) 

Section  1118. — WHEN  SUIT  TO  RECOVER  MONEY  FROM 
BANK  MAY  BE  BROUGHT. — To  actions  brought  to  recover 


862  BUSINESS  LAW  FOE  BUSINESS  MEN. 

money  or  other  property  deposited  with  any  bank,  banker, 
trust  company,  building  and  loan  association  or  savings 
and  loan  society,  there  is  no  limitation. 

Act  of  the  Legislature  of  California,  1915;  in 
effect  August  8,  1915. 

Section  1119. — BANK  DIRECTORS. — No  person  shall  be 
eligible  for  election  as  director  of  a  bank  having  a  capital 
stock  unless  he  is  a  stockholder  of  the  bank,  owning,  in 
his  own  right,  shares  thereof  of  the  par  value  of  at  least 
five  hundred  dollars;  and  every  person  elected  to  be 
director  who,  after  such  election,  shall  cease  to  be  the 
owner  in  his  own  right  of  the  amount  of  such  stock  afore- 
said, or  shall  hypothecate  or  in  any  way  pledge  such 
stock  as  security  for  any  loan  or  debt,  shall  immediately 
notify  the  superintendent  of  banks  in  writing  of  such 
sale  or  hypothecation  and  such  director  may  be  removed 
from  the  office  of  director  by  the  superintendent  of  banks ; 
provided,  however,  that  any  executor  or  executrix,  ad- 
ministrator or  administratrix  holding  shares  of  a  bank  of 
the  par  value  of  five  hundred  dollars,  in  his  or  her  repre- 
sentative capacity,  shall  be  eligible  for  election  as  a 
director  thereof.  If  a  bank  be  organized  without  capital 
stock,  no  person  shall  be  eligible  as  a  director  thereof 
unless  he  is  both  a  member  and  a  depositor  of  such  bank. 
Act  of  the  Legislature  of  California,  1915;  in 
effect  August  8,  1915. 

Section  1120. — UNCLAIMED  DEPOSITS. — All  amounts  of 
money  heretofore  or  hereafter  deposited  with  any  bank 
to  the  credit  of  depositors  who  have  not  made  a  deposit 
on  said  account  or  withdrawn  any  part  thereof  or  the 
interest  and  which  shall  have  remained  unclaimed  for 
more  than  twenty  years  after  the  date  of  such  deposit,  or 
withdrawal  of  any  part  of  principal  or  interest,  and  where 
neither  the  depositor  or  any  claimant  has  filed  any  notice 
with  such  bank  showing  his  or  her  present  residence, 
shall,  with  the  increase  and  proceeds  thereof,  be  deposited 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  863 

with  the  state  treasurer  after  judgment.  The  president 
or  managing  officer  of  every  bank  must,  within  fifteen 
days  after  the  first  day  of  January  of  every  year,  return 
to  the  superintendent  of  banks  and  to  the  state  controller 
a  sworn  statement  showing  the  names  of  depositors 
known  to  be  dead,  or  who  have  not  made  further  deposits, 
or  withdrawn  any  moneys  during  the  preceding  twenty 
years. 

Act  of  the  Legislature  of  California,  1915;  in 
effect  August  8,  1915. 

Section  1121. — BANK  CHECK — INTENT  TO  DEFRAUD.— 
Every  person,  who  for  himself  or  as  the  agent  or  repre- 
sentative of  another  or  as  an  officer  of  a  corporation, 
wilfully,  with  intent  to  defraud,  makes  or  draws  or  utters 
or  delivers  to  another  person  any  check  or  draft  on  a 
bank,  banker  or  depositary  for  the  payment  of  money, 
knowing  at  the  time  of  such  making,  drawing,  uttering 
or  delivery,  that  he  or  his  principal  or  the  corporation  of 
which  he  is  an  officer  has  not  sufficient  funds  in,  or  credit 
with  such  bank,  banker  or  depositary,  to  meet  such  check 
or  draft  in  full  upon  its  presentation,  is  punishable  by 
imprisonment  in  the  county  jail  for  not  more  than  one 
year  or  in  the  state  prison  for  not  more  than  fourteen 
years.  The  word  "credit"  as  used  herein  shall  be  con- 
strued to  be  an  arrangement  or  understanding  with  the 
bank  or  depositary  for  the  payment  of  such  check  or 
draft. 

Act  of  the  Legislature,  approved  May  2,  1919; 
in  effect  July  22,  1919. 

A.  J.  BLEDSOE,  ATTORNEY-AT-LAW,  Los  Angeles, 
California, — General  practice  in  all  the  courts.  Office 
advice.  Written  opinions  by  mail.  See  title  page  of  this 
book  for  office  address  of  A.  J.  Bledsoe. 


PART  XI. 
MINES  AND  MINING 

Section  1122. — UNITED  STATES  LAWS. — The  laws  of  the 
United  States  govern  the  subject  of  mines  and  mining, 
and  provide  the  manner  in  which  locations  shall  be  made, 
how  a  mining  claim  can  be  held,  and  the  particular  lands 
upon  which  a  mining  location  may  be  placed.  The  laws 
of  the  United  States  also  direct  and  control  the  rights 
and  liabilities  of  miners  in  relation  to  each  other.  The 
laws  of  the  United  States  are  paramount  on  all  these 
matters. 

Section  1123. — STATE  LAWS. — While,  as  has  been  said, 
the  laws  of  the  United  States  are  paramount,  yet  the 
State  of  California  has  power,  through  its  Legislature, 
to  pass  mining  laws,  providing  for  the  health  and  safety 
of  those  engaged  in  mining,  or  employed  in  and  about 
mining  works ;  and  to  pass  mining  laws  regulating  loca- 
tions, and  other  matters,  provided  such  laws  are  not  in 
conflict  with  the  laws  of  the  United  States. 

Section  1124. — LOCAL  RULES  AND  CUSTOMS.  —  The 
miners  of  any  mining  district  in  the  State  may  adopt 
local  rules  and  establish  local  customs  in  relation  to  the 
acquisition,  holding,  and  working  of  claims  within  such 
district ;  and  such  rules  and  customs,  when  proved,  have 
the  force  of  law,  provided  they  do  not  conflict  with  the 
laws  of  the  United  States  or  of  the  State  of  California. 
These  local  rules  and  customs  usually  deal  with  the  post- 
ing and  recording  of  location  notices,  and  sometimes  regu- 
late the  size  of  a  claim,  and  the  number  of  claims  which 

864 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  865 

any  person  may  locate,  in  the  district;  and  while  they 
cannot  extend  or  enlarge  the  rights  conferred  by  the  laws 
of  the  United  States  or  of  the  State,  they  can  and  fre- 
quently do  restrict  them. 

Section  1125. — WHO  MAY  LOCATE  A  MINING  CLAIM.— 
Only  those  who  are  citizens  of  the  United  States,  or  who 
have  declared  their  intention  to  become  such,  are  al- 
lowed by  the  law  to  make  a  location  of  mineral  lands  in 
California. 

Revised  Statutes  of  the  United  States,  Section 

2319. 
Act  of  the  Legislature,  approved  March  13, 1909. 

Section  1126. — UPON  WHAT  LAND  MINING  CLAIM  MAY 
BE  LOCATED. — Only  unoccupied,  unclaimed  public  mineral 
lands  are  locatable  as  a  mining  claim.  The  land  must 
be  public  land,  that  is,  it  must  be  land  the  title  to  which 
is  in  the  United  States,  and  which  is  open  to  entry. 
Therefore,  if  it  is  land  which  has  been  expressly  reserved 
'by  law,  or  if  it  is  occupied  as  an  Indian  Reservation,  it 
is  not  open  to  entry  as  mineral  land.  It  must  be  un- 
occupied and  unclaimed ;  that  is,  it  cannot  be  located  upon 
if  there  is  already  a  claimant  in  good  faith  occupying 
the  land.  But  this  does  not  mean  every  occupancy  of  any 
character,  a  mere  possession  without  right.  The  occupa- 
tion and  claim  to  the  land,  in  order  to  be  a  bar  to  location 
by  another,  must  be  in  good  faith  and  in  compliance  with 
the  law  of  the  United  States.  And,  lastly,  it  must  be 
mineral  land.  The  test  of  the  character  of  the  land  is, 
whether  it  is  more  valuable  for  minerals  than  for  agri- 
cultural purposes.  If  the  land  contains  mineral  in  its 
natural  state,  it  is  mineral  land,  and  may  be  located  upon 
as  a  mining  claim. 

Section  1127. — VALUABLE  MINERAL  DEPOSIT. — In  order 
to  constitute  a  valuable  mineral  deposit  within  the  mean- 
ing of  the  federal  laws,  there  must  be  minerals  in  such 


866  BUSINESS  LAW  FOR  BUSINESS  MEN. 

quantity  as  to  justify  the  expenditure  of  effort  to  extract 
them.  It  is  not  necessary,  however,  that  mineral  of 
sufficient  amount  and  value  to  allow  immediate  profitable 
working  be  shown  to  exist  in  the  land,  a  present  or  pros- 
pective commercial  value  being  enough.  (Decided  by 
the  Supreme  Court  of  California,  in  the  case  of  Madison 
vs.  Octave  Oil  Company,  which  decision  is  printed  in 
Volume  37,  California  Decisions,  page  29.) 

Section  1128. — WHAT  Is  MINING. — Mining  is  defined 
to  be  digging  and  searching  for  precious  and  economic 
metals  and  minerals,  whether  by  shafts,  pits,  and  tun- 
nels, or  by  placer  or  hydraulic  gravel  mining;  and  the 
term  includes  the  mining  of  coal,  iron,  phosphate,  and 
hydrocarbons,  and  the  boring  for  oil  and  gas,  as  well  as 
prospecting  for  any  of  those  metals  or  minerals. 

Section  1129. — WHAT  CONSTITUTES  A  VALID  LOCATION. 
To  constitute  a  valid  location  of  a  mining  claim,  three 
things  are  always  essential.  There  must  be,  first,  dis- 
covery of  the  mineral;  second,  posting  and  recording  of' 
notice ;  third,  marking  the  location  on  the  ground  so  that 
the  boundaries  can  be  readily  traced. 

In  all  legislation,  whether  of  congress  or  of  the  state 
or  territory,  and  by  all  mining  regulations  and  rules, 
discovery  and  appropriation  are  recognized  as  the  source 
of  title  to  mining  claims,  and  development  by  working 
as  the  condition  of  continued  ownership  until  a  patent 
is  obtained. 

(a)  Appropriation. — " Appropriation"  is  ordinarily 
effected  by  first  posting  the  notice  of  location  at  or  near 
the  point  where  the  ledge  is  exposed,  then  recording  the 
notice,  and  thereafter  marking  the  boundaries. 

(b)  Performance  of  Essential  Acts. — When  every  act 
necessary  to  complete  a  location  has  been  done  before 
an  adverse  claim  has  accrued,  the  order  in  which  such 
nets  have  been  performed  is  immaterial. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS. 

(c)  Marking  of  Boundaries  Main  Act. — The  marking 
of  the  location  upon  the  ground  so  that  the  boundaries 
may  be  readily  traced,  is  the  main  act  of  original  location. 

(d)  Posting    of   Notice. — There    is    nothing    in    the 
statute  requiring  the  posting  of  the  notice  on  the  day  of 
discovery,  or  prescribing  where  it  shall  be  posted  on  the 
claim  or  at  all. 

(e)  Completion  of  Location. — The  discovery  is  the 
source  of  title  and  vests  the  discoverer  with  the  prior 
right  to  complete  his  location,  which  he  can  only  lose  by 
a  failure  within  a  reasonable  time  to  mark  his  location 
so  that  the  boundaries  can  be  traced  upon  the  ground. 

(f)  Prior  Posting  Unnecessary  to  Prior  Discovery .— 
Prior  discovery  is  not  required  to  be  accompanied  by  a 
prior  posting  of  notice  in  order  to  vest  the  claimant  with 
the  prror  right  to  complete  his  location. 

The  mining  law  of  the  United  States  does  not  require 
the  notice  of  location  to  be  posted  or  recorded. 

(Decided  by  the  Court  of  Appeals  of  California,  in  the 
case  of  McCleary  vs.  "W.  D.  Broaddus,  which  decision  is 
printed  in  Volume  11  of  California  Appellate  Decisions, 
page  146.) 

Section  1130. — THE  DISCOVERY. — If  it  is  a  lode  claim, 
there  must  be  an  actual  discovery  of  mineral.  If  a  person 
should  attempt  to  take  a  lode  claim  on  land  which  he  had 
not  prospected,  and  knew  nothing  about,  it  would  not  be 
a  valid  location.  Good  faith  is  required  by  the  law.  And 
no  location  of  a  claim  can  be  made  until  the  discovery  of 
the  vein  or  lode  within  the  limits  of  the  claim  located. 
To  discover  a  quartz  claim,  means  the  actual  finding  of 
mineral-bearing  rock  in  place,  the  discovery  of  mineral- 
bearing  ore  within  the  crevices  of  the  rock,  or  incased 
within  defined  boundaries;  or,  the  discovery  of  such  in- 
dications of  the  presence  of  ore  within  rock  in  place,  as 
an  experienced  miner  would  feel  justified  in  spending  his 
time  and  money  upon  with  the  reasonable  expectation  of 
finding  ore  in  paying  quantities.  When  a  locator  finds 


868  BUSINESS  LAW  FOR  BUSINESS  MEN. 

rock  in  place  containing  mineral,  lie  has  made  a  discovery 
within  the  meaning  of  the  law,  whether  the  earth  or  rock 
is  rich  or  poor,  whether  it  assays  high  or  low.  It  is  the 
finding  of  the  mineral  in  the  rock  in  place,  as  distin- 
guished from  float  rock,  that  constitutes  the  discovery, 
and  warrants  the  prospector  in  making  a  location  of  a 
mining  claim.  The  claimant  should,  therefore,  prior  to 
locating  his  claim,  unless  the  vein  can  be  traced  upon  the 
surface,  sink  a  shaft  or  run  a  tunnel  or  drift  to  a  suffi- 
cient depth  to  discover  and  develop  a  mineral-bearing 
vein,  lode,  or  crevice.  He  should  also  determine,  if  pos- 
sible, the  general  course  of  the  vein  in  either  direction 
from  the  point  of  discovery,  by  which  direction  he  will 
be  governed  in  making  the  boundaries  of  his  claim  on  the 
surface.  What  has  been  said  on  the  subject  of  discovery 
applies  only  to  lode  or  quartz  claims.  The  law  does  not 
specify  any  actual  discovery  of  mineral  as  an  essential 
to  the  location  of  a  placer  claim,  and  it  has  been  held  in 
California  that  a  location  of  a  placer  claim  may  be  made 
without  discovery  of  minerals  being  first  made  on  the 
ground.  But  no  patent  could  be  obtained  for  a  placer 
claim  without  proof  of  the  mineral  character  of  the  claim. 

Section  1131. — MARKING  THE  BOUNDARIES. — The  bound- 
aries must  be  marked  in  such  a  way  that  the  claim  can 
be  identified  on  the  ground.  The  locator  should  drive  a 
post  or  erect  a  monument  of  stones  at  each  corner  of  his 
surface  ground;  and  at  the  point  of  discovery,  or  dis- 
covery shaft,  he  should  fix  a  post,  stake,  or  board,  on 
which  should  be  designated  the  name  of  the  lode,  the  name 
or  names  of  the  locators,  and  the  number  of  feet  claimed 
and  in  which  direction  from  the  point  of  discovery. 

Section  1132. — LOCATION  NOTICE. — A  notice  of  loca- 
tion must  be  posted  on  the  claim,  at  the  point  of  dis- 
covery, or  discovery  shaft. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  869 

Section  1133. — FOEM  OF  NOTICE  OF  LOCATION  OF  LODE 
CLAIM. — The  following  is  a  form  of  location  of  lode 
claim  :— 

LOCATION  NOTICE 

NOTICE  IS  HEREBY  GIVEN  TO  ALL  WHOM  IT 

MAY  CONCERN:    That , 

a  citizen  of  the  United  States,  having  discovered  a  lode  or 

vein  of  quartz,  or  rock  in  place,  bearing 

(here  insert  kind  of  mineral  discovered),  within  the  limits 
of  the  claim  hereby  located,  has  this  day,  under  and  in 
accordance  with  the  Revised  Statutes  of  the  United 

States,  Chapter  VII,  Title  32,  located (here 

state  number  of  feet)  linear  feet  of  this  vein  or  lode,  with 

surface  ground (here  state  number  of 

feet)  feet  in  width,  situated  in 

mining  district,  County  of ,  State  of  Cali- 
fornia, and  known  as (here 

state  name  of  mine),  extending feet 

to  a (here  describe  natural 

object  or  monument) ,  and feet 

to (here  describe  natural  object  or 

monument)  from  this  notice  at  the  discovery  or  prospect 
shaft,  the  exterior  boundaries  of  this  claim  being  dis- 
tinctly marked  by  reference  to  some  natural  object  or 
permanent  monument,  and  more  particularly  described  as 

follows,  to-wit :  

(Here  insert  description.) 


and  I  intend  to  hold  and  work  said  claim  as  provided  by 
the  local  customs  and  local  rules  of  miners,  and  the 
mining  Statutes  of  the  United  States. 

Dated  on  the  ground,  the day  of ,  19 

Dicevered ,  19 

,  locator. 

Recorded ,  19 


870  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Section  1134. — FORM  OF  NOTICE  OF  LOCATION  OF  A 
PLACER  CLAIM. — The  following  is  a  form  of  notice  of 
location  of  a  placer  claim  :— 

LOCATION  NOTICE 

NOTICE  IS  HEREBY  GIVEN  TO  ALL  WHOM  IT 

MAY  CONCERN:    That ,  a  citizen 

of  the  United  States,  has  this  day  located,  in  accordance 
with  the  Revised  Statutes  of  the  United  States,  Chapter 
VI,  Title  32,  the  following  described  placer  mining 
ground,  to-wit:  

(Description:  If  on  surveyed  land,  describe  the  legal 
subdivision.  If  on  unsurveyed  land,  describe  as  accu- 
rately as  possible  by  courses  and  distances.) 


Situated  in mining  district,  County 

of ,  State  of  California.    This  claim  shall 

be  known  as (here  insert 

name  of  claim)  mining  claim,  and  I  intend  to  work  the 
same  in  accordance  with  the  local  customs  -and  rules  of 
miners,  and  the  mining  Statutes  of  the  United  States. 


Dated  on  the  ground  the day  of ?...,  19 

Located ,  19 

Recorded ,  19 

Section  1135. — RECORDING  OF  LOCATION  NOTICE. — The 
Congress  of  the  United  States  has  provided  by  law  that 
"the  location  notice  must  be  filed  for  record  in  all 
respects  as  required  by  the  State  laws  and  local  rules 
and  regulations,  if  there  be  any."  The  State  of  Cali- 
fornia, by  an  Act  of  the  Legislature,  has  provided  that 
notices  of  location  of  mining  claims  must  be  recorded 
in  the  Recorder's  office  of  the  county  where  the  mining 
claim  is  situated,  within  thirty  days  after  the  posting  of 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  871 

notice   of  location.     This   applies  to  lode,  placer,   and 
tunnel  claims. 

Civil  Code  of  California,  Section  1159. 

Act  of  the  Legislature,  approved  March  13, 1909. 

Section  1136. — SIZE  OF  LODE  CLAIM.— Any  person  who 
is  a  citizen  of  the  United  States,  or  who  has  declared 
his  intention  to  become  a  citizen,  may  locate,  record,  and 
hold  a  mining  claim  of  fifteen  hundred  linear  feet  along 
the  course  of  any  mineral  vein  or  lode  subject  to  loca- 
tion; or  an  association  of  persons,  who  are  citizens  of 
the  United  States,  may  make  a  joint  location  of  fifteen 
hundred  feet  along  the  course  of  the  lode  or  vein.  The 
claim,  according  to  the  law,  is  not  to  exceed  fifteen  hun- 
dred feet  in  length.  As  to  width,  the  law  provides  that 
the  lateral  extent  of  location  on  veins  or  lodes  shall  in 
no  case  exceed  three  hundred  feet  on  each  side  of  the 
middle  of  the  vein  at  the  surface.  Thus  the  extreme 
size  of  a  lode  claim  is  fifteen  hundred  feet  in  length  by 
six  hundred  feet  in  width.  But  the  law  also  gives  mining 
districts  the  right  to  reduce  the  width  of  a  mining  claim 
to  less  than  six  hundred  feet,  but  not  less  than  fifty  feet. 
The  laws  referred  to  are  the  laws  of  the  United  States. 
The  State  of  California  has  no  law  of  its  own  upon  the 
subject.  When  the  locator  does  not  determine  by  survey 
or  exploration  where  the  middle  of  his  vein  at  the  sur- 
face is,  his  discovery  shaft  is  taken  to  mark  the  middle 
of  the  vein. 

Where  the  vein  runs  in  one  direction,  the  location 
must  follow  the  direction  of  the  vein,  and  the  locator 
cannot  stake  his  claim  crosswise  of  the  vein  and  expect 
to  hold  the  full  amount  allowed  by  law  as  the  size  of  a 
lode  claim.  Where  the  vein  within  a  mining  claim  ran 
in  a  northerly  and  southerly  direction,  and  the  location 
was  crosswise  of  the  vein,  it  was  held  by  the  Court  of 
Appeals  that  the  side-lines  were  really  end-lines,  con- 
sidering the  direction  of  the  lode  on  the  surface;  and 
that  the  rights  of  the  locators  must  be  confined  to  the 


872  BUSINESS  LAW  FOR  BUSINESS  MEN. 

area  within  the  side-lines  three  hundred  feet  on  each 
side  of  the  vein  or  lode.  (Decided  by  the  California 
Court  of  Appeals,  in  the  case  of  Southern  California 
Ey.  Co.  vs.  O'Donnell,  which  decision  is  printed  in 
"Volume  85  of  the  Pacific  Beporter  (advance  sheets), 
page  932.) 

Revised  Statutes  of  the  United  States,  Section 
2320. 

Section  1137. — SIZE  OF  PLACER  CLAIM. — An  individual 
may  locate  twenty  acres  as  a  placer  claim.  Two  persons 
may  associate  themselves  together  and  locate  forty  acres 
as  a  placer  claim;  and  so  on  up  to  eight  persons,  who 
may  locate  one  hundred  and  sixty  acres  as  a  placer 
claim.  But  no  individual  can  locate  more  than  twenty 
acres,  and  no  association  of  persons  can  locate  more  than 
one  hundred  and  sixty  acres. 

Revised  Statutes  of  the  United  States,  Sections 
2330,  2331. 

Section  1138. — DISCOVERY  ON  PLACER  GROUND. — It  has 
already  been  stated  that  there  must  be  a  valid  discovery 
of  minerals,  before  the  location  can  have  any  legal  effect, 
and  that  the  discovery  of  a  quartz  claim  must  be  of  a 
lode  or  vein  in  rock  in  place.  But  when  we  come  to  con- 
sider a  placer  claim,  the  rule  stated  does  not  apply.  The 
term  "placer"  is  of  wide  significance.  It  includes  any 
form  of  mineral  deposit,  except  quartz  or  other  rock  in 
place.  All  forms  of  mineral  and  metal  bearing  earth, 
other  than  veins  or  lodes  in  rock  in  place,  are  held  to 
be  "placer."  They  cannot  be  fixed  in  place,  confined 
within  walls  of  rock,  for  they  may  be  found  in  shifting- 
sand,  or  loose  gravel,  or  in  the  channels  of  rivers;  and 
the  term  "placer"  includes  natural  gas,  petroleum,  and 
hydrocarbons.  But  while  a  valid  location  may  be  made 
under  the  laws  relating  to  placer  locations  without  a 
previous  discovery  of  mineral,  yet  such  discovery  must 
be  made  before  a  patent  from  the  United  States  Gov- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  873 

eminent  can  be  issued  under  the  Acts  of  Congress  re- 
lating to  the  disposition  of  mineral  lands.  (Decided  by 
the  Supreme  Court  of  California  in  the  case  of  Gregory 
vs.  Pershbaker,  which  decision  is  printed  in  Volume  73 
of  the  California  Reports,  page  109.) 

Section  1139. — DISCOVERY  OF  OIL. — A  discovery  of  oil 
within  the  limits  of  the  claim  is  essential  to  the  validity 
of  an  oil  location.  To  constitute  a  discovery  of  oil,  there 
must  be  something  more  than  ordinary  surface  indica- 
tions, such  as  the  seepage  of  oil,  or  geological  forma- 
tions. There  must  be  an  actual  discovery  of  oil  in  pay- 
ing quantities.  It  is  not  necessary  that  this  discovery 
be  made  before  or  at  the  time  of  the  location,  for  a  sub- 
sequent discovery  will,  operate  to  perfect  the  location. 
But  if  the  location  is  made  before  discovery  of  oil  in 
paying  quantities,  and  the  locator  leaves  the  claim,  with- 
out prosecuting  work  on  it,  another  person  may  lawfully 
enter  and  locate  on  the  land.  (Decided  by  the  Supreme 
Court  of  California,  in  the  case  of  New  England  and 
Coalinga  Oil  Co.  vs.  Congdon,  which  decision  is  printed 
in  Volume  34  of  California  Decisions,  page  395.) 

Section  1140. — HOMESTEADER  AND  OIL  LOCATOR. — A 
claimant  to  government  land  under  a  homestead  entry 
acquires  a  valid  title  thereto  as  against  prior  locators 
under  an  oil  placer  mining  location,  where  such  locators 
were  not  in  the  possession  of  the  land  at  the  time  of 
such  entry,  nor  engaged  in  the  diligent  prosecution  of 
the  work  toward  a  discovery,  but  had  merely  made  im- 
provements thereon  in  excess  of  the  required  amount  of 
assessment  work. 

The  rule  that  actual  possession  of  a  mining  claim 
held  under  a  mining  location  is  unnecessary  for  the  pro- 
tection of  the  title  thereto,  is  applicable  only  when  the 
location  is  valid  and  complete. 

The  principle  that  discovery  and  appropriation  are 
the  source  of  title  of  mining  claims,  and  assessment  or 


874  BUSINESS  LAW  FOR  BUSINESS  MEN. 

development  work  is  the  condition  of  their  continued 
possession,  applies  only  when  the  location  is  valid  and 
complete. 

A  location  is  valid  and  complete  only  when,  alter 
compliance  with  other  requirements,  a  discovery  of 
valuable  mineral  in  place  has  been  made. 

In  case  of  oil  locations  the  locator  is  permitted  to 
mark  the  boundaries  of  his  location  and  post  and  record 
his  notice  after  discovery  and,  while  diligently  prose- 
cuting his  work  to  a  discovery,  is  entitled  to  protection 
in  his  possession  undisturbed  by  any  form  of  hostile  or 
clandestine  entry. 

(Decided  by  the  Supreme  Court  of  California,  in  the 
case  of  McLemare  vs.  Express  Oil  Company,  which 
decision  is  printed  in  Volume  40  of  the  California  De- 
cisions, page  371.) 

Section  1141. — TIME  WITHIN  WHICH  LOCATION  MUST 
BE  MADE  AFTER  DISCOVERY. — The  law  of  the  United 
States  does  not  specify  any  certain  time  within  which 
location  must  be  made,  and  notices  posted  or  recorded, 
after  discovery.  The  location  must  be  made,  and  the 
boundaries  marked  on  the  ground,  within  a  reasonable 
time  after  discovery.  If  local  rules  and  customs  pre- 
scribe a  certain  time,  that  time  must  be  followed.  When- 
ever any  patent  to  mineral  lands  shall  contain  a  state- 
ment of  the  date  of  location  of  a  claim  or  claims,  upon 
which  such  patent  is  based,  this  statement  will  be  re- 
ceived in  the  courts  of  California  as  prima  facie  evi- 
dence of  the  true  date  of  the  location.  (Art  of  the 
Legislature,  approved  March  7,  1905.) 

Section  1142. — 0  i  L  AND  ASPHALTUM. — Petroleum, 
natural  gas,  and  asphaltum  are  held  to  be  mineral,  and 
may  be  located  as  placer  claims.  Much  controversy  over 
the  question,  whether  public  land  in  which  petroleum  was 
found  could  be  located  under  the  mining  laws,  caused  the 
Congress  of  the  United  States  to  pass  an  act  on  the  sub- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  875 

ject  in  1897,  which  removes  all  doubt.  The  law  reads: 
"Any  person  authorized  to  enter  lands  under  the  mining 
laws  of  the  United  States  may  enter  or  obtain  patent  to 
lands  containing  petroleum  or  other  mineral  oil,  and 
chiefly  valuable  therefor,  under  the  provisions  of  the  laws 
relating  to  placer  and  mineral  claims."  Therefore, 
twenty  acres  of  oil  lands  may  be  located  as  a  placer  claim 
by  an  individual,  and  as  much  as  one  hundred  and  sixty 
acres  by  an  association  of  persons.  It  is  not  necessary 
that  discovery  of  oil  should  be  first  made. 

Act  of  Congress,  approved  February  11,  1897. 

Section  1143. — TRANSFER  OF  EIGHTS  BY  MEMBERS  OF 
ASSOCIATION. — The  rights  acquired  by  an  association  of 
locators  of  mineral  lands  may  be  transferred  among 
themselves  before  discovery,  without  affecting  the  whole 
claim,  and  the  subsequent  discovery  by  any  grantee  will 
perfect  the  entire  original  location. 

Where  an  association  of  eight  persons  locate  one  hun- 
dred and  sixty  acres  of  mineral  land  for  the  purpose  of 
discovering  oil,  and  before  discovery  transfer  a  specific 
portion  to  a  stranger,  such  portion  becomes  a  separate 
and  independent  claim,  unless  there  be  an  agreement  to 
the  contrary;  and  a  subsequent  discovery  of  oil  on  such 
several  portion  will  not  perfect  the  entire  original  loca- 
tion. (Decided  by  the  Supreme  Court  of  California,  in 
the  case  of  Merced  Oil  Mining  Company  vs.  E.  L.  Patter- 
son, which  decision  is  printed  in  California  Decisions, 
Volume  35,  page  550.) 

Section  1144. — ANNUAL  LABOR  AND  ASSESSMENT  WORK. 
In  order  to  hold  a  mining  claim,  the  locator  must  do  a 
certain  amount  of  work  each  year,  and  this  is  measured 
not  by  time,  but  by  the  value  of  the  work  performed. 
On  each  claim  located,  whether  quartz  or  placer,  not  less 
than  one  hundred  dollars'  worth  of  labor  must  be  done, 
or  an  equal  value  of  improvements  made,  during  each 
year  until  a  patent  has  been  issued  for  the  claim. 


876  BUSINESS  LAW  FOE  BUSINESS  MEN. 

A  failure  to  comply  with  this  law  forfeits  the  claim,  and 
leaves  it  open  for  relocation  by  another  person.  But  if 
the  original  locator,  his  heirs,  assigns,  or  legal  repre- 
sentatives, after  the  time  has  expired  within  which  he 
should  have  done  the  assessment  work,  and  before  an- 
other person  has  located  on  the  ground,  then  proceeds  to 
do  the  work,  he  saves  the  forfeiture  and  recovers  the 
claim  again  to  himself. 

Eevised  Statutes  of  the  United  States,  Section 
2324. 

Section  1145. — WHEN  FIRST  WORK  MUST  BE  DONE.— 
The  law  does  not  mean  that  the  work  should  be  done 
within  a  year  from  the  date  of  location.  The  period  for 
performing  the  assessment  work  commences  on  the  first 
day  of  January  succeeding  the  date  of  location  of  the 
claim.  At  least  one  hundred  dollars  worth  of  work  must 
be  done  each  year. 

Supplement    to    the    Revised    Statutes    of   the 
United  States,  Volume  1,  page  276. 

Section  1146. — WHERE  WORK  SHOULD  BE  DONE.— 
Annual  labor  or  improvements  to  the  amount  of  one  hun- 
dred dollars  may  be  anywhere  within  the  boundaries  of 
the  claim.  But  it  is  not  absolutely  necessary  that  this 
work  be  done  within  such  boundaries.  It  may  be  done 
on  adjoining  or  neighboring  ground,  if  the  work  so  done 
tends  to  develop  the  claim,  and  this  will  be  sufficient  com- 
pliance with  the  law. 

And  in  a  case  where  a  miner  holds  several  claims,  the 
annual  labor  or  improvements  required  for  the  whole  of 
them  may  be  done  or  made  upon  any  one  or  more  of  them, 
provided  that  such  labor  or  improvements  tend  to  develop 
them  all.  And  even  if  the  claim  upon  which  the  work  is 
done  is  patented,  and  the  remainder  are  unpatented,  it 
will  make  no  difference,  so  long  as  the  work  done  tends 
in  fact  to  develop,  and  is  done  for  the  purpose  of  develop- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  877 

ing   the    unpatented    claims,    and    as    assessment    work 
upon  them. 

Work  done  or  improvements  made,  for  the  purpose 
of  developing  the  ground  embraced  in  the  location,  out- 
side of  the  limits  of  the  claim,  is  as  available  for  holding 
it  as  if  done  within  its  boundaries.  Labor  and  improve- 
ments, within  the  meaning  of  the  law,  are  deemed  to 
have  been  had  on  a  mining  claim,  whether  it  consists  of 
one  location  or  several,  when  the  labor  is  performed  or 
the  improvements  are  made  for  its  development,  to 
facilitate  the  extraction  of  the  metals  it  may  contain; 
and  such  labor  and  improvements  may  lawfully  be  on 
ground  which  originally  constituted  only  one  of  the  loca- 
tions, as  in  sinking  a  shaft;  or  the  labor  and  improve- 
ments may  be  at  a  distance  from  the  claim  itself,  as 
where  the  labor  is  performed  for  the  turning  of  a 
stream,  or  to  bring  water  on  the  claim,  or  where  the 
improvement  consists  in  the  construction  of  a  flume  to 
carry  off  the  debris  or  waste  material.  (Decided  by  the 
Supreme  Court  of  California  in  the  case  of  De  Noon  vs. 
Morrison,  which  decision  is  printed  in  Volume  83  of  the 
California  Eeports,  page  163.) 

Section    1147. — PROOF    OF   ASSESSMENT    WORK. — The 
law   of   California  provides   that   proof  of  assessment 
work  must  be  made  by  affidavit,  within  thirty  days  after 
the  time  limited  for  performing  the  labor  or  making  the 
improvements,    particularly    describing   the    labor   per- 
formed and  improvements  made,  and  the  value  thereof. 
The  law  also  provides  that  this  affidavit  must  be  recorded 
in  the  office  of  the  County  Recorder  of  the  county  in 
which  the  mine  or  claim  is  situated,  within  thirty  days. 
Statutes  of  1891,  page  219. 
Act   of  the   Legislature,   approved   March   13, 
1909. 

(a)  Recording  Fees. — For  recording  the  affidavit 
herein  required,  the  county  recorder  shall  receive  a  fee 


878  BUSINESS  LAW  FOR  BUSINESS  MEN. 

of  ten  cents  per  folio,  twenty  cents  for  endorsement  and 
ten  cents  for  indexing  the  name  of  each  claim  and  each 
owner. 

Act  of  the  Legislature  of  California,  1915;  in 
effect  August  8,   1915. 


Section  1148.  —  FORM  OF  PROOF  OF  ASSESSMENT  WORK. 
The  following  is  a  form  of  proof  of  assessment  work  : 

PEOOF  OF  LABOR 

STATE  OF  CALIFORNIA,  } 

ss 
COUNTY  OF  ...................................................  j 

Before  me  the  subscriber  personally  appeared  .................. 

....................................  ,  who  being  duly  sworn  says,  that  at  least 

$100  worth  of  labor  or  improvements  were  performed  or 
made  upon  ................................................  (here  state  name  of  mining 

claim  )  ,  situated  in  ....................................................................................  mining 

district,  County  of  .............................................  ,  State  of  California, 

during  the  year  ending  December  31,  19  ..........     Such  ex- 

penditure was  made  by  or  at  the  expense  of  ................................. 

......................................................  ,  owner  of  said  claim,  for  the  pur- 

pose of  holding  said  claim. 

That  the  labor  performed  and  improvements  made 
were  as  follows,  to-wit  :  .................................................................................... 

(Here  give  a  particular  description  of  the  labor  per- 
formed and  improvements  made.) 

That  the  value  of  said  labor  was  $  ........................ 

That  the  value  of  said  improvements  was  $  ........................ 


Subscribed  and  sworn  to  before  me  this  ........................  day 

of  ...............................................................  ,  19  .......... 


Notary  Public  in  and  for  the  County  of  ..............................  , 

State  of  California. 

Section    1149.  —  RELOCATION    OF    CLAIM    AFTER    FOK- 
FEITURE.  —  If  for  any  reason  a  mining  claim  has  been  for- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.    '        879 

felted,  by  failure  to  do  assessment  work,  or  by  reason 
of  abandonment,  another  person  may  relocate  it.  He 
must  make  his  location  as  the  original  locator  did,  and 
in  his  notice  of  location  he  should  state  that  the  claim 
was  originally  located  by  another  person  (naming  him), 
but  that  the  claim  had  been  abandoned  or  forfeited. 

Section  1150. — MINERAL  ENTRIES  WITHIN  FOREST 
KESERVES. — The  law  provides  that  "any  mineral  lands 
in  any  forest  reservation  which  have  been  or  which  may 
be  shown  to  be  such,  and  subject  to  entry  under  the  exist- 
ing mining  laws  of  the  United  States  and  the  rules  and 
regulations  applying  thereto,  shall  continue  to  be  subject 
to  such  location  and  entry,"  notwithstanding  the  reser- 
vation. This  makes  mineral  lands  in  the  forest  reserves 
subject  to  location  and  entry  under  the  general  mining 
laws  in  the  usual  manner. 

Section  1151. — LOCATION  BY  AGENTS. — A  location  of 
a  mining  claim  may  be  made  in  the  name  of  another  tlian 
the  actual  locator,  and  when  so  made,  the  person  in 
whose  name  it  is  made  becomes  vested  with  the  legal 
title  to  the  claim.  A  prospector  may  locate  for  himself, 
and  then  make  other  locations  in  the  names  of  others, 
and  he  will  be  considered  the  agent  of  the  persons  in 
whose  names  the  locations  are  made.  (Decided  by  the 
Supreme  Court  of  California  in  the  case  of  Moore  vs. 
Hamerslag,  which  decision  is  printed  in  Volume  109  of 
the  California  Reports,  page  122.) 

Section  1152. — LOCATION  BY  MINORS. — A  valid  loca- 
tion of  a  mining  claim  may  be  made  by  a  minor.  The 
law  allows  any  one  who  is  a  citizen,  or  who  has  declared 
his  intention  to  become  such,  to  locate  a  mining  claim. 
The  law  does  not  require  that  the  locator  shall  be  of  any 
particular  age.  In  a  California  case  the  Supreme  Court 
held  that  a  minor  can  make  a  location  of  a  mining  claim 
in  this  State,  saying:  "Nor  is  there  any  reason  in  the 


880  BUSINESS  LAW  FOR  BUSINESS  MEN. 

nature  of  things  why  a  minor  may  not  make  a  valid  loca- 
tion. After  the  preliminary  steps  are  taken,  all  that  is 
required  is  that  a  certain  amount  of  work  shall  be  done. 
If  the  minor  cannot  do  it,  he  can  get  any  one  to  do  it  for 
him,  and  the  condition  imposed  by  the  statute  is  fulfilled. 
If  he  cannot,  the  claim  lapses,  and  is  open  to  relocation 
by  others.  It  may  be  added  that  so  far  as  we  know  it  is 
the  practice  of  many  mining  communities  for  minors  to 
locate  claims."  (Decided  by  the  Supreme  Court  of  Cali- 
fornia in  the  case  of  Thompson  vs.  Spray,  which  de- 
cision is  printed  in  Volume  72  of  the  California  Reports, 
page  528.) 

Section  1153. — TUNNEL  CLAIMS.— The  laws  of  the 
United  States  provide  for  certain  tunnel  claims,  where 
a  tunnel  is  run  for  the  discovery  of  "blind  lodes  or 
veins;"  and  so  long  as  the  tunnel  claimant  operates  his 
tunnel,  the  law  reserves  in  his  favor  3,000  feet  from  the 
face  of  the  tunnel,  with  1,500  feet  in  the  opposite  direc- 
tion on  the  strike  of  the  vein,  from  either  wall  of  his 
tunnel.  The  law  states  that  the  owner  of  the  tunnel  shall 
have  the  right  of  possession  of  all  veins  or  lodes  within 
3,000  feet  from  the  face  of  such  tunnel,  on  the  line  there- 
of, not  previously  known  to  exist,  discovered  in  the  tun- 
nel, to  the  same  extent  as  if  discovered  upon  the  sur- 
face. Locations  on  the  line  of  such  tunnel,  of  veins  or 
lodes  not  appearing  on  the  surface,  made  by  other  parties 
after  the  commencement  of  the  tunnel,  and  while  it  is 
being  prosecuted  with  reasonable  diligence,  are  invalid. 
Failure  to  prosecute  the  work  on  the  tunnel  for  six 
months  is  considered  an  abandonment  of  the  right  to  all 
veins  on  the  line  not  discovered  when  the  work  ceased. 
Revised  Statutes  of  the  United  States,  Section 
2323. 

Section  1154. — LOCATION  OF  TUNNEL  CLAIM. — The 
term  "face,"  as  used  in  the  tunnel  claim  law,  means  the 
first  working  face  formed  in  the  tunnel,  and  signifies  the 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  881 

point  at  which  the  tunnel  actually  enters  cover,  it  being 
from  this  point  that  the  3,000  feet  are  to  be  counted 
upon  which  prospecting  is  prohibited.  To  avail  them- 
selves of  the  benefits  of  this  provision  of  law,  the  pro- 
prietors of  a  mining  tunnel  will  be  required,  at  the  time 
they  enter  cover,  to  give  proper  notice  of  their  tunnel 
location  by  erecting  a  substantial  post,  board,  or  monu- 
ment at  the  face  or  point  of  commencement  thereof,  upon 
which  should  be  posted  a  good  and  sufficient  notice,  giv- 
ing the  names  of  the  parties  or  company  claiming  the 
tunnel  right;  the  actual  or  proposed  course  or  direction 
of  the  tunnel;  the  height  and  width  thereof,  and  the 
course  and  distance  from  such  face  or  point  of  com- 
mencement to  some  permanent,  well  known  objects  in 
the  vicinity ;  and  at  the  time  of  posting  such  notice  they 
should,  in  order  that  miners  or  prospectors  may  be  en- 
abled to  determine  whether  or  not  they  are  within  the 
lines  of  the  tunnel,  establish  the  boundary  lines  thereof, 
by  stakes  or  monuments  placed  along  such  lines  at  inter- 
vals of  not  more  than  600  feet,  to  the  terminus  of  the 
3,000  feet  from  the  face  or  point  of  commencement  of 
the  tunnel,  and  the  lines  so  marked  will  define  and  gov- 
ern as  to  the  specific  boundaries  within  which  prospect- 
ing for  lodes  not  previously  known  to  exist  is  prohibited 
while  work  on  the  tunnel  is  being  prosecuted  with  rea- 
sonable diligence.  A  copy  of  the  posted  notice  must  be 
filed  with  the  County  Recorder,  and  should  also  be  filed 
with  the  Recorder  of  the  mining  district,  if  any ;  with  an 
affidavit  attached  of  the  owners,  claimants,  or  projectors 
of  the  tunnel,  stating  the  amount  expended  by  themselves 
and  their  predecessors  in  interest  in  prosecuting  the 
work;  the  extent  of  the  work  performed;  and  that  it  is 
their  intention  in  good  faith  to  prosecute  the  work  on 
the  tunnel  with  reasonable  diligence  for  the  development 
of  a  vein  or  lode,  or  for  tlie  discovery  of  mines. 

Section  1155. — LODE  AND  PLACER  CLAIMS  IN  THE  SAME 
GROUND. — It  sometimes  occurs  that  a  lode  will  be  discov- 


882  BUSINESS  LAW  FOR  BUSINESS  MEN. 

ered  within  the  boundaries  of  a  placer  claim.  lu  that 
event,  the  owners  of  the  placer  claim  have  an  immediate 
right  to  apply  to  the  government  for  a  patent,  and  the 
application  must  state  the  existence  of  the  lode.  The 
government  will  then  issue  a  patent  for  the  lode,  fifty 
feet  in  width,  upon  the  payment  of  $5.00  per  acre;  and 
also  a  patent  for  the  placer  portion  of  the  land  upon  the 
payment  of  $2.50  per  acre.  If  the  owner  of  a  placer 
claim  makes  application  for  a  patent,  without  mention- 
ing a  known  vein  or  lode  within  its  boundaries,  any  other 
person  may  locate  the  lode,  in  the  same  manner  as  any 
other  quartz  claim  is  located,  but  acquiring  only  1,500 
by  50  feet. 

Revised  Statutes  of  the  United  States,  Sec.  2333. 

Section  1156. — DISCOVERY  OF  VEIN  PASSING  THROUGH 
PLACER  CLAIM. — If  a  discovery  is  made  on  a  vein  pass- 
ing through  a  placer  claim,  and  at  a  point  just  outside 
the  boundary  of  the  placer  claim,  the  discoverer  of  the 
lode  may  make  a  location  which  will  include  such  por- 
tion of  the  placer  claim  as  is  required  to  secure  a  full 
lode  claim  of  the  dimensions  customary  in  that  mining 
district ;  and  he  may  then  mine  the  vein  underneath  the 
surface  of  the  placer. 

Section  1157. — MILL  SITES. — The  owner  of  a  lode 
claim  may  also  locate,  in  the  same  manner  as  mining 
claims  are  located  (that  is,  by  posting  and  recording 
notice,  and  erecting  monuments  for  identification),  five 
acres  of  non-mineral  land  for  a  mill  site.  The  mill  site 
need  not  be  adjacent  to  the  mining  claim.  It  must  be 
used  for  a  mill  site  in  connection  with  the  mining  claim, 
where  a  mill  site  is  located  by  the  owner  of  a  lode  claim. 
But  the  law  further  provides  that  the  owner  of  a  quartz- 
mill  or  reduction-works,  not  owning  a  mine  in  connection 
therewith,  may  also  locate  a  mill  site,  not  exceeding  five 
acres  of  non-mineral  land,  and  obtain  a  patent  for  it. 

Revised  Statutes  of  the  United  States,  Sec.  2337. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  883 

Section  1158. — TIMBER  FOR  MINING  PURPOSES. — The 
law  allows  sufficient  timber  to  be  cut  on  mineral  land  for 
the  proper  working  of  the  mine  proper.  Timber  for  the 
mine,  shafts,  or  tunnels,  for  houses  for  employees,  and 
other  purposes  in  the  working  of  the  mine,  may  lawfully 
be  cut  and  used. 

Section  1159. — MINING  PARTNERSHIPS. — For  the  law 
as  to  mining  partnerships,  see  under  the  heading  "Part- 
nership." 

Section  1160. — LIENS  ON  MINING  CLAIMS. — For  the 
law  as  to  liens  on  mining  claims,  see  under  the  heading, 
' '  Mechanics  Liens. ' ' 

Section  1161. — ENTRY  OF  COAL  LANDS. — Coal  lands 
may  be  entered  without  making  the  location  required  for 
other  claims.  There  is  a  difference,  also,  in  the  persons 
qualified  to  take  coal  lands,  and  in  the  number  of  acres 
which  can  be  taken.  The  person  who  takes  coal  land 
must  not  only  be  a  citizen  of  the  United  States,  or  have 
declared  his  intention  to  become  such,  but  he  must  also 
be  over  the  age  of  21  years.  Within  sixty  days  after  the 
date  of  actual  possession  and  the  commencement  of  im- 
provements on  the  land,  an  individual  may  enter  at  the 
Land  Office  in  the  district  any  quantity  of  vacant  coal 
lands  not  exceeding  160  acres.  An  association  of  per- 
sons may  enter  not  exceeding  320  acres.  The  price  to  be 
paid  for  coal  lands  is  $20  per  a'cre,  for  lands  within  fif- 
teen miles  of  a  completed  railroad,  or  $10  per  acre  for 
lands  more  than  fifteen  miles  from  a.  completed  rail- 
road. 

Revised  Statutes  of  the  United  States,  Section 
2348. 


884  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Section  1162. — How  TO  OBTAIN  A  PATENT  TO  A  MINING 
CLAIM. — The  Eevised  Statutes  of  the  United  States,  Sec- 
tion 2335,  provide  the  manner  in  which  a  patent  to  a 
mining  claim  may  be  obtained.  It  will  be  seen  from  what 
follows  that  the  claim-owner  who  desires  a  patent  must 
go  to  a  lawyer,  to  have  his  application  made  out,  and  the 
various  plats  and  notices  properly  filed  and  published; 
and  as  he  cannot  safely  use  any  of  the  necessary  forms 
himself,  without  the  aid  of  a  competent  lawyer,  the  forms 
are  not  given  in  this  book.  The  claimant  who  wants  a 
patent  is  required,  in  the  first  place,  to  have  a  correct 
survey  of  his  claim  made,  under  authority  of  the  United 
States  Surveyor-General  for  California;  such  survey  to 
show  with  accuracy  the  exterior  surface  boundaries  of 
the  claim,  which  boundaries  are  required  to  be  distinctly 
marked  by  monuments  on  the  ground.  Section  2335  of 
the  United  States  Eevised  Statutes  is  as  follows:  "A 
patent  for  any  land  claim  and  located  for  valuable  de- 
posits may  be  obtained  in  the  following  manner:  Any 
person,  association,  or  corporation  authorized  to  locate 
a  claim  under  this  chapter,  having  claimed  and  located  a 
piece  of  land  for  such  purposes,  who  has,  or  have  com- 
plied with  the  terms  of  this  chapter,  may  file  in  the 
proper  land  office  an  application  for  a  patent,  under  oath, 
showing  such  compliance,  together  with  a  plat  and  field 
notes  of  the  claim  or  claims  in  common,  made  by  or  under 
the  direction  of  the  United  States  Surveyor-General, 
showing  accurately  the  boundaries  of  the  claim  or  claims, 
which  shall  be  distinctly  marked  by  monuments  on  the 
ground,  and  shall  post  a  copy  of  such  plat,  together  with 
a  notice  of  such  application  for  a  patent,  in  a  conspicu- 
ous place  on  the  land  embraced  in  such  plat  previous  to 
the  filing  of  the  application  for  a  patent,  and  shall  file 
an  affidavit  of  at  least  two  persons  that  such  notice  has 
been  duly  posted,  and  shall  file  a  copy  of  the  notice  in 
such  land  office,  and  shall  thereupon  be  entitled  to  a  pat- 
ent for  the  land,  in  the  manner  following:  The  register 
of  the  land  office,  upon  the  filing  of  such  application,  plat, 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  885 

field  notes,  notices,  and  affidavits,  shall  publish  a  notice 
that  such  application  has  been  made,  for  the  period  of 
sixty  days,  in  a  newspaper  to  be  by  him  designated  as 
published  nearest  to  such  claim ;  and  he  shall  also  post 
such  notice  in  his  office  for  the  same  period.  The  claim- 
ant at  the  time  of  filing  this  application,  or  at  any  time 
thereafter,  within  sixty  days  of  publication,  shall  file 
with  the  register  a  certificate  of  the  United  States  Sur- 
veyor-General that  five  hundred  dollars'  worth  of  labor 
has  been  expended  or  improvements  made  upon  the  claim 
by  himself  or  grantors ;  that  the  plat  is  correct,  with  such 
further  description  by  such  reference  to  natural  objects 
or  permanent  monuments  as  shall  identify  the  claim,  and 
furnish  an  accurate  description,  to  be  incorporated  in  the 
patent.  At  the  expiration  of  the  sixty  days  of  publica- 
tion, the  claimant  shall  file  his  affidavit,  showing  that  the 
plat  and  notice  have  been  posted  in  a  conspicuous  place 
on  the  claim  during  such  period  of  publication.  If  no 
adverse  claim  shall  have  been  filed  with  the  register 
and  the  receiver  of  the  proper  land  office  at  the  expira- 
tion of  the  sixty  days  of  publication,  it  shall  be  assumed 
that  the  applicant  is  entitled  to  a  patent,  upon  the  pay- 
ment to  the  proper  officer  of  five  dollars  per  acre,  and 
that  no  adverse  claim  exists." 

Revised  Statutes  of  the  United  States,  Section 
2335. 

Section  1163. — MINING  LEASE. — A  mining  lease  is 
necessarily  different  in  many  respects  from  the  ordinary 
lease,  for  it  must  provide  for  amount  and  character  of 
work  to  be  done,  timbering,  the  use  of  machinery,  inspec- 
tion of  work  and  mine,  the  payment  of  royalty,  and 
possibly  other  matters,  which  never  enter  into  leases  of 
other  property. 

A  mining  lease  must  be  in  writing,  if  the  term  is  for 
more  than  one  year. 

Section  1164. — FORM  OF  MINING  LEASE. — The  follow- 
ing is  a  form  of  mining  lease : 


886  BUSINESS  LAW  FOE  BUSINESS  MEN. 

THIS  INDENTURE,  made  this day  of 

,  in  the  year  of  our  Lord  one  thousand  nine 

hundred  and ,  between 

,  lessor,  and ,  lessee  or 

tenant,  Witnesseth,  That  the  said  lessor  for  and  in  con- 
sideration of  the  rents,  royalties,  covenants,  and  agree- 
ments hereinafter  reserved,  and  by  the  said  lessee  to  be 
paid,  kept,  and  performed,  has  granted,  remised,  and 
let,  and  by  these  presents  does  grant,  remise,  and  let  unto 
the  said  lessee,  all  the  following  described  mine  and  min- 
ing property,  situated  in mining  district, 

County  of ,  State  of  California,  to-wit: 


(Description  of  property.) 

Together  with  the  appurtenances ,  to 

have  and  to  hold  unto  the  said  lessee  or  tenant  for  the 

term  of years  from  the  date  hereof,  expiring 

at  noon  on  the day  of , 

19 ,  unless  sooner  forfeited  or  determined  through 

the  violation  of  any  covenant  hereinafter  against  the 
said  tenant reserved. 

And  in  consideration  of  the  said  demise,  the  said 
lessee  does  covenant  and  agree  with  said  lessor  as  fol- 
lows, to-wit: 

To  enter  upon  said  mine  or  premises  and  work  the 
same  mine  fashion,  in  manner  necessary  to  good  and 
economical  mining,  so  as  to  take  out  the  greatest  amount 
of  ore  possible,  with  due  regard  to  the  safety,  develop- 
ment, and  preservation  of  the  said  premises  as  a  work- 
able mine. 

To  work  and  mine  said  premises  as  aforesaid  stead- 
ily and  continuously  from  the  date  of  this  lease;  and 

that  any  failure  to  work  said  premises  with  at  least 

persons  employed  for  the  space  of 

consecutive  days  may  be  considered  a 

violation  of  this  covenant. 

To  well  and  sufficiently  timber  said  mine  at  all  points 
where  proper,  in  accordance  with  good  mining;  and  to 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  887 

repair  all  old  timbering  wherever  it  may  become  neces- 
sary. 

To  allow  said  lessor  and  his  agents  to  enter  upon  and 
into  all  parts  of  said  mine  for  the  purpose  of  inspection, 
with  use  of  all  passages,  ropes,  windlass,  ladder-ways, 
and  all  other  means  of  ingress  and  egress  for  such  pur- 
pose. 

To  not  assign  this  lease,  or  any  interest  thereunder, 
and  to  not  sublet  the  said  premises  or  any  part  thereof, 
without  the  written  assent  of  said  lessor,  and  to  not 
allow  any  person  or  persons  except  the  said  lessee  and 
his  workmen  to  take  or  hold  possession  of  said  premises 
or  any  part  thereof  under  any  pretense  whatever. 

To  occupy  and  hold  all  cross  or  parallel  lodes,  dips, 
spurs,  feeders,  crevices,  or  mineral  deposits  of  any  kind, 
which  may  be  discovered  in  working  under  this  lease,  or 

in  any  tunnel  run  to  intersect  said lode,  or 

,by  the  said  lessee  or  any  person  or  persons  under  him 

in  any  manner  at  any  point  within feet  of 

the  center  line  of  said  lode,  as  the  property  of  said 
lessor ;  with  privilege  to  said  lessee  of  working  the  same 
as  an  appurtenance  of  said  demised  premises,  during  the 
term  of  this  lease ;  and  to  not  locate  or  record  the  same, 
or  allow  the  same  to  be  located  or  recorded,  except  in 
the  name  of  said  lessor. 

To  keep  at  all  times  the  drifts,  shafts,  tunnels,  and 
other  passages  and  workings  of  said  demised  premises 
thoroughly  drained  and  clear  of  loose  rock  and  rubbish 
of  all  kinds. 

To  pay  and  deliver  to  said  lessor  as  royalty. 

of  all  ore  to  be  extracted  from  said  premises  during  said 
term,  of  like  assay  to  that  retained  by  said  lessee,  deliv- 
ered at as  soon  as  mined,  without  offset, 

deduction,  or  charge  whatever,  except  lessor's  propor- 
tion for  packing. 

To  deliver  up  to  said  lessor  the  said  premises,  with 

the  appurtenances  and  all  improvements in 

good  order  and  condition,  with  all  shafts  and  tunnels 
and  other  passages  thoroughly  clear  of  rubbish  and 
drained,  and  the  mine  in  all  points  ready  for  immediate 
continued  working  (accidents  not  arising  from  neg- 


BUSINESS  LAW  FOR  BUSINESS  MEN. 

ligence  alone  excusing),  without  demand  or  further  no- 
tice, on  said day  of ,. ,  19 , 

at  noon,  or  at  any  time  previous,  upon  demand  for  for- 
feiture. 

And  finally,  upon  the  violation  by  said  lessee,  or  any 
person  under  him,  of  any  covenant  or  covenants  herein- 
before reserved,  the  term  of  this  lease  shall,  at  the  option 
of  said  lessor,  expire,  and  the  same  and  said  premises 
with  the  appurtenances  shall  become  forfeit  to  said 
lessor ;  and  said  lessor  or  his  agent  may  thereupon,  after 
demand  of  possession  in  writing,  enter  upon  said  prem- 
ises and  dispossess  all  persons  occupying  the  same,  with 
or  without  force,  and  with  or  without  process  of  law; 
or  at  the  option  of  said  lessor,  the  said  tenant  and  all 
persons  found  in  occupation  may  be  proceeded  against 
as  trespassers  from  the  beginning  of  said  term  both  as 
to  realty  and  the  ore  served  therefrom;  or  as  guilty  of 
unlawful  detainer. 

Each  and  every'  clause  and  covenant  of  this  inden- 
ture shall  extend  to  the  heirs,  executors  and  administra- 
tors of  all  parties  hereto;  and  to  the  assigns  of  said 
lessor;  and  as  said  lessor  may  elect,  to  the  assigns  of 
said  lessee. 

In  witness  whereof,  The  said  parties,  lessor  and 
lessee,  have  hereunto  set  their  hands  and  seals  the  day 
and  year  first  above  written. 

(Seal.) 

(Seal.) 

(Here  add  acknowledgment  before  Notary  Public.) 

Section  1165. — OIL  AND  GAS  LEASES. — The  law  is  more 
strictly  applied  to  leases  for  oil  and  gas  purposes  than 
to  any  others.  Other  minerals,  being  of  solid  formation, 
are  in  place  within  certain  boundaries,  or,  being  placer, 
yet  are  not  usually  shifting  nor  fluctuating.  Oil  and  gas 
are  fugitive  and  wandering,  and  their  existence  within 
the  limits  of  a  particular  tract  is  uncertain.  Some  of 
the  principles  of  law  applied  to  oil  and  gas  leases  are  as 
follows : 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  889 

(a)  Right  to  Bore  for  Oil  Necessarily  Exclusive.— 
The  Supreme  Court  of  the  United  States  has  decided  that 
the  right  to  bore  for  oil  or  gas  within  a  given  area  is  nec- 
essarily exclusive,  owing  to  the  peculiar  nature  of  the 
operations.     Therefore,  if  the  owner  of  land  leases  to 
another  the  right  to  bore  for  oil  or  gas  within  a  certain 
described  area,  he  is  prohibited,  whether  expressed  in 
the  lease  or  not,  from  boring  another  well  therein  him- 
self, and  he  may  be  prevented  by  injunction  from  inter- 
fering with  the  exclusive  rights  of  the  lessee.     (Decided 
by  the  Supreme  Court  of  the  United  States  in  the  case 
of  Brown  vs.  Spillman,  which  decision  is  printed  in  Vol- 
ume 155  of  the  United  States  Supreme  Court  Reports, 
page  665.) 

(b)  Lessee  Must  Begin  Operations  Within  a  Reasu**- 
able  Time. — If  the  lease  is  silent  as  to  the  time  when  tm>* 
lessee  must  begin  boring,  the  law  fills  the  gap  by  provid- 
ing that  he  must  begin  operations  within  a  reasonable 
time.    What  is  a  reasonable  time  will  depend  upon  the 
particular  case  and  all  the  circumstances;  for  instance, 
the  nature  of  the  country,  the  ease  or  difficulty  with 
which  machinery  may  be  brought  on  the  ground,  the 
availability  of  labor,  etc. 

(c)  Failure  to  Commence  Work  Forfeits  the  Lease. 
Although  the  lease  is  for  a  definite  term,  yet  a  failure 
to  commence  work  within  the  time  named,  or,  if  no  time 
is  named,  within  a  reasonable  time,  forfeits  the  lease. 

(d)  Work   Must   Be   Prosecuted    With   Diligence. — 
When  work  is  once  begun,  it  must  be  carried  on  with 
diligence.    This  does  not  mean  every  day,  or  every  hour. 
But  there  must  not  be  an  unreasonable  or  prolonged 
cessation  from  actual  operations.     The  work  must  be 
carried  on  so  steadily,  and  with  such  practical  applica- 
tion, as  will  show  the  good  faith  of  the  lessee. 

(e)  Lease  Must  Be  Literally  Complied  With. — An  oil 
lease  must  be  literally  complied  with.  If  the  lessee  agrees 
to  sink  a  well  of  a  certain  bore,  he  will  not  comply  with 


BUSINESS  LAW  FOR  BUSINESS  MEN. 

his  lease  by  sinking  a  well  of  a  smaller  bore.    He  must 
give  it  the  size  and  capacity  agreed  on. 

(f)  Failure  to  Find  Oil. — Where  the  lease  is  for  a 
fixed  period,  and  as  much  longer  as  oil  is  found  or  pro- 
duced in  paying  quantities,  if  oil  is  not  found  in  paying 
quantities  within  the  time,  the  lease  is  forfeited. 

(g)  Net  Proceeds. — Where  the  lessee  agrees  to  pay 
the  lessor  one-tenth,  or  any  other  portion,  of  the  profits 
realized  from  the  sale  of  the  oil  produced,  the  word 
"profits"  does  not  mean  the  gross  output,  but  only  the 
net  amount  realized  after  deducting  expenses. 

(h)  Failure  to  Pay  Royalty. — A  failure  to  pay  the 
royalty  agreed  on  by  the  lessee  will  forfeit  the  lease,  at 
the  option  of  the  lessor. 

Section  1166. — I*ORM  OP  OIL  LEASE. — The  following 
is  a  form  of  oil  lease.  The  lease,  if  it  is  to  be  recorded, 
should  be  acknowledged: 

THIS  LEASE,  Made  the day  of , 

19 ,  by  and  between. 


of  the  County  of ,  State  of  California,  lessor , 

and 

lessee 

WITNESSETH :  That  said  lessor ,  for  and  in  con- 
sideration of  the  rents,  covenants,  and  agreements  here- 
inafter mentioned,  reserved,  and  contained  on  the  part 
and  behalf  of  said  lessee to  be  paid,  kept,  and  per- 
formed, does  by  these  presents  grant,  remise,  and  let 

unto  said  lessee ,  the  exclusive  right,  privilege,  and 

easement  of  sinking,  boring,  developing,  and  working  to 
any  desired  depth,  wells  for  the  extraction  of  natural 
gas,  petroleum,  kerosene,  coal  oil,  and  other  oil,  gaseous 
and  volatile  substances,  and  of  taking  from  such  wells, 
and  appropriating,  having,  using,  and  disposing  of  any 
and  all  of  said  substances,  in  all  the  certain  tract  of  land 
situate  in  the  County  of State  of 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  891 

California,  described  as  follows,  to-wit: 

(Here  describe  land.) 


and  also  the  right,  privilege,  and  easement  of  conducting 
and  carrying  away  from  the  said  wells  and  other  wells 
that  may  be  sunk  or  bored  by  said  lessee,  on  adjacent 
and  contiguous  lands  through  pipes  underground,  as 
hereinafter  provided,  all  natural  gas,  petroleum,  kero- 
sene, coal  oil,  and  other  oil,  gaseous,  and  volatile  sub- 
stances extracted  from  said  wells. 

To  have  and  to  hold  all  of  said  rights,  privileges,  and 

easements  unto  said  lessee exclusively  from  the 

day  of '. ,  19 ,  for  and  during  the  term 

of years,  with  the  right  to  said 

lessee to  a  renewal  of  this  lease  from  said  lessor for 

a  second  term  of '. years,  from  and  after  the 

expiration  hereof  upon  the  terms  hereinafter  provided. 

Said  lessor further  agrees  that  said  lessee may 

occupy  and  use  at  one  or  more  places  on  said  tract  of 

land,  an  area  not  to  exceed acres, 

upon  which  to  sink  a  well,  wherever  a  well  mav  be  bored 
thereon.  A  piece  of  land  shall  be  selected  without  un- 
necessary injury  to  the  lessor ,  of  such  shape  as  the 

lessee may  desire  for  boring  such  wells  and  operating 

the  machinery  used  in  boring,  working,  and  casing  the 
same,  and  care  and  storage  of  the  product,  said  piece  of 
land  to  be  so  used  so  long  during  the  term  of  this  lease 
as  is  necessary  for  said  purposes. 

It  is  further  understood,  that  should  anv  natural  gas, 
petroleum,  kerosene,  coal  oil,  or  other  oil,  graseous  or 
volatile  substances  be  produced  from  said  wells,  or  from 
wells  sunk  or  bored  by  the  lessee  on  adjacent  or  contigu- 
ous lands,  the  said  lessee  shall  have  the  right  to  enter 
upon  said  lands  and  dig  trenches  from  said  wells  through 
said  lands,  without  unnecessary  injury  to  the  lessor,  and 
lav  pipes  therein  for  conveying  away  therefrom  any  and 
all  of  said  substances,  provided  the  top  or  upper  surface 

of  said  pipes  are  laid  at  least inches  below 

the  surface  of  the  ground,  and  the  trenches  in  which  they 


BUSINESS  LAW  FOR  BUSINESS  MEN. 

are  laid  are  well  filled  in  with  earth  so  as  not  to  inter- 
fere with  the  full  and  free  cultivation  or  other  use  or 
enjoyment  of  said  lands  by  the  lessor ,  but  no  such 
trenches  are  to  be  dug  so  as  to  interfere  with  the  use  of 
or  to  injure or  other  improve- 
ments on  said  premises  at  the  time  such  trenches  are 

dug,  and  none  are  to  be  dug  through  any 

without  giving  the  owner 

written  notice  thereof,  and  paying  therefor  the  value  of 
all  property  injured  or  destroyed  thereby;  and  no  pipe 
is  to  be  laid  across  any  creek  or  slough  so  as  in  any  way 
to  obstruct  or  interfere  with  the  free  and  full  flow  of 
water  through  the  same,  and  all  pipes  laid  through  said 
lands  are  to  be  made  tight  and  secure  so  as  not  to  permit 
the  escape  therefrom  of  any  substances  injurious  to  any 
property,  and  should  any  such  substance  escape  from 
such  piDes  and  injure  any  such  property  (and  the  lessee 
should  fail  to  repair  such  pipes  and  prevent  such  escape 

and  stop  such  injury,  within days  after 

receiving  from  the  lessor  a  written  notice  so  to  do),  then 
the  lessee  shall  be  liable  for  and  shall  pay  to  the  owner 
rJl  damages  so  caused. 

It  is  further  understood  and  agreed  by  and  between 
the  parties  hereto,  that  the  lessee,  so  long  as  this  lease 
remains  in  full  force,  is  to  be  the  sole  and  exclusive  own- 
er for  and  during  the  full  term  of  this  lease,  and  of  every 
renewal  thereof,  of  all  natural  gas,  petroleum,  kerosene, 
coal  oil,  and  other  oil,  gaseous,  and  volatile  substances 
extracted  from  wells  on  said  land;  and  the  lessor  shall 
have  no  ri^ht  during  the  continuance  of  this  lease  or  any 
renewal  thereof  before  default  in  the  payment  of  the 
royalty  hereafter  mentioned,  to  bore  or  sink  any  well  or 
wells  for  natural  gas,  petroleum,  kerosene,  coal  oil,  or 
other  oil,  gaseous  or  volatile  substances  on  any  of  said 
land,  or  to  use  or  take  any  such  substance  therefrom; 
but  the  lessor  is  at  all  times  to  be  the  sole  and  exclusive 
owner  of  all  water  that  may  flow  therefrom,  provided 
that  the  lessee  may  use  suffiicent  of  said  water  to  operate 
and  run  any  steam  engines  and  boilers  used  at  or  near 
said  well  for  boring  or  working  the  same,  and  subject  to 
the  uses  herein  provided,  shall  permit  the  flow  of  water 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  O^o 

from  said  wells  for  the  use  and  benefit  of  the  lessor,  so 
far  as  the  same  may  flow  without  interfering  with  the 
proper  use  of  the  wells  by  the  lessee. 

And  the  lessee  shall  have  the  right  at  all  times  dur- 
ing the  continuance  of  this  lease  or  any  renewal  thereof, 
to  enter  upon  and  pass  over  said  land  to  and  from  all 
wells  bored  theeron  as  herein  provided;  but  he  is  to  do 
no  damage  to  any  of  said  premises  without  paying  a  fair 

and  reasonable  compensation  therefor  within 

days  after  such  damage  is  done,  and  will  give  the  lessor 
notice  in  writing  before  commencing  to  bore  a  well  on 
any  portion  of  said  land. 

It  is  further  understood  and  agreed,  that  the  lessee 
shall  at  all  times  during  the  existence  of  this  lease  have 
the  right  to  enter  upon  and  remove  from  said  land  all 
improvements,  machinery,  well-casing,  and  all  other 
property  placed  by  "him  thereon  or  in  wells  thereon. 

It  is  further  understood  and  agreed,  that  the  lessee 
shall,  so  long  as  this  lease  remains  in  force,  pay  to  the 

lessor  the  value  at  the  well  or  wells  of  the 

part  of  all  the  gas,  oil,  or  other  products  herein  men- 
tioned, said  value  to  be  ascertained  and  fixed  at  the  point 

of  production,  on  or  before  the day  of 

each  month,  and  payment  shall  be  made  on  the 

day  of  each  and  every  month  for  all  gas,  oil,  or  other 
products  produced  during  the  preceding  calendar  month. 

It  is  expressly  and  distinctly  understood  and  agreed 
between  the  parties  hereto,  that  it  shall  at  all  times  be 
the  privilege  of  the  lessee  to  discontinue  and  terminate 
this  lease  by  a  failure  to  pay  any  installment  of  monthly 

royalty  with days  after  the  same  becomes 

due  as  herein  provided,  and  such  failure  shall  operate 
ipso  facto  as  a  surrender  of  this  lease,  and  upon  such 
surrender  the  lessee  shall  be  discharged  from  all  liabil- 
ity to  pay  any  rent  to  become  due  by  the  terms  of  this 
lease. 

And  should  any  well  or  wells  bored  or  sunk  on  said 
land  as  herein  provided  be  abandoned  by  the  lessee,  he 

shall  give  the  lessor „ days*  written  notice 

of  his  intention  to  abandon  the  same.  If  the  lessor  so 
desires,  and  shall  pay  to  said  lessee  within 


894  BUSINESS  LAW  FOR  BUSINESS  MEN." 

days  the  costs  of  the"  casing  already  in  said  well  or  wells, 
the  lessee  agrees  to  sell  the  same  to  the  lessor  at  the 
actual  cost  of  said  casing  delivered  at  the  mouth  of  the 
well,  and  thereupon  the  lessor  shall  become  the  owner 
of  such  well  or  wells  and  all  of  the  products  thereof  of 
any  kind  or  nature. 

Nothing  herein  contained  is  to  be  so  construed  as  to 
affect  the  right  of  the  lessor  to  fully  possess,  occupy, 
and  enjoy  said  lands  subject  to  the  conditions  herein  ex- 
pressed in  favor  of  the  lessee. 

It  is  understood  and  agreed  between  the  parties  here- 
to that  wherever  the  term  lessor  is  used  in  this  lease,  it 
extends  to  and  includes  the  heirs,  executors,  adminis- 
trators, and  assigns  of  the  lessor  named  herein;  and  the 
term  lessee  extends  to  and  includes  the  heirs,  executors, 
administrators,  and  assigns  of  the  lessee  herein  named. 

And  now  it  is  further  understood  and  agreed  by  all  the 
parties  hereto,  that  if  none  of  said  natural  gas,  oil,  or 
other  kindred  substance  is  found  in  or  near  said  lands, 
and  the  lessee  does  not  proceed  to  develop  said  leased 

lands  within months  from  this  date, 

and  complete  a  well  within '. months 

thereafter,  then  this  lease  shall  terminate  and  be  of  no 
value,  otherwise  to  remain  in  full  force  and  effect. 

In  witness  whereof,  the  said  parties  have  hereunto 
set  their  hands  and  seals  the  day  and  year  first  above 
written. 

: : (Seal.) 

(Seal.) 

Section  1167. — MINING  DEEDS. — A  mining  claim  may 
be  sold  and  transferred  by  deed,  either  before  or  after  a 
patent  has  been  applied  for  or  obtained. .  The  locator  of 
a  mining  claim  obtains  the  legal. title  by  his  location,  and 
may  transfer  his  title  at  any  time. 

Section  1168.— FORM  OF  MINING  DEED. — The  follow- 
ing is  a  form  of  mining  deed  for  quartz.  If  used  for 
placer  claim,  the  description  should  be  changed  so  as  to 
apply: 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  895 

THIS  INDENTURE,  made  the day  of 

,  in  the  year  of  our  Lord  one  thousand  nine 

hundred  and ,  between , 

of  the  County  of ,  and  State 

of  California,  party  of  the  first  part,  and 

' ,  of  the  County  of.. ,  and  State 

of  California,  party  of  the  second  part; 

Witnesseth,  That  the  said  party  of  the  first  part,  for 

find  in  consideration  of  the  sum  of 

Dollars,  lawful  money  of  the  United  States  of  America, 
to  him  in  hand  paid  by  the  said  party  of  the  second  part, 
the  receipt  whereof  is  hereby  acknowledged,  hath  grant- 
ed, bargained,  sold,  remised,  released,  and  forever  quit- 
claimed, and  by  these  presents  does  grant,  bargain,  sell, 
remise,  release,  and .  forever  quitclaim,  unto  the  said 
party  of  the  second  part,  his  heirs  and  assigns,  the 

lode,  as  located,  surveyed,  recorded, 

and  held  by  said  party  of  the  first  part,   situated  in 

.". mining  district,   

County,  State  of  California,  and  named  and  called 

Mine,  together  with  all  the  dips,  spurs,  and 

angles,  and  also  all  the  metals,  ores,  gold  and  silver  bear- 
ing quartz,  rock,  and  earth  therein,  and  all  the  rights, 
privileges,  and  franchises  thereto  incident,  appendant, 
and  appurtenant,  or  therewith  usually  had  and  enjoyed ; 
and  also,  all  and  singular  the  tenements,  hereditaments, 
and  appurtenances  thereunto  belonging,  or  in  any  wise 
appertaining,  and  the  rents,  issues  and  profits  thereof; 
and  also,  all  the  estate,  right,  title,  interest,  property, 
possession,  claim,  and  demand  whatsoever,  as  well  in  law 
as  in  equity,  of  the  said  party  of  the  first  part,  of,  in,  or 
to  the  said  premises,  and  every  part  and  parcel  thereof, 
with  the  appurtenances. 

To  have  and  to  hold,  all  and  singular,  the  said  prem- 
ises, together  with  the  appurtenances  and  privileges 
thereto  incident,  unto  the  said  party  of  the  second  part, 
his  heirs  and  assigns  forever.  In  witness  whereof  the 
said  party  of  the  first  part  has  hereunto  set  his  hand  and 
seaLthe  day  and  year  first  above  written. 

..: , :.-.: _ -...-_ ( Seal. )  - ,  . 

(Here  add  acknowledgment  before  Notary.) 


896  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Section  1169. — WORKING  MINE  ON  SHARES, — A  valid 
agreement  may  be  made  for  the  working  of  a  mine  on 
shares,  and  such  agreement  does  not  constitute  and  will 
not  be  considered  a  lease  of  the  mining  claim.  Under 
such  a  contract,  the  parties  have  a  common  interest  in 
the  products  of  the  mine  when  taken  out.  Such  a  con- 
tract does  not  create  the  relation  of  landlord  and  tenant, 
but  fixes  a  rule  of  compensation  for  services  rendered. 
It  is,  in  all  its  essential  features,  a  contract  for  labor  to 
be  performed  and  to  be  paid  for  by  a  share  of  the  profits 
realized  from  such  labor.  (Decided  by  the  Supreme 
Court  of  California  in  the  case  of  Hudepahl  vs.  Liberty 
Hill  Mining  Co.,  which  decision  is  printed  in  Volume  80 
of  the  California  Reports,  page  553.) 

Section  1170. — WHEN  BOUNDARY  MARKS  ARE  SUF- 
FICIENT.— The  boundary  marks  are  always  sufficient  to 
sustain  a  location  if  they  are  so  distinct  and  plain  that 
the  claim  can  be  identified  on  the  ground.  In  a  case  in 
Siskiyou  County,  two  adjoining  mining  claims  were  each 
marked  at  the  corners  by  four  stakes  about  a  foot  and  a 
half  long,  flattened  on  two  sides,  and  driven  into  the 
ground  about  four  inches;  two  stakes  being  at  the  ends 
of  the  dividing  line  common  to  both  claims ;  some  stakes 
being  in  the  brush,  and  others  in  the  open  ground.  In 
the  middle  of  the  dividing  line  was  a  tree  blazed  on  both 
sides,  on  one  of  which  the  notices  of  location  were  posted, 
describing  the  claims  by  courses  and  distances,  running 
from  the  tree  to  a  stake,  and  from  stake  to  stake  to  point 
of  beginning.  The  ledge  on  both  claims  had  been  suf- 
ficiently developed  to  show  its  existence  and  direction. 
The  Supreme  Court  held  that  the  law  as  to  marking  the 
location  on  the  ground  was  sufficiently  complied  with, 
under  the  most  stringent  construction  of  the  law.  (De- 
cided by  the  Supreme  Court  of  California  in  the  case  of 
Eaton  vs.  Norris,  which  decision  is  printed  in  Volume 
131  of  the  California  Reports,  page  561.) 


BUSINESS  CONTBACTS  AND  LEGAL  OBLIGATIONS.  897 

Section  1171. — EEEOE  IN  DESCRIPTION  IN  LOCATION 
NOTICE. — The  description  in  a  notice  of  location  of  a  min- 
ing claim,  specifying  the  number  of  acres  claimed,  is 
sufficient,  if  it  designate  the  land  by  the  adjoining  tracts 
on  the  north,  east,  and  south,  and  by  unoccupied  lands 
on  the  west ;  and  the  insertion  of  the  wrong  legal  subdi- 
visions will  not  invalidate  it.  (Decided  by  the  Supreme 
Court  of  California  in  the  case  of  Duryea  vs.  Boucher, 
which  decision  is  printed  in  Volume  67  of  the  California 
Reports,  page  141.) 

Section  1172. — CHARACTER  OF  ANNUAL  ASSESSMENT 
WORK. — Whether  the  character  of  the  annual  assessment 
work  is  of  the  kind  required  by  law  is  always  a  question 
of  fact,  to  be  determined  by  the  surrounding  circum- 
stances. Not  all  expenditures  made  with  a  view  to  work- 
ing a  mine  would  be  considered  work  expended  upon  a 
mine  for  the  purpose  of  holding  it ;  as,  for  instance,  work 
done  at  a  distance  from  the  mine  in  the  construction  of 
a  mill.  On  the  other  hand,  it  has  been  decided  that  the 
services  of  a  watchman  looking  after  the  buildings  erect- 
ed to  work  a  mine  properly  constitutes  assessment  work, 
though  the  mine  is  idle  at  the  time.  (Decided  by  the 
Supreme  Court  of  California  in  the  case  of  Altoona 
Quicksilver  Mining  Co.  vs.  Integral  Quicksilver  Mining 
Co.,  which  decision  is  printed  in  Volume  114  of  the  Cali- 
fornia Reports,  page  100.) 

Section  1173. — TIME  WITHIN  WHICH  RELOCATION  CAN 
BE  MADE. — The  law  of  California  gives  to  the  occupant 
of  a  mining  claim  thirty  days  after  the  expiration  of  the 
year  within  which  to  file  his  affidavit  of  assessment  wor- 
done,  in  the  office  of  the  County  Recorder ;  and  the  mine 
is  not  open  to  relocation  until  after  the  expiration  of  the 
thirty  days.  For  instance,  the  occupant  has  the  whole 
of  the  calendar  year  succeeding  the  date  of  his  location 
in  which  to  do  his  assessment  work;  then  he  has  thirty 
davs  more  in  which  to  file  his  affidavit  of  work  done  with 


898  BUSINESS  LAW  FOR  BUSINESS  MEN. 

the  County  Eecorder,  and  no  relocation  can  "be  valid 
within  such  times.  (Decided  by  the  Supreme  Court  of 
California  in  the  case  of  Harris  vs.  Kellogg,  which  de- 
cision is  printed  in  Volume  117  of  the  California  Re- 
ports, page  484.) 

Statutes  of  1891,  page  219. 

Section  1174. — RESUMPTION  OF  WORK. — As  already 
stated,  the  locator  of  a  mining  claim  must  expend  upon 
it  in  labor  or  improvements  $100  each  year,  and  non- 
compliance  with  this  requirement  renders  the  claim  sub- 
ject to  relocation  by  others,  unless,  before  such  reloca- 
tion, the  original  locator,  his  heirs,  assigns,  or  legal  rep- 
resentatives, have  resumed  work  upon  the  claim.  This 
resumption  of  worfc,  however,  must  be  bona  fide  in  char- 
acter and  with  the  intention  of  completing  the  amount 
of  work  due.  It  is  not  sufficient,  when  the  claim  has  be- 
come subject  to  relocation,  for  the  claimant  to  go  upon 
it  and  do  a  few  hours'  or  a  few  days'  work,  and  then 
quit,  thinking  that  he  has  thus,  by  such  perfunctory  re- 
sumption, done  all  that  is  sufficient  to  hold  his  claim  for 
another  year;  he  must  resume  work  in  good  faith,  with 
the  intention  of  completing  the  full  amount  required  by 
law.  (Decided  by  the  Supreme  Court  of  California  in 
the  case  of  McCormick  vs.  Baldwin,  which  decision  is 
printed  in  Volume  104  of  the  California  Reports,  page 
227.) 

Section  1175. — FAILURE  TO  COMPLY  WITH  LOCAL  CUS- 
TOMS IN  WORKING  MINING  CLAIMS. — A  right  to  hold  and 
work  a  mining  claim  when  acquired  may  be  lost  by  a 
failure  or  neglect  to  comply  with  the  rules  and  regula- 
tions of  the  miners,  relative  to  the  acquisition  and  ten- 
ure of  claims,  in  force  in  the  district  where  the  claim  is 
located;  and  if  such  rules  and  regulations  are  not  com- 
plied with  by  those  holding  claims  in  the  district,  the 
ground  becomes  once  more  open  to  the  occupation  of  the 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  899 

next  comer.  (Decided,  by  the  Supreme  Court  of  Cali- 
fornia in  the  case  of  St.  John  vs.  Kidd,  which  decision 
is  printed  in  Volume  26  of  the  California  Reports,  page 
263.) 

Section  1176. — OVERLAPPING  LOCATIONS. — It  is  famil- 
iar history  in  mining  districts  that  claims  have  often 
been  found  to  overlap  one  another  to  a  greater  or  less 
extent.  When  this  occurs,  the  law  of  California  is,  in  so 
far  as  the  ground  taken  was  vacant,  each  location,  if 
properly  made  in  other  respects,  is  valid  and  sufficient 
to  that  extent.  As  to  the  ground  actually  covered  by  the 
two  locations,  the  right  will  be  determined  by  ascer- 
taining which  location  was  first  made.  If  A  makes  a 
location  today,  and  B  makes  a  location  tomorrow,  and 
the  location  of  B  covers  a  part  of  the  ground  located  by 
A  the  day  before,  B  will  lose  so  much  of  his  location  as 
overlaps  the  location  of  A;  for  A  was  first  in  time,  and 
thus  acquired  a  prior  right.  But  B  will  not  lose  his 
whole  location.  So  much  of  it  as  does  not  overlap  the 
prior  location  will  be  good,  and  he  can  hold  that  much. 
(Decided  by  the  Supreme  Court  of  California  in  the  case 
of  Doe  vs.  Tyler,  which  decision  is  printed  in  Volume 
73  of  the  California  Eeports,  page  21.) 

Section  1177. — INTERSECTING  VEINS. — Where  two 
veins  or  lodes  of  mineral  belonging  to  different  owners 
intersect,  the  owner  of  the  vein  which  was  first  located 
has  the  right  to  the  ore  in  the  space  of  intersection,  but 
the  other  owner  has  a  right  of  way  through  such  space 
for  the  purpose  of  working  his  vein.  (Decided  by  the 
Supreme  Court  of  California  in  the  case  of  Wilhelm  vs. 
Silvester,  which  decision  is  printed  in  Volume  101  of 
the  California  Eeports,  page  358.) 

Section  1178. — RULE  THAT  END  LINES  SHALL  PARAL- 
LEL EACH  OTHER.— The  Revised  Statutes  of  the.  United 
States  say  that  "the  end  lines  of  each  claim  shall  be 


900  BUSINESS  LAW  FOR  BUSINESS  MEN. 

parallel  with  each  other."  But  this  does  not  mean  that 
the  two  end  lines  must  be  exactly  parallel.  In  the  case 
of  Doe  vs.  Sanger,  a  San  Bernardino  County  mining 
suit,  the  Supreme  Court  of  California  stated  the  true 
rule  as  follows:  "It  has  been  held  that  the  provisions 
of  the  Federal  statutes  relating  to  lode  claims  were 
passed  with  the  understanding,  founded  upon  the  gen- 
eral practice  of  miners,  that  the  surface  locations  of  such 
claims  will  be  made  lengthwise  along  the  general  direc- 
tion of  the  lode  or  vein  in  the  general  form  of  a  parallel- 
ogram, with  side  lines  along  the  lode,  and  the  end  lines 
across  it.  But  suppose  that  a  surface  location  should  be 
made,  for  instance,  in  the  shape  of  an  octagon.  In  such 
a  case  there  would  be  no  end  lines  and  no  side  lines,  and 
if  the  locator  could  go  outside  his  lines  in  one  direction 
he  could  do  so  in  eight  directions,  and  encroach  upon  his 
neighbors  from  every  point  of  the  compass.  If,  how- 
ever, a  location  is  made  in  substantial  compliance  with 
the  intent  of  the  statute — that  is,  where  there  are  two 
side  lines  running  along  the  course  of  the  vein,  and  two 
shorter  end  lines  running  across  it,  so  that  the  two  sets 
of  lines  are  distinct,  and  apparent — such  a  location  is 
not  void,  but  gives  the  right  to  follow  a  vein  laterally, 
although  the  original  end  lines  may  not  be  exactly  paral- 
lel, or  although  they  may  differ  from  a  true  parallel." 
(Decided  by  the  Supreme  Court  of  California  in  the  case 
of  Doe  vs.  Sanger,  which  decision  is  printed  in  Volume 
83  of  the  California  Reports,  page  203.) 

Section  1179. — EXTRA-LATEEAL  EIGHT,  OB  BIGHT  TO 
PURSUE  THE  VEIN  OR  LODE  ON  ITS  DIP  BEYOND  THE  SIDE 
LINES  OF  THE  CLAIM. — Section  2322  of  the  Revised  Stat- 
utes of  the  United  States  provides:  "The  locators  of 
all  mining  locations  shall  have  the  exclusive  right  of  pos- 
session and  enjoyment  of  all  the  surface  included  within 
the  lines  of  their  locations,  and  all  veins,  lodes,  and 
ledges  throughout  their  entire  depth  the  top  or  apex  of 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  901 

which  lies  inside  of  such  surface  lines  extended  down 
ward  vertically,  although  such  veins,  lodes,  or  ledges 
may  so  far  depart  from  a  perpendicular  in  their  course 
downward  as  to  extend  outside  of  the  vertical  side  lines 
of  such  surface  locations."  A  mineral  vein  or  lode  sel- 
dom or  never  descends  vertically  into  the  earth,  but  on 
its  downward  course  makes  an  angle  with  the  vertical — 
or,  in  popular  terms,  it  does  not  go  straight  down,  but  in 
a  slanting  direction — so  that,  if  followed  far  enough  into 
the  interior  of  the  earth,  it  will  eventually  be  found  to 
extend  outside  of  the  side  lines  of  the  claim.  In  other 
words,  the  vein  eventually  reaches  the  point  in  the  inter- 
ior of  the  earth  where,  if  a  vertical  line  were  run  to  the 
surface  it  would  strike  a  point  outside  the  surface  bound- 
aries of  the  claim.  The  right  to  thus  follow  the  vein  on 
its  downward  course  beyond  the  side  lines  of  the  claim 
is  sometimes  called  the  extra-lateral  right,  and  is  con- 
ferred by  the  Section  of  the  Revised  Statutes  of  the 
United  States  just  quoted.  In  thus  following  the  vein  on 
its  dip,  the  miner  is  confined,  however,  to  that  part  of  it 
which  is  found  between  the  end  lines  of  his  claim  ex- 
tended in  their  own  direction.  The  law  prescribes  that 
the  end  lines  of  a  claim  shall  be  parallel  with  each  other. 
Yet  for  the  full  enjoyment  of  this  extra-lateral  right  it 
is  important  that  the  end  lines  of  the  claim  should  follow 
this  requirement  of  parallelism;  for  it  has  been  held  by 
the  courts  that  where  the  end  lines  were  not  parallel, 
but  converged  in  the  direction  of  the  dip  of  the  vein,  the 
miner  could  not  pursue  the  vein  outside  of  his  side  lines 
beyond  the  point  where  his  converging  end  lines  extended 
met.  On  the  other  hand,  where  the  end  lines  diverged  in 
the  direction  of  the  dip,  thus  making  the  portion  of  the 
vein  included  within  them  larger  the  farther  such  end 
lines  were  extended,  it  has  been  held  that  the  miner  could 
not  take  the  ore  from  any  greater  length  of  vein  outside 
of  his  side  lines  than  was  included  between  his  end  lines  as 
laid  down  on  the  ground. 


902  BUSINESS  LAW  FOB  BUSINESS  MEN. 

Section  1180. — DAMAGES  FOE  TEESPASS  ON  MINING 
CLAIM. — One  who  unintentionally,  and  in  the  honest  be- 
lief that  he  is  lawfully  exercising  a  right  which  he  has, 
enters  upon  the  mining  property  of  another  and  removes 
his  ore,  is  liable  in  damages  for  its  value,  and  for  no 
more.  He  may  limit  the  recovery  of  the  owner  by  de- 
ducting from  the  value  of  the  ore  at  the  mouth  of  the 
shaft  the  cost  of  mining  and  transporting  it  to  that  point. 
But  one  who  wilfully  and  intentionally  takes  ores  from 
the  land  of  another  is  liable  to  him  for  the  full  value  of 
the  property  taken,  at  the  time  of  his  conversion  of  it, 
without  any  deduction  for  the  labor  bestowed  or  expense 
incurred  in  removing  it  and  preparing  it  for  the  market. 

Section  1181. — STATE  HOMESTEAD  ON  MINING  CLAIM. 
The  locator  of  a  mining  claim  may,  under  the  State  law, 
declare  a  homestead  upon  it,  if  he  is  living  on  it;  and 
when  that  is  done  it  has  all  the  characteristics  of  a  home- 
stead declared  upon  any  other  character  of  landj  sub- 
ject, however,  to  the  holder  complying  with  the  require- 
ments of  the  law  relating  to  the  holding  of  mining  claims 
until  issue  of  patent  from  the  United  States  Govern- 
ment. (Decided  by  the  Supreme  Court  of  California  in 
the  case  of  Gaylord  vs.  Place,  which  decision  is  printed 
in  Volume  98  of  the  California  Reports,  page  472.) 

Section  1182. — SCHOOL  LANDS. — The  law  of  Congress 
granting  certain  agricultural  lands  to  the  State  of  Cali- 
fornia for  school  purposes,  and  providing  that  mineral 
lands  shall  not  be  subdivided  into  sections,  public  lands 
belonging  to  the  State  under  said  Act,  if  agricultural, 
which  the  proper  United  States  officials  have  platted  into 
a  section  and  classified  as  agricultural  lands,  and  con- 
cerning which  the  receiver  of  the  public  land  office  has 
certified  that  the  State's  title  thereto  under  said  Act  is 
free  from  adverse  claims,  are  not,  after  their  disposal 
by  the  State,  subject  to  re-entry  as  mineral  lands;  the 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS. 

determination  of  the  United  States  officials  that  the 
lands  were  agricultural  being  conclusive  against  a  col- 
lateral attack.  (Decided  by  the  Supreme  Court  of  Cali- 
fornia in  the  case  of  Saunders  vs.  La  Purisima  Gold 
Mining  Co.,  which  decision  is  printed  in  Volume  125  of 
the  California  Reports,  page  159.) 

Section  1183. — AUTHORITY  OP  MINE  SUPERINTENDENT 
TO  PURCHASE  SUPPLIES. — Mine  Superintendents,  by  vir- 
tue of  their  position,  have  authority  to  purchase  all  sup- 
plies necessary  for  the  operation  of  the  mine ;  and  when 
they  do  so  the  owners  will  be  bound  to  pay  for  them.  In 
one  case  it  was  held  by  our  Supreme  Court  that  the 
owner  of  the  mine  was  bound  to  pay  for  provisions 
ordered  by  the  superintendent  for  a  boarding  house  at 
which  the  miners  lived,  and  the  court  said:  "The  record 
discloses  the  fact  that  its  was  absolutely  necessary  that 
provisions  should  be  furnished  this  boarding  house,  in 
order  that  the  mine  might  continue  in  operation;  and  it 
would  seem  that,  aside  from  any  express  authority  from 
the  defendant  to  purchase  these  articles,  and  regardless 
of  the  question  of  ostensible  agency,  the  respective 
superintendents  of  the  mine,  by  virtue  of  their  positions 
alone,  had  the  power  to  bind  the  defendant  for  the  pay- 
ment of  these  goods."  (Decided  by  the  Supreme  Court 
of  California  in  the  case  of  Heald  vs.  Hendy,  which  de- 
cision is  printed  in  Volume  89  of  the  California  Reports, 
page  632.) 

Section  1184. — HYDRAULIC  MINING. — Hydraulic  min- 
ing, as  the  term  is  used  in  the  laws  of  California,  is  min- 
ing by  means  of  the  application  of  water,  under  pres- 
sure, through  a  nozzle,  against  a  natural  bank.  It  may 
be  carried  on  in  this  state  wherever  and  whenever  it  can 
be  done  without  material  injury  to  the  navigable  streams 
or  the  lands  adjacent  thereto. 

Civil  Code,  Sections  1424,  1425. 


904  BUSINESS  LAW  FOB  BUSINESS  MEN. 

Section  1185. — TAILINGS  AND  DEBKIS. — No  person  or 
corporation  has  the  right  to  cover  his  neighbor's  land 
with  debris  from  mine  or  mill,  nor  to  permit  any  of  the 
tailings  or  refuse  matter  to  flow  or  be  placed  on  the  land 
of  another.  For  the  violation  of  another's  right  of  use 
and  possession,  by  flowing  or  covering  his  land  with 
debris,  or  by  causing  his  soil  to  wash  or  cave,  the  owner 
of  the  mine  will  be  liable  in  damages,  and  the  injury  may 
be  stopped  by  injunction. 

Section  1186. — CONSOLIDATION  OP  MINING  CORPORA- 
TIONS.— Two  or  more  mining  corporations  owning  claims 
lying  in  the  same  vicinity  may  consolidate  upon  terms 
agreed  upon  by  the  respective  Boards  of  Directors  or 
Trustees  of  such  corporations,  provided  the  written  con- 
sent of  stockholders  representing  two-thirds  of  the  capi- 
tal stock  of  each  company  be  obtained.  Such  consolida- 
tion does  not  relieve  the  respective  companies  or  their 
stockholders  of  existing  indebtedness.  In  case  of  such 
consolidation,  notice  of  the  same  must  be  given  by  ad- 
vertising for  at  least  one  month  in  a  newspaper  in  the 
county  where  the  mining  property  is  situated,  and  also 
in  a  newspaper  published  in  the  county  where  the  prin- 
cipal place  of  business  of  any  of  such  corporations  shall 
be.  When  the  consolidation  is  completed  a  certificate 
thereof,  containing  the  manner  and  terms  of  the  consoli- 
dation, must  be  filed  in  the  office  of  the  County  Clerk  of 
the  county  in  which  the  original  certificate  of  incorpora- 
tion of  any  of  said  companies  was  filed,  and  a  copy  there- 
of must  be  filed  in  the  office  of  the  Secretary  of  State. 
Such  certificate  must  be  signed  by  a  majority  of  each 
Board  of  Directors  or  Trustees  of  the  original  com- 
panies; and  they  must  within  thirty  days  after  the  filing 
of  such  certificate,  and  after  at  least  ten  days'  public 
notice,  call  a  meeting  of  the  stockholders  of  all  of  said 
companies  so  consolidated,  to  elect  a  Board  of  Trustees 
or  Directors  for  the  consolidated  company  for  the  ensu- 


BUSINESS  CONTEACTS  AND  LEGAL  OBLIGATIONS.  905 

ing  year.  The  said  certificate  must  also  contain  all  the 
matters  required  to  be  stated  in  Articles  of  Incorpora- 
tion. 

Civil  Code,  Section  361. 

Section  1187. — TRANSFER  OP  STOCK  IN  MINING  CORPO- 
RATIONS.-— The  Civil  Code  of  California,  Sections  586, 
587,  makes  the  following  particular  provisions  about  the 
transfer  of  stock  in  mining  corporations:  "Any  corpo- 
ration organized  in  this  state  for  the  purpose  of  mining 
or  carrying  on  mining  operations  in  or  without  this  state, 
may  establish  and  maintain  agencies  in  other  states  of 
the  United  States,  for  the  transfer  and  issuing  of  their 
stock;  and  a  transfer  or  issue  of  the  stock  at  any  such 
transfer  agency,  in  accordance  with  the  provisions  of  its 
bv-laws,  is  valid  and  binding  as  fully  and  effectually  for 
all  purposes  as  if  made  upon  the  books  of  such  corporation 
at  its  principal  office  within  this  state.  The  agencies 
must  be  governed  by  the  by-laws  and  the  directors  of  the 
corporation.  All  stock  of  such  corporation,  issued  at  a 
transfer  agency,  must  be  signed  by  the  president  and 
secretarv  of  the  corporation,  and  countersigned  at  the 
time  of  its  issue  by  the  agent  having  charge  of  the  trans- 
fer agency." 

Civil  Code,  Sections  586,  587. 

Section  1188. — HOURS  OF  WORK  IN  UNDERGROUND 
MINES. — The  period  of  employment  for  all  persons  work- 
ing in  underground  mines  in  search  of  minerals,  whether 
base  or  precious,  or  who  are  engaged  in  such  under- 
ground mines  for  other  purposes,  or  who  are  employed 
or  engaged  in  other  underground  workings  whether  for 
the  purpose  of  tunneling,  making  excavations  or  to  ac- 
complish any  other  purpose  or  design,  or  who  are  em- 
ployed in  smelters  and  other  institutions  for  the  reduc- 
tion or  refining  of  ores  or  metals,  shall  not  exceed  eight 
hours  within  any  twenty-four  hours,  and  the  hours  of 


906  BUSINESS  LAW  FOR  BUSINESS  MEN. 

employment  in  such  employment  or  work  day  shall  be 
consecutive,  excluding,  however,  any  intermission  of 
time  for  lunch  or  meals;  provided  that,  in  the  case  of 
emergency  where  life  or  property  is  in  imminent  danger, 
the  period  may  be  a  longer  time  during  the  continuance 
of  the  exigency  or  emergency. 

Act  of  the  Legislature,  approved  March  10, 1909. 

Section  1189. — ABANDONED  OIL  WELLS. — Abandoned 
oil  wells  must  be  filled  by  the  owner,  with  clay,  earth  or 
cement  mortar,  thoroughly  packed  and  tamped,  to  a 
point  above  the  upper  oil-bearing  strata.  While  with- 
drawing the  casing,  water  must  be  effectually  and  per- 
manently excluded. 

Act  of  the  Legislature,  approved  March  20, 1909. 

Section  1190. — CAPPING  GAS  WELLS. — All  persons, 
firms,  corporations  and  associations  are  prohibited  from 
wilfully  permitting  any  natural  gas  wastefully  to  escape 
into  the  atmosphere. 

All  persons,  firms,  corporations  or  associations  dig- 
ging, drilling,  excavating,  constructing  or  owning  or  con- 
trolling any  well  from  which  natural  gas  flows  shall  up- 
on the  abandonment  of  such  well  cap  or  otherwise  close 
the  mouth  of  or  entrance  to  the  same  in  such  a  manner 
as  to  prevent  the  unnecessary  or  wasteful  escape  into 
the  atmosphere  of  such  natural  gas.  And  no  person, 
firm,  corporation  or  association  owning  or  controlling 
land  in  which  such  well  or  wells  are  situated  shall  wil- 
fully permit  natural  gas  flowing  from  such  well  or  wells, 
wastefully  or  unnecessarily  to  escape  into  the  atmos- 
phere. 

Any  person,  firm,  corporation  or  association  who 
shall  wilfully  violate  any  of  the  provisions  of  this  act 
shall  be  deemed  guilty  of  a  misdemeanor,  and  upon  con- 
viction thereof  shall  be  punished  by  a  fine  of  not  more 
than  one  thousand  dollars  or  by  imprisonment  in  the 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  907 

county  jail  of  not  more  than  one  year,  or  by  both  such 
fine  and  imprisonment. 

For  the  purposes  of  this  act  each  day  during  which 
natural  gas  shall  be  wilfully  allowed  wastefully  or  unnec- 
esarily  to  escape  into  the  atmosphere  shall  be  deemed  a 
separate  and  distinct  violation  of  this  act. 

Act  of  the  Legislature,  approved  March  25, 1911. 

Section  1191. — EXTRACTION  OF  MINERALS  FROM  THE 
WATERS  OF  STREAMS  OR  LAKES. — Minerals  contained  in 
the  waters  of  any  stream  or  lake  in  this  state  shall  not 
be  extracted  from  said  waters  except  upon  charges, 
terms  and  conditions  prescribed  by  law.  No  person, 
firm,  corporation  or  association  shall  hereafter  gain  the 
right  to  extract  or  cause  to  be  extracted  said  minerals 
from  said  waters  by  user,  custom,  prescription,  appro- 
priation, littoral  rights,  riparian  rights,  or  in  any  man- 
ner other  than  by  lease  from  or  express  permission  of 
the  state  as  prescribed  by  law ;  and  no  such  lease  or  per- 
mission shall  be  granted  for  a  longer  period  than  twenty- 
five  years. 

Act  of  the  Legislature,  approved  April  14,  1911. 

Section  1192. — MORTGAGE  ON  MINING  PROPERTY. — The 
directors  of  a  mining  corporation  have  no  power  or  au- 
thority to  mortgage  the  mining  ground  of  the  company 
without  a  ratification  by  the  holders  of  two-thirds  of  the 
capital  stock.  The  want  of  such  ratification  can  be  raised 
by  anyone  who  connects  himself  with  the  title  of  the 
corporation  which  owned  the  property,  as  well  as  by  the 
stockholders  thereof.  The  consent  of  the  stockholders 
cannot  be  presumed  from  the  mere  fact  of  the  execution 
of  the  mortgage,  whether  under  the  corporate  seal  or  not. 

(Decided  by  the  District  Court  of  Appeals  of  Cali- 
fornia, Second  District,  in  the  case  of  Mrs.  M.  T.  Ben- 
nett vs.  Bed  Cloud  Mining  Company,  which  decision  is 
printed  in  Volume  11  of  California  Appellate  Decisions, 
page  623.) 


908  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Section  1192a. — OIL  AND  GAS  PERMITS  AND  LEASES  ON 
GOVERNMENT  LAND. — 1920  ACT  OF  CONGRESS. — The  Con- 
gress of  the  United  States  passed  a  law,  in  effect  Febru- 
ary 25,  1920,  to  promote  the  mining  of  coal,  phosphate, 
oil,  oil  shale,  gas  and  radium,  on  the  public  lands. 

(a)  Oil  and  Gas  Permit. — Referring  to  oil  and  gas 
in  California,  the  law  reads :    That  the  Secretary  of  the 
Interior  is  hereby  authorized,  under  such  necessary  and 
proper  rules  and  regulations  as  he  may  prescribe,  to  grant 
to  any  applicant  qualified  under  this  Act  a  prospecting 
permit,  which  shall  give  the  exclusive  right,  for  a  period 
not  exceeding  two  years,  to  prospect  for  oil  or  gas  upon 
not  to  exceed  two  thousand  five  hundred  and  sixty  acres 
of  land,   wherein  such  deposits  belong  to  the  United 
States,  and  are  not  within  any  known  geological  struc- 
ture of  a  producing  oil  or  gas  field,  upon  condition  that 
the  permittee  shall  begin  drilling  operations  within  six 
months  from  the  date  of  the  permit,  and  shall,  within  one 
year  from  and  after  the  date  of  permit,  drill  one  or  more 
wells  for  oil  or  gas  to  a  depth  of  not  less  than  five  hun- 
dred feet  each,  unless  valuable  deposits  of  oil  or  gas 
shall  be  sooner  discovered,  and  shall,  within  two  years 
from  date  of  the  permit,  drill  for  oil  or  gas  to  an  aggre- 
gate depth  of  not  less  than  two  thousand  feet  unless 
valuable  deposits  of  oil  or  gas  shall  be  sooner  discov- 
ered.   The  Secretary  of  the  Interior  may,  if  he  shall  find 
that  the  permittee  has  been  unable  with  the  exercise  of 
diligence  to  test  the  land  in  the  time  granted  by  the  per- 
mit, extend  any  such  permit  for  such  time,  not  exceeding 
two  years,  and  upon  such  conditions  as  he  shall  prescribe. 

(b)  Location  and  Monuments. — Whether  the  lands 
sought  in  any  such  application  and  permit  are  surveyed 
or  unsurveyed  the  applicant  shall,  prior  to  filing  his  ap- 
plication for  permit,  locate  such  lands  in  a  reasonably 
compact  form  and  according  to  the  legal  subdivisions  of 
the  public  land  surveys  if  the  land  be  surveyed;  and  in 
an  approximately  square  or  rectangular  tract  if  the  land 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  909 

be  an  unsurveyed  tract,  the  length  of  which  shall  not  ex- 
ceed two  and  one-half  times  its  width,  and  if  he  shall 
cause  to  be  erected  upon  the  land  for  which  a  permit  is 
sought  a  monument  not  less  than  four  feet  high,  at  some 
conspicuous  place  thereon,  and  shall  post  a  notice  in  writ- 
ing on  or  near  said  monument,  stating  that  an  applica- 
tion for  permit  will  be  made  within  thirty  days  after  date 
of  posting  said  notice,  the  name  of  the  applicant,  the  date 
of  the  notice,  and  such  a  general  description  of  the  land 
to  be  covered  by  such  permit  by  reference  to  courses  and 
distances  from  such  monument  and  such  other  natural 
objects  and  permanent  monuments  as  will  reasonably 
identify  the  land,  stating  the  amount  thereof  in  acres,  he 
shall  during  the  period  of  thirty  days  following  such 
marking  and  posting,  be  entitled  to  a  preference  right 
over  others  to  a  permit  for  the  land  so  identified.  The 
applicant  shall,  within  ninety  days  after  receiving  a  per- 
mit, mark  each  of  the  corners  of  the  tract  described  in 
the  permit  upon  the  ground  with  substantial  monuments, 
so  that  the  boundaries  can  be  readily  traced  on  the 
ground,  and  shall  post  in  a  conspicuous  place  upon  the 
lands  a  notice  that  such  permit  has  been  granted  and  a 
description  of  the  lands  covered  thereby. 

(c)  Leases. — That  upon  establishing  to  the  satisfac- 
tion of  the  Secretary  of  the  Interior  that  valuable  de- 
posits of  oil  or  gas  have  been  discovered  within  the  lim- 
its of  the  land  embraced  in  any  permit,  the  permittee 
shall  be  entitled  to  a  lease  for  one-fourth  of  the  land  em- 
braced in  the  prospecting  permit:  Provided,  That  the 
permittee  shall  be  granted  a  lease  for  as  much  as  one 
hundred  and  sixty  acres  of  said  lands,  if  there  be  that 
number  of  acres  within  the  permit.  The  area  to  be  se- 
lected by  the  permittee  shall  be  in  compact  form,  and, 
if  surveyed,  to  be  described  by  the  legal  subdivisions  of 
the  public-land  surveys ;  if  unsurveyed,  to  be  surveyed  by 
the  government  at  the  expense  of  the  applicant  for  lease 
in  accordance  with  rules  and  regulations  to  be  prescribed 


910  BUSINESS  LAW  FOR  BUSINESS  MEN. 

by  the  Secretary  of  the  Interior,  and  the  lands  leased 
shall  be  conformed  to  and  taken  in  accordance  with  the 
legal  subdivisions  of  such  surveys ;  deposits  made  to  cover 
expense  of  surveys  shall  be  deemed  appropriated  for  that 
purpose,  and  any  excess  deposits  may  be  repaid  to  the 
person  or  persons  making  such  deposit  or  their  legal 
representatives. 

(d)  Term  of  Lease — Royalty. — Such  leases  shall  be 
for  a  term  of  twenty  years  upon  a  royalty  of  5  per  centum 
in  amount  or  value  of  the  production  and  the  annual  pay- 
ment in  advance  of  a  rental  of  $1  per  acre,  the  rental 
paid  for  any  one  year  to  be  credited  against  the  royalties 
as  they  accrue  for  that  year,  with  the  right  of  renewal. 

(e)  Preference  Right. — The  permittee  shall  also  be 
entitled  to  a  preference  right  to  a  lease  for  the  remainder 
of  the  land  in  his  prospecting  permit  at  a  royalty  of  not 
less  than  12^  per  centum  in  amount  or  value  of  the  pro- 
duction, and  under  such  other  conditions  as  are  fixed  for 
oil  or  gas  leases  in  this  Act,  the  royalty  to  be  determined 
by  competitive  bidding  or  fixed  by  such  other  method  as 
the  Secretary  may  by  regulations  prescribe:  Provided, 
that  the  Secretary  shall  have  the  right  to  reject  any  or 
all  bids. 

(f)  Royalty  Before  Lease. — That  until  the  permittee 
shall  apply  for  lease  to  the  one-quarter  of  the  permit 
area  heretofore  provided  for  he  shall  pay  to  the  United 
States  20  per  centum  of  the  gross  value  of  all  oil  or  gas 
secured  by  him  from  the  lands  embraced  within  his  per- 
mit ar.d  sold  or  otherwise  disposed  of  or  held  by  him  for 
sale  or  other  disposition. 

(g)  Drilling  and  Waste. — That  all  permits  and  leases 
of  lands  containing  oil  or  gas,  made  or  issued  under  the 
provisions  of  this  Act,  shall  be  subject  to  the  condition 
that  no  wells  shall  be  drilled  within  two  hundred  feet  of 
any  of  the  outer  boundaries  of  the  lands  so  permitted  or 
leased,  unless  the  adjoining  lands  have  been  patented,  pr 
the  title  thereto  otherwise  vested  in  private  owners,  and 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  911 

to  the  further  condition  that  the  permittee  or  lessee  will, 
in  conducting  his  explorations  and  mining  operations, 
use  all  reasonable  precautions  to  prevent  waste  of  oil  or 
gas  developed  in  the  land,  or  the  entrance  of  water 
through  wells  drilled  by  him  to  the  oil  sands  or  oil-bear- 
ing strata,  to  the  destruction  or  injury  of  the  oil  deposits. 
Violations  of  the  provisions  of  this  section  shall  consti- 
tute grounds  for  the  forfeiture  of  the  permit  or  lease, 
to  be  enforced  through  appropriate  proceedings  in  courts 
of  competent  jurisdiction. 

(h)  Lease  in  Producing  Oil  or  Gas  Field. — That  all 
unappropriated  deposits  of  oil  or  gas  situated  within  the 
known  geologic  structure  of  a  producing  oil  or  gas  field 
and  the  unentered  lands  containing  the  same,  not  subject 
to  preferential  lease,  may  be  leased  by  the  Secretary  of 
the  Interior  to  the  highest  responsible  bidder  by  competi- 
tive bidding  under  general  regulations  to  qualified  appli- 
cants in  areas  not  exceeding  six  hundred  and  forty  acres 
and  in  tracts  which  shall  not  exceed  in  length  two  and 
one-half  times  their  width,  such  leases  to  be  conditioned 
upon  the  payment  by  the  lessee  of  such  bonus  as  may  be 
accepted  and  of  such  royalty  as  may  be  fixed  in  the  lease, 
which  shall  not  be  less  than  12!/2  per  centum  in  amount 
or  value  of  the  production,  and  the  payment  in  advance 
of  a  rental  of  not  less  than  $1  per  acre  per  annum  there- 
after during  the  continuance  of  the  lease,  the  rental  paid 
for  any  one  year  to  be  credited  against  the  royalties  as 
they  accrue  for  that  year. 

(i)  Renewal  of  Lease.— Leases  shall  be  for  a  period 
of  twenty  years,  with  the  preferential  right  in  the  lessee 
to  renew  the  same  for  successive  periods  of  ten  years, 
upon  such  reasonable  terms  and  conditions  as  may  be  pre- 
scribed by  the  Secretary  of  the  Interior,  unless  otherwise 
provided  by  law  at  the  time  of  the  expiration  of  such 
periods.  Whenever'  the  average  daily  production  of  any 
oil  well  shall  not  exceed  ten  barrels  per  day,  the  Secre- 
tary of  the  Interior  is  authorized  to  reduce  the  royalty  on 
future  production  when  in  his  judgment  the  wells  cannot 


912  BUSINESS  LAW  FOR  BUSINESS  MEN. 

be  successfully  operated  upon  the  royalty  fixed  in  the 
lease.  The  provisions  of  this  paragraph  shall  apply  to 
all  oil  and  gas  leases  made  under  this  Act. 

(j)  Relinquishment  of  Claims  Acquired  Under  Prior 
Mining  Laws. — That  upon  relinquishment  to  the  United 
States,  filed  in  the  General  Land  Office  within  six  months 
after  the  approval  of  this  Act,  of  all  right,  title,  and  in- 
terest claimed  and  possessed  prior  to  July  3,  1910,  and 
continuously  since,  by  the  claimant  or  his  predecessor 
in  interest  under  the  preexisting  placer  mining  law,  to 
any  oil  or  gas  bearing  land  upon  which  there  has  been 
drilled  one  or  more  oil  or  gas  wells  to  discovery  embraced 
in  the  executive  order  of  withdrawal  issued  September 
27, 1909,  and  not  within  any  naval  petroleum  reserve,  and 
upon  payment  as  royalty  to  the  United  States  of  an 
r»  mount  equal  to  the  value  at  the  time  of  production  of 
one-eighth  of  all  the  oil  or  gas  already  produced  except 
oil  or  gas  used  for  production  purposes  on  the  claim,  or 
unavoidably  lost,  from  such  land,  the  claimant,  or  his  suc- 
cessor, if  in  possession  of  such  land,  undisputed  by  any 
other  claimant  prior  to  July  1,  1919,  shall  be  entitled  to 
a  lease  thereon  from  the  United  States  for  a  period  of 
twenty  years,  at  a  royalty  of  not  less  than  12^  per 
centum  of  all  the  oil  or  gas  produced  except  oil  or  gas 
used  for  production  purposes  on  the  claim,  or  unavoid- 
ably lost:  Provided,  that  not  more  than  one-half  of  the 
area,  but  in  no  case  to  exceed  three  thousand  two  hun- 
dred acres,  within  the  geologic  oil  or  gas  structure  of  a 
producing  oil  or  gas  field  shall  be  leased  to  any  one  claim- 
ant under  the  provision  of  this  section  when  the  area 
of  such  geologic  oil  structure  exceeds  six  hundred  and 
forty  acres.  Any  claimant  or  his  successor,  subject  to 
Ihis  limitation,  shall,  however,  have  the  right  to  select 
and  receive  the  lease  as  in  this  section  provided  for  that 
portion  of  his  claim  or  claims  equal  to,  but  not  in  excess 
of,  said  one-half  of  the  area  of  such  geologic  oil  struc- 
ture, but  not  more  than  three  thousand  two  hundred 
acres. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  913 

(k)  Naval  Petroleum  Reserve. — All  such  leases  shall 
be  made  and  the  amount  of  royalty  to  be  paid  for  oil  and 
gas  produced,  except  oil  or  gas  used  for  production  pur- 
poses on  the  claim,  or  unavoidably  lost,  after  the  execu- 
tion of  such  lease,  shall  be  fixed  by  the  Secretary  of  the 
Interior  under  appropriate  rules  and  regulations:  Pro- 
vided, however,  that  as  to  all  like  claims  situate  within 
any  naval  petroleum  reserve  the  producing  wells  thereon 
only  shall  be  leased,  together  with  an  area  of  laud  suf- 
ficient for  the  operation  thereof,  upon  the  terms  and  pay- 
ment of  royalties  for  past  and  future  production  a*  here- 
in provided  for  in  the  leasing  of  claims.  No  wells  shall 
be  drilled  in  the  land  subject  to  this  provision  within  six 
hundred  and  sixty  feet  of  any  such  leased  well  without 
the  consent  of  the  lessee:  Provided,  however,  that  the 
president  may,  in  his  discretion,  lease  the  remainder  or 
any  part  of  any  such  claim  upon  which  such  wells  have 
been  drilled,  and  in  the  event  of  such  leasing  said  claim- 
ant or  his  successor  shall  have  a  preference  right  to  such 
lease:  And  provided  further,  that  he  may  permit  the 
drilling  of  additional  wells  by  the  claimant  or  his  suc- 
cessor within  the  limited  area  of  six  hundred  and  sixty 
feet  theretofore  provided  for  upon  such  terms  and  con- 
ditions as  he  may  prescribe. 

No  claimant  for  a  lease  who  has  been  guilty  of  any 
fraud  or  who  had  knowledge  or  reasonable  grounds  to 
know  of  any  fraud,  or  who  has  not  acted  honestly  and  in 
good  faith,  shall  be  entitled  to  any  of  the  benefits  of 
this  section. 

(1)  Conflicting  Claims.— In  case  of  conflicting  claim- 
ants for  leases,  the  Secretary  of  the  Interior  is  authorized 
to  grant  leases  to  one  or  more  of  them  as  shall  be  deemed 
just.  All  leases  hereunder  shall  inure  to  the  benefit  of 
the  claimant  and  all  persons  claiming  through  or  under 
him  by  lease,  contract,  or  otherwise,  as  their  interests 
may  appear,  subject,  however,  to  the  same  limitation  as 
to  area  and  acreage  as  is  provided  for  claimant  in  this 


914  BUSINESS  LAW  FOR  BUSINESS  MEN. 

section:  Provided,  that  no  claimant  acquiring  any  in- 
terest in  such  lands  since  September  1,  1919,  from  a 
claimant  on  or  since  said  date  claiming  or  holding  more 
than  the  maximum  allowed  claimant  under  this  section, 
shall  secure  a  lease  thereon  or  any  interest  therein;  but 
the  inhibition  of  this  proviso  shall  not  apply  to  an  ex- 
change of  any  interest  in  such  lands  made  prior  to  the 
1st  day  of  January,  1920,  which  did  not  increase  or  reduce 
Ihe  area  or  acreage  held  or  claimed  in  excess  of  said 
maximum  by  either  party  to  the  exchange :  Provided  fur- 
ther, that  no  lease  or  leases  under  this  section  shall  be 
granted,  nor  shall  any  interest  therein  inure,  to  any  per- 
son, association,  or  corporation  for  a  greater  aggregate 
area  or  acreage  than  the  maximum  in  this  section  pro- 
vided for. 

That  whenever  the  validity  of  any  gas  or  petroleum 
placer  claim  under  preexisting  law  to  land  embraced  in 
the  executive  order  of  withdrawal  issued  September  27, 
1909,  has  been  or  may  hereafter  be  drawn  in  question  on 
behalf  of  the  United  States  in  any  departmental  or  ju- 
dicial proceedings,  the  president  is  hereby  authorized  at 
any  time  within  twelve  months  after  the  approval  of  this 
Act  to  direct  the  compromise  and  settlement  of  any  such 
controversy  upon  such  terms  and  conditions  as  may  be 
agreed  upon,  to  be  carried  out  by  an  exchange  or  division 
of  land  or  division  of  the  proceeds  of  operation. 

(m)  Protection  of  Bona  Fide  Occupants  or  Claim- 
ants.— That  any  person  who  on  October  1,  1919,  was  a 
bona  fide  occupant  or  claimant  of  oil  or  gas  lands  under 
a  claim  initiated  while  such  lands  were  not  withdrawn 
from  oil  or  gas  location  and  entry,  and  who  had  previ- 
ously performed  all  acts  under  then  existing  laws  neces- 
sary to  valid  locations  thereof  except  to  make  discovery, 
and  upon  which  discovery  had  not  been  made  prior  to 
the  passage  of  this  Act,  and  who  has  performed  work 
or  expended  on  or  for  the  benefit  of  such  locations  ,an 
amount  equal  in  the  aggregate  of  $250  for  each,  location,; 
if  application  therefor  shall  be  made  within  six  months 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  915 

from  the  passage  of  this  Act,  shall  be  entitled  to  pros- 
pecting permits  thereon  upon  the  same  terms  and  condi- 
tions, and  limitations  as  to  acreage,  as  other  permits  pro- 
vided for  in  this  Act ;  or  where  any  such  person  has  here- 
tofore made  such  discovery,  he  shall  be  entitled  to  a  lease 
thereon  under  such  terms  as  the  Secretary  of  the  Interior 
may  prescribe  unless  otherwise  provided  for:  Provided, 
that  where  such  prospecting  permit  is  granted  upon  land 
within  any  known  geologic  structure  of  a  producing  oil 
or  gas  field,  the  royalty  to  be  fixed  in  any  lease  thereafter 
granted  thereon  or  any  portion  thereof  shall  be  not  less 
than  12^  per  centum  of  all  the  oil  or  gas  produced  ex- 
cept oil  or  gas  used  for  production  purposes  on  the  claim, 
or  unavoidably  lost:  Provided,  however,  that  the  pro- 
visions of  this  section  shall  not  apply  to  lands  reserved 
for  the  use  of  the  navy :  Provided,  however,  that  no  claim- 
ant for  a  permit  or  lease  who  has  been  guilty  of  any  fraud 
or  who  had  knowledge  or  reasonable  grounds  to  know  of 
any  fraud,  or  who  has  not  acted  honestly  and  in  good 
faith,  shall  be  entitled  to  any  of  the  benefits  of  this  sec- 
tion. 

All  permits  or  leases  hereunder  shall  inure  to  the 
benefit  of  the  claimant  and  all  persons  claiming  through 
or  under  him  by  lease,  contract,  or  otherwise,  as  their 
interests  may  appear. 

(n)  Preference  on  Lands  Entered  as  Agricultural.— 
In  the  case  of  lands  bona  fide  entered  as  agricultural, 
and  not  withdrawn  or  classified  as  mineral  at  the  time  of 
entry,  but  not  including  lands  claimed  under  any  railroad 
grant,  the  entryman  or  patentee,  or  assigns,  where  as- 
signment was  made  prior  to  January  1, 1918,  if  the  entry 
has  been  patented  with  the  mineral  right  reserved,  shall 
be  entitled  to  a  preference  right  to  a  permit  and  to  a 
lease,  as  herein  provided,  in  case  of  discovery ;  and  with- 
in an  area  not  greater  than  a  township  such  entryman 
and  patentees,  or"  assigns  holding  restricted  patents  may 
( ombine  their  holdings,  not  to  exceed  two  thousand  five 
hundred  and  sixty  acres  for  the  purpose  of  making  joint 


916  BUSINESS  LAW  FOR  BUSINESS  MEN. 

application.  Leases  executed  under  this  section  and  em- 
bracing only  lands  so  entered  shall  provide  for  the  pay- 
ment of  a  royalty  of  not  less  than  12!/2  per  centum  as  to 
such  areas  within  the  permit  as  may  not  be  included  with- 
in the  discovery  lease  to  which  the  permittee  is  entitled 
under  section  14  hereof. 

(o)  Permit  May  Be  Canceled. — That  the  Secretary 
of  the  Interior  shall  reserve  and  may  exercise  the  author- 
ity to  cancel  any  prospecting  permit  upon  failure  by  the 
permittee  to  exercise  due  diligence  in  the  prosecution  of 
the  prospecting  work  in  accordance  with  the  terms  and 
conditions  stated  in  the  permit,  and  shall  insert  in  every 
such  permit  issued  under  the  provisions  of  this  Act  ap- 
propriate provisions  for  its  cancellation  by  him. 

(p)  Number  of  Leases. — No  person,  association,  or 
corporation  shall  take  or  hold,  at  one  time,  more  than 
three  oil  or  gas  leases  granted  hereunder  in  any  one 
state,  and  not  more  than  one  lease  within  the  geologic 
structure  of  the  same  producing  oil  or  gas  field ;  no  cor- 
poration shall  hold  any  interest  as  a  stockholder  of  an- 
other corporation  in  more  than  such  number  of  leases ; 
and  no  person  or  corporation  shall  take  or  hold  any  in- 
terest or  interests  as  a  member  of  an  association  or  asso- 
ciations or  as  a  stockholder  of  a  corporation  or  corpora- 
tions holding  a  lease  under  the  provisions  hereof,  which, 
together  with  the  area  embraced  in  any  direct  holding  of 
a  lease  under  this  Act,  or  which,  together  with  any  other 
interest  or  interests  as  a  member  of  an  association  or 
associations  or  as  a  stockholder  of  a  corporation  or  cor- 
porations holding  a  lease  under  the  provisions  hereof, 
for  any  kind  of  mineral  leased  hereunder,  exceeds  in  the 
aggregate  an  amount  equivalent  to  the  maximum  number 
of  acres  of  the  respective  kinds  of  minerals  allowed  to 
any  one  lessee  under  this  Act.  Any  interests  held  in  vio- 
lation of  this  Act  shall  be  forfeited  to  the  United  States 
by  appropriate  proceedings  instituted  by  the  attorney 
general  for  thnt  purpose  in  the  United  States  district 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  917 

court  for  the  district  in  which  the  property,  or  some  part 
thereof,  is  located,  except  that  any  ownership  or  interest 
forbidden  in  this  Act  which  may  be  acquired  by  descent, 
will,  judgment,  or  decree  may  be  held  for  two  years  and 
not  longer  after  its  acquisition:  Provided,  that  nothing 
herein  contained  shall  be  construed  to  prevent  any  num- 
ber of  lessees  under  the  provisions  of  this  Act  from  com- 
bining their  several  interests  so  far  as  may  be  necessary 
for  the  purposes  of  constructing  and  carrying  on  the 
business  of  a  refinery,  or  of  establishing  and  construct- 
ing as  a  common  carrier  a  pipe  line  or  lines  of  railroads 
to  be  operated  and  used  by  them  jointly  in  the  trans- 
portation of  oil  from  their  several  wells,  or  from  the 
wells  of  other  lessees  under  this  Act,  or  the  transporta- 
tion of  coal :  Provided  further,  that  any  combination  for 
such  purpose  or  purposes  shall  be  subject  to  the  approval 
of  the  Secretary  of  the  Interior  on  application  to  him  for 
permission  to  form  the  same:  And  provided  further,  that 
if  any  of  the  lands  or  deposits  leased  under  the  pro- 
visions of  this  Act  shall  be  subleased,  trusteed,  possessed, 
or  controlled  by  any  device  permanently,  temporarily, 
directly,  indirectly,  tacitly,  or  in  any  manner  whatsoever, 
so  that  they  form  part  of,  or  are  in  any  wise  controlled 
by  any  combination  in  the  form  of  an  unlawful  trust,  with 
consent  of  lessee,  or  form  the  subject  of  any  contract  or 
conspiracy  in  restraint  of  trade  in  the  mining  or  selling 
of  coal,  phosphate,  oil,  oil  shale,  gas,  or  sodium  entered 
into  by  the  lessee,  or  any  agreements  or  understanding, 
written,  verbal,  or  otherwise  to  which  such  lessee  shall 
be  a  part}7,  of  which  his  or  its  output  is  to  be  or  become 
the  subject,  to  control  the  price  or  prices  thereof  or  of 
any  holding  of  such  lands  by  any  individual,  partnership, 
association,  corporation,  or  control,  in  excess  of  the 
amounts  of  lands  provided  in  this  Act,  the  lease  thereof 
shall  be  forfeited  by  appropriate  court  proceedings. 

(q)  Pipe  Lines. — That  rights   of    way   through  the 
public  lands,  including  the  forest  reserves,  of  the  United 


D18  BUSINESS  LAW  FOR  BUSINESS  MEN. 

States  are  hereby  granted  for  pipe-line  purposes  for  the 
transportation  of  oil  or  natural  gas  to  any  applicant 
possessing  the  qualifications  provided  in  this  Act  to  the 
extent  of  the  ground  occupied  by  the  said  pipe  line  and 
twenty-five  feet  on  each  side  of  the  same,  under  such  reg- 
ulations as  to  survey,  location,  application,  and  use  as 
may  be  prescribed  by  the  Secretary  of  the  Interior,  and 
upon  the  express  condition  that  such  pipe  lines  shall  be 
constructed,  operated,  and  maintained  as  common  car- 
riers: Provided,  that  the  government  shall  in  express 
terms  reserve  and  shall  provide  in  every  lease  of  oil 
lands  hereunder  that  the  lessee,  assignee,  or  beneficiary, 
if  owner,  or  operator  or  owner  of  a  controlling  interest 
in  any  pipe  line  or  of  any  company  operating  the  same 
which  may  be  operated  accessible  to  the  oil  derived  from 
lands  under  such  lease,  shall  at  reasonable  rates  and  with- 
out discrimination  accept  and  convey  the  oil  of  the  gov- 
ernment or  of  any  citizen  or  company  not  the  owner  of 
any  pipe  line,  operating  a  lease  or  purchasing  gas  or  oil 
under  the  provisions  of  this  Act:  Provided  further,  that 
no  right  of  way  shall  hereafter  be  granted  over  said 
lands  for  the  transportation  of  oil  or  natural  gas  except 
under  and  subject  to  the  provisions,  limitations,  and  con- 
ditions of  this  section.  Failure  to  comply  with  the  pro- 
visions of  this  section  or  the  regulations  prescribed  by 
the  Secretary  of  the  Interior  shall  be  ground  for  for- 
feiture of  the  grant  by  the  United  States  district  court 
for  the  district  in  which  the  property,  or  some  part  there- 
of, is  located. 

(r)  Rights  of  Way  for  Other  Purposes. — That  any 
permit,  lease,  occupation,  or  use  permitted  under  this 
Act  shall  reserve  to  the  Secretary  of  the  Interior  the 
right  to  permit  upon  such  terms  as  he  may  determine  to 
be  just,  for  joint  or  several  use,  such  easements  or  rights 
of  way,  including  easements  in  tunnels  upon,  through,  or 
in  the  lands  leased,  occupied,  or  used  as  may  be  neces- 
sary or  appropriate  to  the  working  of  the  same,  or  of 
other  lands  containing  the  deposits  described  in  this  Act, 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  919 

and  the  treatment  and  shipment  of  the  products  thereof 
by  or  under  authority  of  the  government,  its  lessees,  or 
permittees,  and  for  other  public  purposes:  Provided, 
that  said  Secretary,  in  his  discretion,  in  making  any 
lease  under  this  Act,  may  reserve  to  the  United  States 
the  right  to  lease,  sell,  or  otherwise  dispose  of  the  sur- 
face of  the  lands  embraced  within  such  lease  under  exist- 
ing law  or  laws  hereafter  enacted,  in  so  far  as  said  sur- 
face is  not  necessary  for  use  of  the  lessee  in  extracting 
and  removing  the  deposits  therein:  Provided  further, 
that  if  such  reservation  is  made  it  shall  be  so  determined 
before  the  offering  of  such  lease :  And  provided  further, 
that  the  said  Secretary,  during  the  life  of  the  lease,  is 
authorized  to  issue  such  permits  for  easements  herein 
provided  to  be  reserved. 

(s)  Assignment  of  Lease. — That  no  lease  issued  un- 
der the  authority  of  this  Act  shall  be  assigned  or  sublet, 
except  with  the  consent  of  the  Secretary  of  the  Interior. 
The  lessee  may,  in  the  discretion  of  the  Secretary  of  the 
Interior,  be  permitted  at  any  time  to  make  written  re- 
linquishment  of  all  rights  under  such  a  lease,  and  upon 
acceptance  thereof  be  thereby  relieved  of  all  future  obli- 
gations under  said  lease,  and  may  with  like  consent  sur- 
render any  legal  subdivision  of  the  area  included  within 
the  lease.  Each  lease  shall  contain  provisions  for  the 
purpose  of  insuring  the  exercise  of  reasonable  diligence, 
skill,  and  care* in  the  operation  of  said  property;  a  pro- 
vision that  such  rules  for  the  safety  and  welfare  of  the 
miners  and  for  the  prevention  of  undue  waste  as  may  be 
prescribed  by  said  Secretary  shall  be  observed,  including 
a  restriction  of  the  workday  to  not  exceeding  eight  hours 
in  any  one  day  for  underground  workers  except  in  cases 
of  emergency ;  provisions  prohibiting  the  employment  of 
any  boy  under  the  age  of  sixteen  or  the  employment  of 
any  girl  or  woman,  without  regard  to  age,  in  any  mine 
below  the  surface;  provisions  securing  the  workmen 
complete  freedom  of  purchase;  provision  requiring  the 


920  BUSINESS  LAW  FOB  BUSINESS  MEN. 

payment  of  wages  at  least  twice  a  month  in  lawful  money 
of  the  United  States;  and  such  other  provisions  as  he 
may  deem  necessary  to  insure  the  sale  of  the  production 
of  such  leased  lands  to  the  United  States  and  to  the  public 
at  reasonable  prices,  for  the  protection  of  the  interests 
of  the  United  States,  for  the  prevention  of  monopoly,  and 
for  the  safeguarding  of  the  public  welfare:  Provided, 
that  none  of  such  provisions  shall  be  in  conflict  with  the 
laws  of  the  state  in  which  the  leased  property  is  situated. 

(t)  Regulations  ~by  Secretary  of  the  Interior. — That 
any  lease  issued  under  the  provisions  of  this  Act  may  be 
forfeited  and  canceled  by  an  appropriate  proceeding  in 
the  United  States  district  court  for  the  district  in  which 
the  property,  or  some  part  thereof,  is  located,  whenever 
the  lessee  fails  to  comply  with  any  of  the  provisions  of 
this  Act,  of  the  lease,  or  of  the  general  regulations 
promulgated  under  this  Act  and  in  force  at  the  date  of 
the  lease ;  and  the  lease  may  provide  for  resort  to  appro- 
priate methods  for  the  settlement  of  disputes  or  for  rem- 
edies for  breach  of  specified  conditions  thereof. 

That  the  Secretary  of  the  Interior  is  authorized  to 
prescribe  necessary  and  proper  rules  and  regulations 
and  to  do  any  and  all  things  necessary  to  carry  out  and 
accomplish  the  purposes  of  this  Act,  also  to  fix  and  de- 
termine the  boundary  lines  of  any  structure,  or  oil  or  gas 
field,  for  the  purposes  of  this  Act:  Provided,  that  noth- 
ing in  this  Act  shall  be  construed  or  held  to  affect  the 
rights  of  the  states  or  other  local  authority  to  exercise 
any  rights  which  they  may  have,  including  the  right  to 
levy  and  collect  taxes  upon  improvements,  output  of 
mines,  or  other  rights,  property,  or  assets  of  any  lessee 
of  the  United  States. 

(Oil  and  gas  regulations  have  been  issued  and  are  con- 
tained in  Circular  No.  672,  of  the  General  Land  Office 
of  the  United  States.) 

(u)  Royalty  Paid  in  Oil  or  Gas. — That  all  royalty  ac- 
cruing to  the  United  States  under  any  oil  or  gas  lease  or 
permit  under  this  Act  on  demand  of  the  Secretary  of  the 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  921 

Interior  shall  be  paid  in  oil  or  gas. 

Upon  granting  any  oil  or  gas  lease  under  this  Act, 
and  from  time  to  time  thereafter  during  said  lease,  the 
Secretary  of  the  Interior  shall,  except  whenever  in  his 
judgment  it  is  desirable  to  retain  the  same  for  the  use  of 
the  United  States,  offer  for  sale  for  such  period  as  he 
may  determine,  upon  notice  and  advertisement  on  sealed 
bids  or  at  public  auction,  all  royalty  oil  and  gas  accruing 
or  reserved  to  the  United  States  under  such  lease.  Such 
advertisement  and  sale  shall  reserve  to  the  Secretary  of 
the  Interior  the  right  to  reject  all  bids  whenever  within 
his  judgment  the  interest  of  the  United  States  demands ; 
and  in  cases  where  no  satisfactory  bid  is  received  or 
where  the  accepted  bidder  fails  to  complete  the  purchase, 
or  where  the  Secretary  of  the  Interior  shall  determine 
that  it  is  unwise  in  the  public  interest  to  accept  the  offer 
of  the  highest  bidder,  the  Secretary  of  the  Interior,  with- 
in his  discretion,  may  readvertise  such  royalty  for  sale, 
or  sell  at  private  sale  at  not  less  than  the  market  price 
for  such  period,  or  accept  the  value  thereof  from  the 
lessee :  Provided,  however,  that  pending  the  making  of  a 
permanent  contract  for  the  sale  of  any  royalty,  oil  or 
gas  as  herein  provided,  the  Secretary  of  the  Interior  may 
sell  the  current  product  at  private  sale,  at  not  less  than 
the  market  price :  And  provided  further,  that  any  royalty 
oil  or  gas  may  be  sold  at  not  less  than  the  market  price 
at  private  sale  to  any  department  or  agency  of  the  United 
States. 

(v)  Qualifications  of  Applicants— Permits  may  be  is- 
sued to  the  following: 

(1)  A  citizen  of  the  United  States; 

(2)  An  association  of  citizens; 

(3)  A  corporation  organized  under  the  laws  of  the 
United  States  or  of  any  state  or  territory  thereof ; 

(4)  A  municipality. 

Act  of  Congress,  approved  February  25,  1920. 


022  BUSINESS  LAW  FOE  BUSINESS  MEN. 

A.  J.  BLEDSOE,  ATTORNEY-AT-LAW,  Los  Angeles,  Cal. — 
Written  opinions  sent  by  mail,  upon  problems  or  cases 
involving  the  law  of  mines  and  mining.  See  title  page  of 
this  book  for  office  address  of  A.  J.  Bledsoe. 


PART  XII. 

ESTATES  OF  DECEASED  PERSONS 

Section  1193. — SETTLEMENT  OF  ESTATES. — Of  interest 
to  all  is  the  subject  of  the  administration  and  settlement 
of  estates  in  the  State  of  California.  Under  this  head 
will  be  shown  the  various  steps  to  be  taken  in  the  ap- 
pointment of  executors  or  administrators,  the  manage- 
ment of  the  property  of  any  estate,  the  selling  of  prop- 
erty under  orders  of  the  court,  the  rights  of  heirs  and 
legatees,  and  the  final  settlement  and  distribution. 

Section  1194. — EXECUTOKS  AND  ADMINISTRATORS. — An 
executor  is  appoined  where  there  is  a  will>  and  is  either 
appointed  by  the  court  or  named  in  the  will. 

An   administrator   is   appointed  by  the   court  where 
there  is  no  will. 

Authority  to  an  executor  is  given  by  an  appointment 
of  the  Superior  Court,  and  called  Letters  Testamentary. 

Authority  to  an  administrator  is  given  by  the  same 
court,  and  called  Letters  of  Administration. 

Section  1195. — WHERE  LETTERS  WILL  BE  GRANTED.— 
Letters  testamentary  to  an  executor,  or  letters  of  admin- 
istration to  an  administrator,  must  be  granted:  (1)  in 
the  county  of  which  deceased  was  a  resident  at  the  time 
of  his  death,  no  matter  where  he  died;  or,  (2)  in  the 
county  in  which  he  died,  leaving  property  in  the  county, 
and  not  being  a  resident  of  the  state;  or,  (3)  in  the  coun- 
ty in  which  any  part  of  his  estate  may  be,  when  he  dies 
out  of  this  state  and  was  not  a  resident  here  at  the  time 
of  his  death;  or,  (4)  in  the  county  in  which  any  part  of 

923 


924  BUSINESS  LAW  FOE  BUSINESS  MEN. 

the  estate  may  be,  the  decedent  not  being  a  resident  of 
the  State,  and  not  leaving  estate  in  the  county  in  which 
he  died;  or,  (5)  in  all  other  cases,  in  the  county  where 
application  for  letters  is  first  made. 

"When  the  estate  of  the  decedent  is  in  more  than  one 
county,  he  having  died  out  of  the  state,  and  not  having 
been  a  resident  thereof  at  the  time  of  his  death,  or  being 
such  non-resident,  and  dying  within  the  state,  and  not 
leaving  estate  in  the  county  where  he  died,  the  Superior 
Court  of  that  county  in  which  application  is  first  made 
for  letters  testamentary  or  of  administration  has  exclu- 
sive jurisdiction  of  the  settlement  of  the  estate. 

Code  of  Civil  Procedure,  Section  1294,  1295. 

Section  1196. — PEOOF  OF  WILL. — Any  person  having 
a  will  in  his  possession  must  produce  and  deliver  it  to  the 
Superior  Court,  or  the  executor  named  in  the  will,  within 
thirty  days  after  he  receives  information  that  the  maker 
is  dead;  and  if  he  fails  to  do  this  he  will  be  responsible 
for  all  damages  sustained  by  any  one  thereby. 
Code  of  Civil  Procedure,  Section  1298. 

Section  1197. — WHO  MAY  PETITION  FOE  PEOBATE  OF 
WILL. — Any  executor,  devisee,  or  legatee  named  in  any 
will,  or  any  other  person  interested  in  the  estate,  may, 
at  any  time  after  the  death  of  the  testator,  petition  the 
Superior  Court  to  have  the  will  proved. 

Code  of  Civil  Procedure,  Section  1299. 

Section  1198. — WHEN  EXECUTOE  FOBFEITS  EIGHT  TO 
LETTEES. — If  the  person  named  in  a  will  as  executor  wil- 
fully fails,  for  thirty  days  after  he  has  knowledge  of  the 
death  of  the  testator  and  that  he  is  named  as  executor, 
to  petition  the  proper  court  for  the  probate  of  the  will, 
he  will  forfeit  his  rights  as  executor  under  the  will, 
Code  of  Civil  Procedure,  Section  1301. 

Section  1199. — EXECUTOE  MAY  DECLINE  TO  ACT. — An 
executor  named  in  a  will  may  decline  to  act,  by  filing  a 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  925 

written  notice  that  he  renounces  his  appointment  and 
declines  to  act  as  such,  at  the  same  time  that  he  files  the 
will. 

Section  1200. — PROOF  OF  WILL. — When  a  will  is  pre- 
sented for  probate,  the  Superior  Court  will  hear  the 
proofs  and  issue  a  certificate  of  probate.  The  persons 
who  signed  the  will  as  witnesses  are  examined  as  to  their 
knowledge  of  its  execution,  and  to  show  that  it  is  really 
the  will  of  the  testator. 

When  one  of  the  witnesses  to  a  will  is  examined,  and 
the  others  are  dead  or  insane,  or  their  residence  un- 
known, other  testimony,  of  the  handwriting  of  the  testa- 
tor, and  other  circumstances,  will  be  taken  sufficient  to 
prove  that  the  instrument  produced  is  really  the  last  will 
and  testament  of  the  deceased. 

If  all  the  witnesses  to  the  will  are  dead,  or  insane,  or 
not  residing  in  the  county,  the  court  will  allow  the  will 
to  be  proved  by  other  evidence — the  handwriting  of  the 
testator,  the  surrounding  circumstances,  the  handwrit- 
ing of  the  subscribing  witnesses,  etc. 

Code  of  Civil  Procedure,  Section  1315. 

When  a  will  is  presented  which  is  all  in  the  handwrit- 
ing of  the  testator,  an  olographic  will,  it  will  be  proved 
by  the  testimony  of  persons  who  know  his  handwriting. 

Section  1201. — RECORDING  WILL. — The  will  and  a  cer- 
tificate of  the  proof  thereof  must  be  filed  and  recorded 
by  the  clerk  of  the  court. 

Code  of  Civil  Procedure,  Section  1318. 

Section  1202. — PROOF  OF  LOST  OR  DESTROYED  WILL.— 
The  Superior  Court  has  power  to  take  proof  of  a  will, 
although  the  paper  itself  be  lost  or  destroyed.  But  no 
will  can  be  proved  as  a  lost  or  destroyed  will,  unless  the 
proof  shows  that  the  will  was  in  existence  at  the  time 


926  BUSINESS  LAW  FOE  BUSINESS  MEN. 

of  the  death  of  the  testator,  or  was  fraudulently  or  by 
public  calamity  destroyed  in  his  life-tinie;  provided,  ;if 
the  testator  be  committed  to  any  state  hospital  for. the 
insane,  and  after  such  commitment  his  will  is  destroyed 
by  public  calamity,  and  the  testator  is  never  restored  to 
competency,  then  after  his  death  the  will  may  be  pro- 
bated as  though  it  were  in  existence  at  the  time  of  his 
death.  The  provisions  of  a  lost  or  destroyed  will  must 
be  clearly  and  distinctly  proved  by  at  least  two  credible 
witnesses. 

Section  1203. — PROOF  OF  FOREIGN  WILL. — Wills  pro- 
bated in  any  other  state  or  territory  of  the  United  States, 
or  in  any  foreign  country  or  state,  are  admitted  to  pro- 
bate in  this  state  on  the  production  of  a  copy  and  the 
original  record  of  probate  in  another  country. 

Section  1204. — LETTEES  TESTAMENTARY. — After  pro- 
bate of  a  will,  letters  testamentary  will  be  granted  to  the 
persons  therein  named  as  executors.  If  there  are  two 
or  more  executors  named  in  the  will,  and  some  decline  to 
act,  letters  will  be  granted  to  those  who  remain. 

Any  person  interested  in  a  will  may  file  objections  in 
writing  to  the  granting  of  letters  testamentary  to  any  of 
the  persons  named  as  executors,  and  the  objections  will 
be  heard  and  determined  by  the  court. 

If  the  executor  named  in  the  will  be  a  minor  or  absent 
from  the  state,  letters  will  be  granted  to  some  other  per- 
son, who  will  hold  the  trust  until  the  executor  named  in 
the  will  becomes  of  age  or  returns  to  the  state.  If  two 
executors  are  named  in  the  will,  and  one  of  them  is  a 
minor  or  absent  from  the  state,  the  one  who  can  qualify 
will  act  as  executor  alone  until  such  time  as  the  other 
becomes  of  age  or  returns  to  the  state.  The  latter  will 
then  have  the  right  to  act  as  joint  executor. 

Code  of  Civil  Procedure,  Sections  1349,  1354, 
1355. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  927 

Section  1205. — EEVOCATION  OF  LETTERS. — If  an  execu- 
tor or  administrator  becomes  of  unsound  mind,  or  is  con- 
.victed  of  felony  or  infamous  crime,  or  becomes  a  habitual 
drunkard,  or  mismanages  or  wastes  the  estate,  he  will 
be  removed  by  the  Superior  Court  and  another  will  be 
appointed  in  his  place. 

Section  1206. — MARRIED  WOMAN  OR  CORPORATION  MAY 
ACT. — A  married  woman  may  act  as  executrix  of  a  will, 
or  as  administratrix  of  an  estate. 

A  corporation  may  act  as  executor  or  administrator, 
if  authorized  by  its  articles  of  incorporation  so  to  do. 
Code  of  Civil  Procedure,  Sections  1348;  1350, 
1352. 

Section  1207. — LETTERS  OF  ADMINISTRATION. — If  a 
person  dies  without  making  a  will,  the  Superior  Court 
will  grant  letters  of  administration  of  his  estate.  If  a 
person  dies  leaving  a  will,  but  the  will  does  not  name  any 
executor,  the  court  will  appoint  an  administrator,  called 
an  ' '  administrator  with  the  will  annexed, ' '  who  will  have 
power  to  carry  out  the  provisions  of  the  will  in  the  same 
manner  as  he  would  if  named  in  the  will. 

Section  1208. — WHO  ARE  ENTITLED  TO  LETTERS  OF 
AMINISTRATION. — The  persons  entitled  to  letters  of  ad- 
ministration are  as  follows : 

(1)  The  surviving  husband  or  wife,  or  some  compe- 
tent person  whom  he  or  she  may  request  to  have  ap- 
pointed; 

(2)  The  children; 

(3)  The  father  and  mother; 

(4)  The  brothers  and  sisters ; 

(5)  The  grandchildren; 

(6)  The  next  of  kin  entitled  to  share  in  "the  distribu- 
tion of  the  estate; 

(7)  The  public  administrator; 


928  BUSINESS  LAW  FOR  BUSINESS  MEN. 

(8)  The  creditors; 

(9)  Any  person  legally  competent. 

If  the  deceased  was  a  member  of  a  partnership  at 
the  time  of  his  death,  the  surviving  member  must  in  no 
case  be  appointed  administrator  of  the  estate.  This  sec- 
tion shall  apply  to  relatives  of  the  deceased  spouse  of 
decedent,  when  entitled  to  succeed  to  some  portion  cf 
the  estate. 

Act  of  the  Legislature,  approved  April  15,  .1919 ; 
in  effect  July  22, 1919. 

Section  1209. — WHO  ABE  INCOMPETENT  TO  ACT  AS 
EXECUTOR  OR  ADMINISTRATOR. — A  person  may  be  entitled 
to  letters  of  administration,  as  provided  in  the  preceding 
section,  and  at  the  same  time  be  incompetent  for  per- 
sonal reasons.  For  the  law  provides  that  in  the  follow- 
ing cases  the  persons  otherwise  entitled  must  not  be 
appointed:  (1)  When  the  person  is  under  the  age  of 
majority;  or,  (2)  has  been  convicted  of  an  infamous 
crime;  or,  (3)  when  he  is  adjudged  by  the  court  incom- 
petent to  execute  the  duties  of  the  trust  by  reason  of 
drunkenness,  improvidence,  or  want  of  understanding 
or  integrity. 

Code  of  Civil  Procedure,  Sections  1350,  1369. 

Section  1210. — OATH  OF  EXECUTOR  OF  ADMINISTRATOR. 
The  executor  or  administrator  must  take  and  subscribe 
an  oath,  that  he  will  perform,  according  to  law,  the 
duties  of  his  trust.  This  oath  is  in  writing  and  is 
recorded  by  the  clerk  of  the  court  with  the  letters  of 
administration. 

Code  of  Civil  Procedure,  Section  1387. 

Section  1211. — BOND  OF  EXECUTOR  OR  ADMINISTRATOR. 
Executors  or  administrators  in  the  state  of  California 
must  give  a  bond,  for  the  faithful  discharge  of  theiv 
duties,  in  an  amount  equal  to  twice  the  value  of  the  per- 
sonal property  belonging  to  the  estate,  and  twice  the 
probable  value  of  the  rents,  profits,  and  issues  of  the  real 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  929 

property.    The  court  ascertains  these  values  by  examin 
ing  on  oath  the  party  applying  for  letters,  or  any  other 
person.    The  bond  must  be  signed  by  two  or  more  sure- 
ties, to  be  approved  by  the  judge  of  the  court. 
Code  of  Civil  Procedure,  Section  1388. 

An  additional  bond  must  be  given  whenever  the  salo 
of  any  real  estate  is  to  be  made  by  order  of  the  court; 
but  no  additional  bond  is  necessary  when  it  appears  that 
the  amount  of  the  bond  already  given  is  twice  the  value 
of  the  personal  property  remaining  in  or  that  may  come 
into  the  possession  of  the  executor  or  administrator  (in- 
cluding the  annual  rents,  profits,  and  issues  of  real  estate), 
and  twice  the  probable  amount  to  be  realized  on  the  sale 
of  the  real  estate  ordered  to  be  sold. 

Code  of  Civil  Procedure,  Section  1389. 

Section  1212. — SEPARATE  BONDS. — When  two  or  more 
persons  are  appointed  executors  or  administrators,  the 
court  must  require  and  take  a  separate  bond  from  each 
of  them. 

Code  of  Civil  Procedure,  Section  1391. 

Section  1213. — WHEN  EXECUTOR  MAY  ACT  WITHOUT 
BONDS. — A  will  may  expressly  provide  that  the  executor 
named  in  it  shall  act  without  giving  bonds.  Where  a  will 
does  so  provide,  the  executor  will  have  power  to  admin- 
ister the  estate,  including  the  sale  of  property,  without 
giving  any  bonds  whatever.  If  the  estate  is  not  man 
aged  properly,  however,  the  court  has  power  to  demand 
a  bond  of  the  executor,  even  where  the  will  declares  that 
no  bond  shall  be  given.  It  is  the  duty  of  the  court,  no 
matter  what  the  provisions  of  the  will  may  be,  to  see 
that  the  estate  is  properly  managed,  without  waste  or 
unnecessary  or  wilful  losses. 

Code  of  Civil  Procedure,  Section  1396. 


930  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Section  1214. — SPECIAL  ADMINISTRATOR. — When  there 
is  delay  in  application  for  or  the  granting  of  letters  to 
an  executor  or  administrator,  or  when  no  sufficient  bond 
is  filed,  or  when  an  executor  or  administrator  dies  or  is 
suspended  or  removed,  the  Court  may  appoint  a  special 
administrator,  to  act  for  the  time  being,  and  whose  duty 
it  shall  be  to  take  charge  of  and  preserve  the  estate  until 
such  time  as  a  regular  executor  or  administrator  shall  be 
appointed  and  qualified  to  act.  -  The  special  adminis- 
trator must  give  a  bond  in  the  same  manner  as  other 
administrators. 

Code  of  Civil  Procedure,  Section  1411. 
pq*^,-: 

Section  1215. — RELEASE  OF  BONDSMEN. — The  bonds- 
men of  an  executor  or  administrator  may  be  released 
by  the  court.  When  a  surety  of  any  executor  or  ad- 
ministrator desires  to  be  released  from  the  bond,  and 
from  future  responsibility,  he  must  make  an  applica- 
tion therefor  to  the  Superior  Court.  The  court  will  then 
require  the  executor  or  administrator  to  appear  and 
give  a  bond  with  new  sureties,  and  if  he  neglects  to  do 
so  his  letters  will  be  revoked,  and  a  new  executor  or 
administrator  appointed.  If  new  sureties  are  given  to 
the  satisfaction  of  the  judge,  the  surety  who  applied  for 
release  will  not  be  liable  on  the  bond  for  any  subse- 
quent act,  default,  or  misconduct  of  the  executor  or 
administrator. 

Code  of  Civil  Procedure,  Sections  1403,  1404, 
1405. 

Section  1216. — RESIGNATION  OF  EXECUTOR  OR  ADMIN- 
ISTRATOR.— An  executor  or  administrator  may  resign  if 
he  wishes  to  do  so.  He  may  do  this  by  filing  in  the 
Superior  Court  a  written  notice  that  he  resigns  his  ap- 
pointment. But,  before  his  resignation  can  be  accepted 
by  the  court  he  must  file  his  accounts  and  have  them 
allowed  and  settled  by  the  court.  The  court  can  then 
make  an  order  allowing  and  accepting  the  resignation. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  931 

If  there  are  a  number  of  executors  or  administrators, 
and  one  of  them  resigns,  it  will  be  the  duty  of  those  wlio 
remain  to  administer  and  settle  up  the  estate. 
Code  of  Civil  Procedure,  Section  1427. 

Section  1217. — SUIT  AGAINST  BONDSMEN. — If  the  let- 
ters of  an  executor  or  administrator  are  revoked,  or  if 
he  resigns  or  dies,  and  it  is  discovered  that  he  has  been 
faithless  to  his  trust,  any  person  injured  by  his  bad 
conduct  may  bring  a  suit  against  his  bondsmen  to  make 
good  the  losses  sustained. 

Section  1218. — INVENTORY  AND  APPRAISEMENT. — As 
soon  as  an  executor  or  administrator  has  qualified,  he  is 
entitled  to  the  immediate  possession  of  the  real  estate 
and  personal  property  of  the  deceased.  He  may  receive 
the  rents  and  profits  of  the  real  estate,  until  the  estate 
is  settled.  And,  as  he  has  possession  and  charge  of  the 
estate,  the  law  requires  him  to  show  to  the  court  what 
property  the  estate  consists  of,  and  its  location  and 
condition.  This  he  does  by  having  an  inventory  and 
appraisement  made,  which  is  filed  with  the  court.  The 
inventory  is  made  by  the  executor  or  administrator, 
under  oath,  containing  a  true  statement  of  the  real  and 
personal  estate  of  the  deceased  which  has  come  to  his 
possession  or  knowledge,  and  must  be  made  and  filed 
within  three  months  after  his  appointment.  Attached  to 
the  inventory  must  be  an  appraisement  of  the  value  of 
the  property. 

To  make  the  appraisement,  the  court,  or  a  judge 
thereof,  must  appoint  three  disinterested  persons,  one 
of  whom  must  be  one  of  the  inheritance  tax  appraisers 
provided  for  by  law  (any  two  of  which  appraisers  may 
act) ;  provided,  that  the  court  may,  in  its  discretion,  ap- 
point said  inheritance  tax  appraiser  as  sole  appraiser  to 
appraise  said  estate. 


932  BUSINESS  LAW  FOB  BUSINESS  MEN. 

Said  appraisers  are  entitled  to  receive  a  reasonable 
compensation  for  their  services,  not  to  exceed  five  dollars 
per  day,  together  with  his  actual  and  necessary  expenses, 
to  be  allowed  by  the  court  or  judge. 

The  appraisers  or  appraiser  must,  with  the  inven- 
tory, file  a  verified  account  of  their  or  his  services  and 
disbursements. 

If  any  part  of  the  estate  is  in  any  other  county  than 
that  in  which  letters  issued,  an  appraiser  or  appraisers 
thereof  may  in  the  same  manner  as  above  provided,  be 
appointed,  either  by  the  court  or  judge  having  jurisdic- 
tion of  the  estate,  or  by  the  court  or  judge  of  such  other 
county,  on  request  of  the  court  or  judge  having  jurisdic- 
tion. No  clerk  or  deputy,  nor  any  person  related  by  con- 
sanguinity or  affinity  to  or  connected  by  marriage  with, 
or  being  a  partner  or  employee  of  the  judge  of  the  court, 
shall  be  appointed  or  shall  be  competent  to  act  as  ap- 
praiser in  any  estate,  or  matter  or  proceeding  pending 
before  said  judge  or  in  said  court. 

Act  of  the  Legislature,  approved  May  10,  1917 ; 
in  effect  July  27,  1917. 

Section  1219. — WHEN  ADDITIONAL  INVENTORY  RE- 
QUIRED.— Whenever  property  not  mentioned  in  the  first 
inventory  comes  to  the  possession  or  knowledge  of  the 
executor  or  administrator,  he  must  make  and  file  another 
inventory  and  appraisement  covering  such  property. 

Code  of  Civil  Procedure,  Sections  1443,  1446, 
1451. 

Section  1220. — WHEN  No  APPRAISEMENT  REQUIRED. — 
If  the  whole  estate  consists  of  money,  there  need  not  be 
an  appraisement,  but  an  inventory  must  be  made  and 
returned  by  the  executor  or  administrator,  as  in  other 
cases. 

Act  of  the  Legislature,  approved  April  21,  1909. 


BUSINESS  CONTKACTS  AND  LEGAL  OBLIGATIONS.  933 

Section  1221. — MONEY  IN  BANK. — The  surviving  hus- 
band or  wife  or  the  guardian  of  the  estate  of  any  insane 
or  incompetent  husband  or  wife,  of  any  deceased  person, 
or  if  no  husband  or  wife  is  living,  then  the  children,  or 
the  guardian  of  the  estates  of  any  minor  or  insane  or 
incompetent  children  of  said  deceased,  or,  if  no  children 
are  living,  then  the  father  or  mother  or  guardian  of  the 
estate  of  any  insane  or  incompetent  father  or  mother  of 
such  decedent,  and  if  neither  the  father  nor  mother  is 
living,  then  the  brothers  and  sisters  or  the  guardian 
of  the  estates  of  any  minor  or  insane  or  incompetent 
brothers  and  sisters  of  such  decedent,  may,  without  pro- 
curing letters  of  administration,  collect  of  any  bank  any 
sum  which  said  deceased  may  have  left  on  deposit  in  such 
bank  at  the  time  of  his  or  her  death;  provided,  such 
deposits  shall  not  exceed  the  sum  of  one  thousand  dollars. 

(a)  Banks  Authorized  to  Pay. — Any  bank,  upon  re- 
ceiving an  affidavit  stating  that  said  depositor  is  dead, 
and  that  affiant  is  the  surviving  husband  or  wife  or  the 
guardian  of  the  estate  of  an  insane  or  incompetent  sur- 
viving husband  or  wife,  as  the  case  may  be,  of  said 
decedent,  or  stating  that  decedent  left  no  husband  or 
wife,  and  that  affiant  is  the  child,  or  that  affiants  are  the 
children,  or  the  guardians  of  the  estates  of  the  minor, 
insane  or  incompetent  children,  as  the  case  may  be,  of 
said  decedent,  or  stating  that  decedent  left  neither  hus- 
band, wife  nor  children,  and  that  affiant  is  the  father  or 
mother,  or  the  guardian  of  the  estate  of  the  insane  or 
incompetent  father  or  mother,  as  the  case  may  be,  of  said 
decedent,  or  stating  that  the  decedent  left  neither  hus- 
band, wife,  children,  father  nor  mother,  and  that  affiants 
are  the  brothers  and  sisters,  or  the  guardians  of  the 
estates  of  the  minor,  insane  or  incompetent  brothers  and 
sisters,  as  the  case  may  be,  of  said  decedent,  and  that  the 
whole  amount  that  said  decedent  left  on  deposit  in  any 
and  all  banks  of  deposit  in  this  state,  does  not  exceed  the 
sum  of  one  thousand  dollars,  may  pay  to  said  affiant  or 


934  BUSINESS  LAW  FOR  BUSINESS  MEN. 

affiants  any  deposit  of  said  decedent,  if  the  same  does  not 

exceed  the  sum  of  one  thousand  dollars,  and  the  receipt 

of  such  affiant  or  affiants,  is  sufficient  acquittance  therefor. 

Act  of  the  Legislature,  approved  May  18,  1915 ; 

in  effect  August  8,  1915. 

Section  1222. — PROBATE  HOMESTEAD  AND  FAMILY  AL- 
LOWANCE.— The  court  will  set  aside  a  homestead  for  the 
use  of  the  widow  and  children,  whether  there  was  a 
homestead  during  the  life  of  the  decedent  or  not.  This 
homestead  will  be  set  aside  out  of  the  community  prop- 
erty, if  there  be  any,  or  out  of  the  separate  property  of 
the  deceased,  if  there  is  no  community  property.  The 
homestead  will  be  exempt  from  all  claims  against  the 
estate,  whether  individual  debts  of  the  deceased,  or  com- 
munity debts.  The  homestead  is  for  the  use  and  support 
of  the  widow,  child,  or  children,  of  the  deceased,  and  is 
not  an  asset  of  the  estate  for  the  payment  of  debts. 

When  a  homestead  is  set  apart  to  the  use  of  the 
family,  the  property,  with  one  exception  stated  below,  is 
the  property  of  the  surviving  widow,  if  there  is  no  minor 
child.  If  the  decedent  left  also  a  minor  child  or  children, 
the  one  half  of  such  homestead  belongs  to  the  widow,  and 
the  remainder  to  the  child,  or  in  equal  shares  to  the  chil- 
dren, if  there  are  more  than  one.  If  there  is  no  wife  sur- 
viving, the  whole  property  belongs  to  the  minor  child  or 
children.  If  the  property  set  apart  is  a  homestead  se- 
lected from  the  separate  property  of  the  decedent,  the 
court  can  set  it  apart  only  for  a  limited  period,  and,  sub- 
ject to  such  homestead  right,  the  title  vests  in  the  heirs 
of  the  deceased  or  devisees. 

Act  of  the  Legislature,  approved  February  16', 
1911. 

(a)  Setting  Off  of  Recorded  Homestead. — If  the 
homestead  selected  and  recorded  prior  to  the  death  of  the 
decedent  be  returned  in  the  inventory  appraisd  at  not 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  935 

exceeding  five  thousand  dollars  in  value,  or  was  previously 
appraised,  and  such  appraised  value  did  not  exceed  that 
sum,  the  superior  court  must,  by  order,  set  it  off  to  the 
persons  in  whom  title  is  vested  by  the  law.  If  there  be 
subsisting  liens  or  encumbrances  on  the  homestead,  the 
claims  secured  thereby  must  be  presented  and  allowed  as 
other  claims  against  the  estate.  If  the  funds  of  the  estate 
be  adequate  to  pay  all  claims  against  the  estate,  the 
claims  so  secured  must  be  paid  out  of  such  funds.  If  the 
funds  of  the  estate  be  not  sufficient  for  that  purpose,  the 
claims  so  secured  shall  be  paid  proportionately  with  other 
claims  allowed,  and  the  liens  or  encumbrances  on  the 
homestead  shall  only  be  enforced  against  the  homestead 
for  any  deficiency  remaining  after  such  payment;  pro- 
vided, that  it  shall  be  the  duty  of  any  executor  or  ad- 
ministrator, within  sixty  days  after  the  first  publication 
of  notice  to  creditors,  to  notify  in  writing  the  record 
holder  of  any  such  lien  or  encumbrance  upon  real  prop- 
erty subject  to  a  declaration  of  homestead  of  the  death  of 
the  testator  or  intestate,  and  unless  so  notified,  the  rights 
of  the  holder  of  such  lien  or  encumbrance  shall  not  be 
affected  by  his  failure  to  present  such  claim  as  herein- 
above  required. 

Act  of  the  Legislature,  approved  May  21,  1917; 
in  effect  July  27,  1917. 

Section  1223. — EXEMPT  PROPERTY. — In  addition  to  the 
homestead,  the  law  provides  that  the  court  must  set  apart 
for  the  use  of  the  family  all  the  property  of  the  estate 
which  is  by  law  exempt  from  execution. 

Section  1224. — EXTRA  ALLOWANCE. — If  the  amount  set 
apart  be  insufficient  for  the  support  of  the  widow  and 
minor  children,  the  court  will  make  such  further  reason- 
able allowance  out  of  the  estate  as  shall  be  necessary  for 
the  maintenance  of  the  family,  according  to  their  circum- 
stances, during  the  progress  of  the  settlement  of  the 


936  BUSINESS  LAW  FOB  BUSINESS  MEN. 

estate.  Any  such  allowance  made  by  the  court  must  be 
paid  by  the  executor  or  administrator  in  preference  to 
all  other  charges,  except  funeral  charges,  and  expenses 
of  administration;  and  any  such  allowance,  whenever 
made,  may,  in  the  discretion  of  the  court,  take  effect  from 
the  death  of  the  decedent. 

Code  of  Civil  Procedure,  Sections  1465,  1466, 
1467,  1468. 

Section  1225. — ADMINISTBATION  WHEN  ESTATE  DOES 
NOT  EXCEED  FIFTEEN  HUNDKED  DOLLABS. — If  it  appears 
from  the  inventory  that  the  value  of  the  whole  estate  does 
not  exceed  the  sum  of  fifteen  hundred  dollars,  over  and 
above  liens  and  incumbrances  existing  at  the  date  of  the 
death  of  the  deceased,  the  court  must  make  an  order 
assigning  to  the  widow  of  the  deceased,  or  if  there  be 
no  widow  then  to  the  minor  children,  the  whole  of  the 
estate.  And  the  title  to  the  property  will  vest  absolutely 
in  such  widow  or  minor  children,  after  the  payment  of 
the  expenses  of  the  last  illness  of  the  deceased,  funeral 
charges,  and  expenses  of  administration.  The  property 
will  still  be  subject,  however,  to  whatever  mortgages, 
liens,  or  incumbrances  there  may  have  been  upon  it  at 
the  time  of  the  death  of  the  deceased.  After  property 
worth  not  more  than  fifteen  hundred  dollars  is  assigned 
by  the  court  as  above  stated,  there  can  be  no  further  pro- 
ceedings in  the  administration,  unless  other  property  is 
afterwards  discovered. 

Act  of  the  Legislature,  approved  April  25,  1917; 
in  effect  July  27,  1917. 

Section  1226. — CLAIMS  AGAINST  THE  ESTATE. — After 
property  has  been  appropriated  from  the  estate  for  the 
support  of  the  widow  or  minor  children,  as  provided  by 
law,  the  claims  of  creditors  are  to  be  next  considered. 

Section  1227. — NOTICE  TO  CBEDITORS. — Every  executor 
or  administrator  must,  immediately  after  his  letters  are 
issued,  cause  to  be  published  in  some  newspaper  of  the 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  937 

county,  if  there  be  one,  if  not,  then  in  such  newspaper  as 
may  be  designated  by  the  judge  or  court,  a  notice  to  the 
creditors  of  the  decedent,  requiring  all  persons  having 
claims  against  said  decedent  to  file  them,  with  the  neces- 
sary vouchers,  in  the  office  of  the  clerk  of  the  court  from 
which  the  letters  were  issued,  or  to  exhibit  them,  with 
the  necessary  vouchers,  to  the  executor  or  administrator, 
at  the  place  of  his  residence  or  business  to  be  specified  in 
the  notice ;  provided,  said  residence  or  place  of  business 
shall  be  in  the  county  in  which  said  proceeding  is  had. 
Such  notice  must  be  published  not  less  than  once  a  week 
for  four  weeks.  In  case  such  executor  or  administrator 
resigns,  or  is  removed,  before  the  time  expressed  in  the 
notice,  his  successor  must  give  notice  only  for  the  un- 
expired  time  allowed  for  such  filing  or  presentation.  The 
notice  must  fix  the  time  on  or  before  which  claims  must 
be  filed  or  presented. 

Act  of  the  Legislature,  approved  May  3,  1919 ; 
in  effect  July  22,  1919. 

Section  1228. — CLAIMS  BARRED  IF  NOT  PRESENTED  IN 
TIME. — All  claims  arising  upon  contracts,  whether  the 
same  be  due,  not  due,  or  contingent,  and  all  claims  for 
funeral  expenses  and  expenses  of  the  last  sickness,  must 
be  presented  to  the  executor  or  administrator  within  the 
time  limited  in  the  notice  to  creditors,  and  any  claim  not 
so  presented  is  barred  forever.  But,  when  it  is  made  to 
appear  to  the  satisfaction  of  the  court  by  the  affidavit  of 
Ihe  creditor,  that  the  creditor  was  out  of  the  State  when 
1  lie  notice  was  published,  the  claim  may  be  presented  at 
any  time  before  a  decree  of  distribution  is  entered. 

Section  1229. — CLAIMS  MUST  BE  VERIFIED. — Every 
claim  presented  to  the  administrator  or  executor  must  be 
sworn  to  by  the  claimant  or  some  one  on  his  behalf,  who 
must  make  affidavit  that  the  amount  is  justly  due,  that 
no  payments  have  been  made  thereon  which  are  not 


938  BUSINESS  LAW  FOB  BUSINESS  MEN. 

credited,  and  that  there  are  no  offsets  to  the  claim  within 
the  knowledge  of  the  affiant.  The  oath  may  be  taken 
before  any  officer  authorized  to  administer  oaths.  The 
executor  or  administrator  may  also  require  satisfactory 
vouchers  to  be  produced  in  support  of  the  claim. 

Section  1230. — ALLOWANCE  AND  REJECTION  OF  CLAIMS. 
When  a  claim  has  been  presented  to  the  executor  or  ad- 
ministrator, he  must  indorse  thereon  his  allowance  or 
rejection,  with  the  day  and  date.  If  he  allows  the  claim, 
it  must  be  presented  to  the  judge  of  the  court,  who  must 
in  the  same  manner  indorse  on  it  his  allowance  or 
rejection. 

If  the  claim  be  presented  to  the  executor  or  adminis- 
trator before  the  expiration  of  the  time  limited  for  the 
presentation  of  claims,  it  will  be  presented  in  time,  though 
acted  upon  by  the  executor  or  administrator,  and  by  the 
judge,  after  the  expiration  of  such  time. 

Every  claim  which  has  been  allowed  by  the  executor 
or  administrator  and  the  judge  must  be  filed  in  the  court, 
within  thirty  days  thereafter,  and  will  then  rank  among 
the  acknowledged  debts  of  the  estate,  to  be  paid  in  due 
course  of  administration. 

Section  1231. — SUIT  ON  REJECTED  CLAIM. — When  a 
claim  is  rejected  either  by  the  executor  or  administrator, 
or  a  judge  of  the  Superior  Court,  written  notice  of  such 
rejection  shall  be  given  by  the  executor  or  administrator 
to  the  holder  of  such  claim  or  to  the  person  filing  or  pre- 
senting the  same,  and  the  holder  must  bring  suit  in  the 
proper  court  against  the  executor  or  administrator  within 
three  months  after  the  date  of  service  of  such  notice  if 
the  claim  be  then  due  or  within  two  months  after  it  be- 
comes due,  otherwise  the  claim  shall  be  forever  barred. 
If  the  residence  of  the  claimant  is  not  known,  and  the 
same  shall  be  made  to  appear  to  the  satisfaction  of  the 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  939 

court,  the  court  shall  by  its  order  require  the  notice  to 
be  served  on  the  claimant  by  filing  with  the  clerk. 

Act  of  the  Legislature,  approved  May  3,  1919; 
in  effect  July  22,  1919. 

Section  1232. — CLAIM  WHEN  SUIT  PENDING. — If  a  suit 
is  pending  against  a  person  at  the  time  of  his  death,  the 
claim  must  be  presented  to  the  administrator  or  executor, 
the  same  as  if  no  suit  had  been  commenced.  If  the  claim 
is  not  so  presented,  no  recovery  can  be  had  in  the  suit. 

Section  1233. — -PAYMENT  OF  JUDGMENTS. — When  any 
judgment  has  been  rendered  against  a  person  in  his  life- 
time, no  execution  can  be  issued  on  the  judgment  after  his 
death,  but  it  must  be  presented  to  the  executor  or  admin- 
istrator in  the  same  manner  as  any  other  claim;  and,  if 
justly  due  and  unsatisfied,  it  must  be  paid  in  due  course 
of  administration. 

Section  1234. — ALLOWANCE  OF  CLAIM  IN  PART. — When- 
ever any  claim  is  presented  to  an  executor  or  adminis- 
trator or  to  a  judge,  and  he  is  willing  to  allow  the  claim 
in  part,  he  must  state  in  his  indorsement  the  amount  he 
is  willing  to  allow.  If  the  creditor  refuses  to  accept  the 
amount  allowed  in  satisfaction  of  his  claim,  and  sues 
upon  it,  he  will  not  be  allowed  any  costs  unless  he  re- 
covers a  greater  amount. 

Section  1235. — STATUTE  OF  LIMITATIONS. — No  claim 
can  be  allowed  by  the  executor  or  administrator,  or  by  a 
judge  of  the  Superior  Court,  which  is  barred  by  the 
statute  of  limitations. 

No  claim  against  any  estate,  which  has  been  presented 
and  allowed,  is  affected  by  the  statute  of  limitations  pend- 
ing the  proceedings  for  the  settlement  of  the  estate. 

Section  1236. — CLAIM  OF  EXECUTOR  OR  ADMINISTRATOR. 
If  the  executor  or  administrator  is  himself  a  creditor,  his 
claim,  duly  authenticated  by  affidavit,  must  be  presented 
for  allowance  or  rejection  to  the  judge  of  the  court.  The 


940  BUSINESS  LAW  FOR  BUSINESS  MEN. 

judge  may  allow  or  reject  the  claim.  Its  allowance  by 
the  judge  is  sufficient  evidence  of  its  correctness.  If  the 
claim  of  an  executor  or  administrator  is  rejected  by  the 
judge,  he  may  sue  the  estate,  and  summons  in  the  suit 
can  be  served  upon  the  judge. 

Section  1237. — FAILURE  TO  PRESENT  MORTGAGE  CLAIM. 
If  a  mortgagee  fails  to  present  his  claim  against  the 
estate  to  the  executor  or  administrator,  within  the  time 
required  by  law,  he  will  not  altogether  lose  his  debt.  He 
may  still  sue  upon  the  mortgage,  because  it  was  a  lien 
upon  the  property  of  the  deceased  during  his  lifetime. 
But,  not  having  presented  his  claim  as  required  by  law, 
he  must  look  only  to  the  property  of  the  estate  covered 
by  his  mortgage  for  the  collection  of  the  amount  due  him 
He  will  get  it  all,  if  the  property  will  sell  for  enough  to 
pay  it.  But  if  the  money  cannot  be  got  out  of  the  mort- 
gaged property,  by  failure  to  present  the  mortgage  claim 
he  loses  the  right  to  have  other  property  of  the  estate 
applied  to  the  payment  of  the  deficiency.  Where  a  mort- 
gage claim  is  not  presented  against  the  estate,  the  debt 
must  be  collected  out  of  the  mortgaged  property,  or  not 
at  all;  and  no  attorney  fees  can  be  recovered  upon  such 
a  claim  not  presented,  even  though  the  mortgage  may 
have  provided  for  attorney  fees. 

Code  of  Civil  Procedure,  Sections  1490,  1491, 
1493,  1494,  1496,  1497,  1498,  1499,  1500,  1502, 
1503, 1505. 

Section  1238. — ESTATE  CHARGEABLE  WITH  DEBTS. — All 
the  property  of  a  decedent  shall  be  chargeable  with  the 
payment  of  the  debts  of  the  deceased,  the  expenses  of 
administration,  and  the  allowance  to  the  family,  except 
as  otherwise  provided.  And  the  said  property,  personal 
and  real,  may  be  sold.  There  shall  be  no  priority  as  be- 
tween personal  and  real  property  for  the  above  purposes. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  941 

Section  1239. — SALE  OF  PBOPBBTY  TO  PAY  DEBTS. — The 
executor  or  administrator  may  sell  any  property  of  the 
estate  of  a  decedent  without  order  of  court,  and  at  either 
public  or  private  sale,  as  the  executor  or  administrator 
may  determine;  but  no  sale  of  such  property  is  valid 
unless  the  same  be  under  oath  reported  to  and  confirmed 
by  the  court,  and  the  title  to  the  property  does  not  pass 
until  such  sale  be  confirmed  by  the  court. 

(a)  Perishable  and  Depreciating  Property  to  Be  Sold. 
At  any  time  after  receiving  letters,  the  executor,  admin- 
istrator, or  special  administrator  may  sell  perishable  and 
other  personal  property  likely  to  depreciate  in  value,  or 
which  will  incur  loss  or  expense  by  being  kept,  and  so 
much  other  personal  property  as  may  be  necessary  to 
pay  the  allowance  made  to  the  family  of  the  decedent. 
The  executor,  administrator,  or  special  administrator  is 
responsible  for  the  property,   unless,   after   making  a 
sworn  return,  and  on  a  proper  showing,  the  court  shall 
approve  the  sale. 

(b)  Selling   Personal   Property. — If  claims    against 
the  estate  have  been  allowed,  and  a  sale  of  property  is 
necessary  for  their  payment,  or  for  the  expenses  of  ad- 
ministration, or  for  the  payment  of  legacies,  the  executor 
or  administrator  may  sell  so  much  of  the  personal  prop- 
erty as  may  be  necessary  therefor.    He  may  also  make 
a  sale  from  time  to  time,  so  long  as  any  personal  prop- 
erty remains  in  his  hands,  and  sale  thereof  is  necessary. 
If  it  appear  for  the  best  interests  of  the  estate,  he  may, 
at  any  time  after  filing  the  inventory,  in  like  manner, 
and  after  giving  notice  by  publication  for  two  weeks  in 
a  newspaper  of  general  circulation,  printed  and  published 
in  the  county,  sell  the  whole  of  the  personal  property  be- 
longing to  the  estate,  whether  necessary  to  pay  debts  or 
not ;  provided,  that  the  court  may,  by  order,  shorten  the 
time  of  notice  to  like  publication  for  one  week. 

(c)  Order  of  Sales. — In  making  orders  and  sales  for 
the  payment  of  debts  or  family  allowance,  such  articles 
as  are  not  necessary  for  the  support  and  subsistence  of 


942  BUSINESS  LAW  FOE  BUSINESS  MEN. 

the  family   of  the  deceased,   or  are   not   specially  be- 
queathed, must  be  first  sold. 

(d)  When  Executor  or  Administrator  May  Sell  Prop- 
erty.— When  a  sale  of  property  of  the  estate  is  necessary 
to  pay  the  allowance  of  the  family,  or  the  debts  out- 
standing against  the  decedent,  or  the  debts,  expenses,  or 
charges  of  administration,  or  legacies ;  or  when  it  is  for 
the  advantage,  benefit,  and  best  interests  of  the  estate, 
and  those  interested  therein,  that  the  real  estate,  or  some 
part  thereof,  be  sold,  the  executor  or  administrator  may 
sell  any  real  as  well  as  personal  property  of  the  estate. 

(e)  Interested  Persons  May  Apply  for  Order  of  Sale. 
If  the  executor  or  administrator  neglects  or  refuses  to 
sell  the  property  of  the  estate  when  it  is  necessary  or 
when  it  is  for  the  advantage,  benefit  and  best  interests 
of  the  estate  and  those  interested  therein,  that  the  real 
estate  or  some  portion  thereof  be  sold,  any  person  in- 
terested may  make  application  to  the  court,  that  the 
executor  or  administrator  be  required  to  sell,  and  notice 
of  such  application  must  be  given  to  the  executor  or  ad- 
ministrator before  the  hearing. 

(f )  Posting  of  Public  Auction  Sale  Notices. — When  a 
sale  is  to  be  made  at  public  auction,  notice  of  the  time  and 
place  of  sale  must  be  posted  in  three  of  the  most  public 
places  in  the  county  in  which  the  land  is  situated,  ana 
published  in  a  newspaper,  if  there  be  one  printed  in  the 
same  county,  but  if  none,  then  in  such  paper  as  the  court 
may  direct,  for  two  weeks  successively  next  before  the 
sale;  provided,  however,  that  when  it  appears  from  the 
inventory  and  appraisement  that  the  value  of  the  whole 
estate  does  not  exceed  five  hundred  dollars  the  court,  or 
a  judge  thereof,  may  in  his  discretion  dispense  with  the 
publication  in  a  newspaper  and  order  notices  be  posted. 
The  lands  and  tenements  to  be  sold  must  be  described 
with  common  certainty  in  the  notice. 

(g)  Private  Sale  of  Real  Estate. — When  a  sale  of 
real  estate  is  to  be  made  at  private  sale,  notice  of  the 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  943 

same  must  be  posted  up  in  three  of  the  most  public  places 
in  the  county  in  which  the  land  is  situated,  and  published 
in  a  newspaper,  if  there  be  one  printed  in  the  same 
county,  if  none,  then  in  such  paper  as  the  court  or  judge 
may  direct,  for  two  weeks  successively  next  before  the 
day  on  or  after  which  the  sale  is  to  be  made,  in  which  the 
lands  and  tenements  to  be  sold  must  be  described  with 
common  certainty.  The  notice  must  state  a  day  on  or 
after  which  the  sale  will  be  made,  and  a  place  where  offers 
or  bids  will  be  received.  The  day  last  referred  to  must 
be  at  least  fifteen  days  from  the  first  publication  of 
notice;  and  the  sale  must  not  be  made  before  that  day, 
but  must  be  made  within  six  months  thereafter.  The  bids 
or  offers  must  be  in  writing  and  may  be  left  at  the  place 
designated  in  the  notice,  or  delivered  to  the  executor  or 
administrator  personally,  or  may  be  filed  in  the  office  of 
the  clerk  of  the  court  to  which  the  return  of  sale  must 
be  made,  at  any  time  after  the  first  publication  of  the 
notice  and  before  the  making  of  the  sale.  If  it  be  shown 
that  it  will  be  for  the  best  interests  of  the  estate  the 
court  or  judge  may,  by  an  order,  shorten  the  time  of 
notice,  which  shall  not,  however,  be  less  than  one  week, 
and  may  provide  that  the  sale  may  be  made  on  or  after 
a  day  less  than  fifteen  but  not  less  than  eight  days  from 
the  first  publication  of  the  notice,  in  which  case  the  notice 
of  sale  and  the  sale  may  be  made  to  correspond  with 
such  order;  provided,  however,  that  when  it  appears 
from  the  inventory  and  appraisement  that  the  value  of 
the  whole  estate  does  not  exceed  five  hundred  dollars 
the  court,  or  a  judge  thereof,  may  in  his  discretion  dis- 
pense with  the  publication  in  a  newspaper  and  order 
notices  be  posted.  The  lands  and  tenements  to  be  sold 
must  be  described  with  common  certainty  in  the  notice. 
The  executor  or  administrator,  after  making  any 
sale  of  real  estate,  must  make  a  return  of  his  proceed- 
ings to  the  court,  which  must  be  filed  in  the  office  of  the 
clerk  at  any  time  subsequent  to  the  sale.  A  hearing  upon 


944  BUSINESS  LAW  FOR  BUSINESS  MEN. 

the  return  of  the  proceedings  may  be  asked  for  in  the 
return  or  by  petition  subsequently,  and  thereupon  the 
clerk  must  fix  the  day  for  the  hearing,  of  which  notice 
of  at  least  ten  days  must  be  given  by  the  clerk,  by  no- 
tices posted  in  three  public  places  in  the  county  or  by 
publication  in  a  newspaper,  and  must  briefly  indicate  the 
land  sold,  and  must  refer  to  the  return  for  further  par- 
ticulars. Upon  the  hearing  the  court  must  examine  into 
the  necessity  for  the  sale,  or  the  advantage,  benefit  and 
interest  of  the  estate  in  having  the  sale  made,  and  must 
examine  the  return  and  witnesses  in  relation  to  the  sale, 
and  if  good  reason  does  not  exist  for  such  sale,  or  if  the 
proceedings  for  the  sale  were  unfair  or  the  sum  bid  dis- 
proportionate to  the  value  and  it  appears  that  a  sum 
exceeding  such  bid  at  least  ten  per  cent  exclusive  of  the 
expenses  of  a  new  sale  may  be  obtained,  the  court  may 
vacate  the  sale  and  direct  another  to  be  had,  of  which 
notice  must  be  given  and  the  sale  in  all  respects  con- 
ducted as  if  no  previous  sale  had  taken  place.  If  an  offer 
of  ten  per  cent  more  in  amount  than  that  named  in  the 
return  be  made  to  the  court  in  writing,  by  a  responsible 
person,  it  is  in  the  discretion  of  the  court  to  accept  such 
offer  and  confirm  the  sale  to  such  person  or  to  order  a 
new  sale. 

(h)  Order  of  Confirmation  of  Sale. — If  it  appears  to 
the  court  that  there  is  reason  for  a  sale  and  that  the  sale 
was  legally  made  and  fairly  conducted,  and  that  the  sum 
bid  was  not  disproportionate  to  the  value  of  the  prop- 
erty sold,  and  that  a  greater  sum  cannot  be  obtained,  or 
if  the  increased  bid  be  made  and  accepted  by  the  court, 
flic  court  must  make  an  order  confirming  the  sale,  and 
directing  conveyances  to  be  executed.  The  sale,  from 
that  time,  is  confirmed  and  valid,  and  a  certified  copy 
of  the  order  confirming  it  and  directing  conveyances  to 
be  executed  must  be  recorded  in  the  office  of  the  recorder 
of  the  county  in  which  the  land  sold  is  situated.  If,  after 
the  confirmation,  the  purchaser  neglects  or  refuses  to 
comply  with  the  terms  of  the  sale,  the  court  may,  on 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  945 

motion  of  the  executor  or  administrator,  and  after  notice 
to  the  purchaser,  order  a  resale  to  be  made  of  the  prop- 
erty. If  the  amount  realized  on  such  resale  does  not 
cover  the  bid  and  the  expenses  of  the  previous  sale,  such 
purchaser  is  liable  for  the  deficiency  to  the  estate. 

(i)  Conveyances. — Conveyances  must  thereupon  be 
executed  to  the  purchaser  by  the  executor  or  adminis- 
trator, and  they  must  refer  to  the  order  of  the  court 
confirming  the  sale  of  the  property  of  the  estate,  and 
directing  conveyances  thereof  to  be  executed,  and  to  the 
record  of  the  order  of  confirmation  in  the  office  of  the 
county  recorder,  either  by  the  date  of  such  recording, 
or  by  the  date,  volume,  and  page  of  the  record,  and  such 
reference  shall  have  the  same  effect  as  if  the  orders  were 
at  large  inserted  in  the  conveyance.  Conveyances  so 
made  convey  all  the  right,  title,  interest,  and  estate  of 
the  decedent,  in  the  premises,  at  the  time  of  his  death; 
if  prior  to  the  sale,  by  operation  of  law  or  other-wise,  the 
estate  has  acquired  any  right,  title,  or  interest  in  the 
premises,  other  than  or  in  addition  to  that  of  the  de- 
cedent at  the  time  of  his  death,  such  right,  title,  or  in- 
terest also  passes  by  such  conveyances. 

(j)  Commissions  for  Sales  of  Real  Estate. — Any 
executor  or  administrator  may  enter  into  a  contract  with 
any  bona  fide  real  estate  agent  to  secure  a  purchaser  for 
any  real  property  belonging  to  an  estate,  which  contract 
shall  provide  for  payment  to  such  agent  out  of  the  pro- 
ceeds of  sale  to  any  purchaser  secured  by  him  of  a  com- 
mission, the  amount  of  which  must  be  fixed  and  allowed 
by  the  court  upon  confirmation  of  the  sale.  If  a  sale  to 
a  purchaser  obtained  by  such  agent  is  returned  to  the 
court  for  confirmation  and  said  sale  be  confirmed  to  such 
purchaser,  such  contract  shall  be  binding  and  valid  as 
against  the  estate  for  the  amount  so  fixed  and  allowed 
by  the  court. 

By  the  execution  of  any  such  contract  no  personal 
liability  shall  attach  to  the  executor  or  administrator, 


946  BUSINESS  LAW  FOE  BUSINESS  MEN. 

aud  no  liability  of  any  kind  shall  be  incurred  by  the 
estate  unless  an  actual  sale  is  made  and  confirmed. 

(k)  Sale  of  Contracts  for  Purchase  of  Lands. — If  a 
decedent,  at  the  time  of  his  death,  was  possessed  of  a 
contract  for  the  purchase  of  lands,  his  interest  in  such 
land  and  under  such  contract  may  be  sold  by  his  executor 
or  administrator,  in  the  same  manner  as  if  he  had  died 
seized  of  such  land,  and  the  same  proceedings  may  be 
had  for  that  purpose  as  are  prescribed  for  the  sale  of 
lands  of  which  he  died  seized. 

(1)  Holder  of  Lien  or  Mortgage  May  Purchase 
Lands. — At  any  sale  of  lands  upon  which  there  is  a 
mortgage  or  lien,  the  holder  thereof  may  become  the 
purchaser,  and  his  receipt  for  the  amount  due  him  from 
the  proceeds  of  the  sale  is  a  payment  pro  tanto.  If  the 
amount  for  which  he  purchased  the  property  is  insuffi- 
cient to  defray  the  expenses  and  discharge  his  mortgage 
or  lien,  he  must  pay  the  court,  or  the  clerk  thereof  an 
amount  sufficient  to  pay  such  expenses. 

Act  of  the  Legislature,  approved  May  25,  1919 ; 
in  effect  July  25,  1919. 

Section  1240. — SALE  UNDER  A  WILL. — When  property 
is  directed  by  will  to  be  sold,  or  authority  is  given  in 
the  will  to  sell  property,  the  executor  may  sell  any  prop- 
erty of  the  estate  without  the  order  of  the  court,  and 
either  by  public  or  private  sale,  and  with  or  without 
notice ;  but  the  executor  must  make  a  return  to  the  court 
of  such  sales,  as  in  other  cases;  and  if  directions  are 
made  in  the  will  as  to  the  mode  of  selling,  or  the  par- 
ticular property  to  be  sold,  such  directions  must  be  ob- 
served. In  either  case  no  title  passes  unless  the  sale  is 
confirmed  by  the  court. 

Code  of  Civil  Procedure,  Section  1561. 

Section  1241. — COMPENSATION  OF  EXECUTORS  AND  AD- 
MINISTRATORS.— When  no  compensation  is  provided  by 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  947 

the  will,  or  the  executor  renounces  all  claim  thereto,  he 
must  be  allowed  commissions  upon  the  amount  of  estate 
accounted  for  by  him,  as  follows :  For  the  first  thousand 
dollars,  at  the  rate  of  seven  per  cent;  for  the  next  nine 
thousand  dollars,  at  the  rate  of  four  per  cent;  for  the 
next  ten  thousand  dollars,  at  the  rate  of  three  per  cent; 
for  the  next  thirty  thousand  dollars,  at  the  rate  of  two 
per  cent ;  for  the  next  fifty  thousand  dollars,  at  the  rate 
of  one  per  cent ;  and  for  all  above  one  hundred  thousand 
dollars,  at  the  rate  of  one  half  of  one  per  cent.  If  there 
are  two  or  more  executors  the  compensation  shall  be 
apportioned  among  them  by  the  court  according  to  the. 
services  actually  rendered  by  them  respectively.  The 
same  commissions  shall  be  allowed  to  administrators. 
In  all  cases,  such  further  allowance  may  be  made  as  the 
court  may  deem  just  and  reasonable  for  any  extraor- 
dinary service,  but  the  total  amount  of  such  extra  allow- 
ance must  not  exceed  one  half  the  amount  of  commis- 
sions allowed  by  this  section.  Where  the  property  of 
the  estate  is  distributed  in  kind,  and  involves  no  labor 
beyond  the  custody  and  distribution  of  the  same,  the 
commission  shall  be  computed  on  all  the  estate  above  the 
value  of  twenty  thousand  dollars,  at  one  half  of  the 
rates  fixed  in  this  section.  Public  administrators  shall 
receive  the  same  compensation  and  allowances  as  are 
allowed  in  this  title  to  other  administrators.  All  con- 
tracts between  an  executor  or  administrator  and  an  heir, 
devisee  or  legatee,  for  a  higher  compensation  than  that 
allowed  by  this  section,  shall  be  void. 

Code  of  Civil  Procedure,  Section  1618. 

Section  1242. — ATTORNEY  FEES. — Executors  and  ad- 
ministrators must  be  allowed,  for  fees  of  their  attorneys, 
for  conducting  the  ordinary  probate  proceedings,  the 
same  amounts  specified  in  the  preceding  sections  as  com- 
missions for  their  own  services. 

In  all  cases,  such  further  allowance  may  be  made  as 
the  court  may  deem  just  and  reasonable,  for  any  extraor- 


948  BUSINESS  LAW  FOE  BUSINESS  MEN. 

diiiary  service,  such  as  sales  or  mortgages  of  real  estate, 
contested  or  litigated  claims  against  the  estate,  litigation 
in  regard  to  the  property  of  the  estate,  and  such  other 
litigation  as  it  may  become  necessary  for  the  executor  or 
administrator  to  prosecute  or  defend. 

Code  of  Civil  Procedure,  Section  1619. 

Section  1243. — PAYMENT  OP  DEBTS  BEARING  INTEREST. 
If  there  be  any  debt  of  the  decedent  bearing  interest, 
whether  filed  or  not,  or  whether  presented  or  not,  the 
executor  or  administrator  may,  by  order  of  the  court, 
pay  the  amount  then  accumulated  and  unpaid,  or  any 
part  thereof,  at  any  time  when  there  are  sufficient  funds 
properly  applicable  thereto,  whether  said  claim  be  then 
due  or  not;  and  interest  shall  thereupon  cease  to  accrue 
upon  the  amount  so  paid. 

Code  of  Civil  Procedure,  Section  1513. 

Section  1244. — WHEN  CLAIMANT  CANNOT  BE  FOUND. — 
Whenever  any  claim  has  been  filed  or  presented  and 
shall  have  been  approved  by  the  executor  or  adminis- 
trator and  by  the  judge,  but  the  same  has  not  been  paid, 
and  the  estate  is  in  all  other  respects  ready  to  be  closed, 
if  it  be  made  to  appear  to  the  satisfaction  of  the  court  or 
judge,  by  affidavit,  or  by  testimony  taken  in  open  court, 
that  the  same  cannot  be,  and  has  not  been,  paid  because 
the  claimant  cannot  be  found,  the  court  or  judge  shall 
make  an  order  fixing  the  amount  of  said  claim,  with  in- 
terest, if  any,  and  directing  the  executor  or  adminis- 
trator to  deposit  the  amount  with  the  county  treasurer 
of  the  county  in  which  the  estate  is  being  probated,  who 
shall  give  a  receipt  for  the  same,  and  who  shall  be  liable 
upon  his  official  bond  therefor.  Such  executor  or  ad- 
ministrator shall  at  once  make  the  deposit  in  accordance 
with  such  order  of  court  and  shall  forthwith  proceed  to 
close  up  and  settle  such  estate.  Upon  the  final  settle- 
ment of  his  accounts,  the  receipt  of  such  treasurer  shall 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  949 

be  received  as  a  proper  voucher  for  the  payment  of  such 
claim,  and  shall  have  the  same  force  and  effect  as  if 
executed  by  such  claimant. 

When  the  amount  so  deposited  is  not  claimed  within 
five  years  the  court  or  judge,  upon  such  showing  by  the 
affidavit  of  the  county  treasurer,  must  direct  the  same  to 
be  deposited  in  the  state  treasury  for  the  benefit  of  such 
claimant,  or  his  legal  representative  to  be  paid  to  him 
whenever,  within  five  years  after  such  deposit,  proof  to 
the  satisfaction  of  the  state  controller  and  state  treas- 
urer is  produced  that  he  is.  entitled  thereto.  When  so 
claimed,  the  evidence  and  the  joint  order  of  the  con- 
troller and  treasurer  must  be  filed  by  the  treasurer  as 
his  voucher,  and  the  amount  of  the  claim  paid  to  the 
claimant,  or  his  legal  representative,  on  filing  the  proper 
receipt.  If  no  one  claims  the  amount,  as  herein  pro- 
vided, the  claim  devolves  and  escheats  to  the  people  of 
the  State  of  California  and  shall  be  placed  by  the  state 
treasurer  to  the  credit  of  the  school  fund. 

Code  of  Civil  Procedure,  Section  1514. 

(a)  Form  of  Creditor's  Claim. — The  following  is  a 
form  of  creditor's  claim  against  the  estate  of  a  deceased 
person : 

In  the  Superior  Court  of  the County 

of ,  State  of  California. 

In  the  matter  of  the  estate  of  John  Smith,  Deceased. 

Los  Angeles,  Cal., ,  19 

Letters  as  Administrator  in  the  estate  of  the  said 
John  Smith,  deceased,  having  been  granted  to  Martin 
Green,  the  undersigned,  a  creditor  of  said  deceased,  pre- 
sents his  claim  against  the  estate  of  said  deceased,  with 
the  necessary  vouchers,  to  said  Martin  Green,  Adminis- 
trator, for  approval,  as  follows,  to-wit : 

Estate  of  John  Smith,  Deceased. 

To  Samuel  Brown,  Dr. 

(Here  insert  statement  of  demand.) 


950  BUSINESS  LAW  FOR  BUSINESS  MEN. 

STATE  OF  CALIFORNIA,  1  gg 
COUNTY  OF ] 

Samuel  Brown,  whose  foregoing  claim  is  herewith 
presented  to  the  Administrator  of  the  estate  of  said 
deceased,  being  duly  sworn,  says,  that  the  amount  there- 
of, to-wit,  the  sum  of Dollars 

is  justly  due  to  said  claimant,  that  no  payments  have 
been  made  thereon  which  are  not  credited,  and  that  there 
are  no  offsets  to  the  same  to  the  knowledge  of  the 
claimant  and  affiant. 

Subscribed  and  sworn  to  before  me  this day 

of ,  19 


Notary  Public  in  and  for  said  County  and  State. 

Section  1245. — PARTIAL  ALLOWANCE  TO  EXECUTOR,  AD- 
MINISTRATOR OR  ATTORNEY. — At  any  time  after  one  year 
from  the  admission  of  a  will  to  probate,  or  the  granting  of 
letters  of  administration,  any  executor,  or  adminis- 
trator, may,  upon  such  notice  to  the  other  parties  in- 
terested in  the  estate  as  the  court  shall  by  order  require, 
apply  to  the  court  for  an  allowance  to  himself  upon  his 
commissions,  and  the  court  shall  on  the  hearing  of  such 
application  make  an  order  allowing  such  executor  or 
administrator  such  portion  of  his  commissions  as  to  the 
court  shall  seem  proper,  and  the  portion  so  allowed  may 
be  thereupon  charged  against  the  estate. 

Any  attorney  who  has  rendered  services  to  an  execu- 
tor or  administrator  may  at  any  time  during  the  admin- 
istration, and  upon  such  notice  to  the  other  parties  in- 
terested in  the  estate  as  the  court  shall  by  order  require, 
apply  to  the  court  for  an  allowance  to  himself  of  com- 
pensation therefor,  and  the  court  shall  on  the  hearing  of 
such  application  make  an  order  requiring  the  executor 
or  administrator  to  pay  to  such  attorney  out  of  the  estate 
such  compensation  on  account  of  services  rendered  by 
such  attorney  up  to  the  date  of  such  order  as  to  the  court 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  951 

shall  seem  proper,  and  such  payment  shall  be  forth- 
with made. 

Act  of  the  Legislature,  approved  April  7,  1911. 

Section  1246. — ACCOUNTS  OF  EXECUTORS  AND  ADMIN- 
ISTRATORS.— When  required  by  the  court,  either  upon  its 
own  motion  or  upon  the  application  of  any  person  in- 
terested in  the  estate,  the  executor  or  administrator 
must  render  an  account  under  oath,  showing  the  amount 
of  money  received  and  expended  by  him,  the  amount  of 
all  claims  presented  against  the  estate,  and  the  names  of 
the  claimants,  and  all  other  matters  necessary  to  show 
the  condition  of  its  affairs.  Objections  may  be  made  to 
the  correctness  of  the  account,  by  any  person  interested, 
which  the  court  will  hear  and  determine. 

Code  of  Civil  Procedure,  Section  1622. 

Section  1247. — PAYMENT  OF  DEBTS. — The  debts  of  the 
estate  must  be  paid  in  the  following  order: 

1.  Funeral  expenses ; 

2.  Expenses  of  the  last  sickness ; 

3.  Debts   having   preference    by   the   laws    of   the 
United  States; 

4.  Judgments  rendered  against  the  decedent  in  his 
lifetime,  and  mortgages  and  other  liens  in  the  order  of 
their  date; 

5.  All  other  demands  against  the  estate. 

The  preference  given  to  a  mortgage  or  lien  only  ex- 
tends to  the  proceeds  of  the  property  subject  to  the  mort- 
gage or  lien. 

Code  of  Civil  Procedure,  Sections  1643,  1644. 

Section  1248. — ERECTION  OF  MONUMENT. — Executors 
and  administrators  of  the  estates  of  deceased  persons 
have  authority  to  expend  a  reasonable  sum  out  of  the 
estate  to  erect  a  monument,  or  tombstone,  suitable  to 
mark  the  grave  of  the  deceased. 


952  BUSINESS  LAW  FOB  BUSINESS  MEN. 

Section  1249. — PARTIAL  DISTRIBUTION  OF  ESTATE.— 
Where  the  time  for  filing  or  presenting  claims  has  ex- 
pired, and  all  claims  that  have  been  allowed  have  been 
paid,  or  are  secured  by  a  mortgage  upon  real  estate  suffi- 
cient to  pay  them,  and  the  estate  is  not  in  a  condition  to 
be  finally  closed  and  distributed,  the  executor  or  admin- 
istrator, or  coexecutor  or  coadministrator,  may  present 
his  petition  to  the  court  for  ratable  payment  of  the 
legacies,  or  ratable  distribution  of  the  estate  to  all  the 
heirs,  legatees,  devisees,  or  their  assignees,  grantees  or 
successors  in  interest.  Notice  of -such  application  must 
be  given  to  all  persons  interested  in  the  estate,  in  the 
same  manner  that  notice  is  required  to  be  given  of  the 
settlement  of  the  account  of  an  executor  or  adminis- 
trator. Any  person  interested  in  the  estate  may  appear 
at  the  time  named  and  resist  the  application.  If  at  the 
hearing,  it  appears  that  the  allegations  in  the  petition  of 
said  executor,  administrator,  coexecutor,  or  coadminis- 
trator, are  true,  and  the  court  is  satisfied  that  no  injury 
can  result  to  the  estate  by  granting  the  petition,  the 
court  must  make  an  order  directing  the  executor  or 
executors,  administrator  or  administrators,  as  the  case 
may  be,  to  deliver  to  the  heirs,  legatees,  devisees,  or  to 
their  assigns,  grantees  or  successors  in  interest  the 
whole  portion  of  the  estate  to  which  they  may  be  entitled, 
or  only  a  part  thereof,  designating  it.  The  costs  of  the 
proceedings  under  this  section  must  be  paid  by  the 
estate,  excepting  that  in  case  a  partition  is  necessary, 
the  costs  of  such  partition  must  be  apportioned  amongst 
the  parties  interested  in  such  partition. 

Act  of  the  Legislature,  approved  May  17,  1917 ; 
in  effect  July  27,  1917. 

Section  1250. — FINAL  DISTRIBUTION  OF  ESTATE. — Upon 
the  final  settlement  of  the  accounts  of  the  executor  or 
administrator,  or  at  any  subsequent  time,  upon  the  appli- 
cation of  the  executor  or  administrator,  or  of  any  heir, 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  953 

legatee,  devisee  (or  his  assignee,  grantee  or  successor 
in  interest),  the  court  must  proceed  to  distribute  the 
residue  of  the  estate  in  the  hands  of  the  executor  or  ad- 
ministrator, if  any,  among  the  persons  who  by  law  are 
entitled  thereto ;  and  if  the  decedent  has  left  a  surviving 
child,  or  the  issue  of  a  deceased  child,  and  any  of  them, 
before  the  close  of  the  administration,  have  died  while 
under  age  and  not  having  been  married,  no  administra- 
tion on  such  deceased  child's  estate  is  necessary,  but  all 
the  estate  which  such  deceased  child  was  entitled  to  by 
inheritance  must,  without  administration,  be  distributed 
as  provided  by  law.  A  statement  of  any  receipts  ana 
disbursements  of  the  executor  or  administrator,  since 
the  rendition  of  his  final  account,  must  be  reported  and 
filed  at  the  time  of  making  such  distribution. 

Act  of  the  Legislature,  approved  April  24,  1911. 

Section  1251. — SUCCESSION  TO  PKOPEKTY. — If  a  person 
dies,  leaving  a  will,  his  property  goes  to  the  persons 
named  therein  as  legatees. 

Who  may  make  a  will,  who  may  take  by  will,  and 
what  may  be  disposed  of  by  will,  has  been  discussed 
under  the  heading  "Wills." 

We  now  consider  how  the  property  of  a  person  who 
dies,  leaving  no  will,  will  descend  upon  his  death,  and  to 
whom  it  will  go  in  succession  as  his  heirs  at  law. 

The  Code  defines  the  term  succession,  as  the  coming 
in  of  another  to  take  the  property  of  one  who  dies  with- 
out disposing  of  it  by  will.  The  property,  both  real  and 
personal,  of  one  who  dies  without  disposing  of  it  by  will, 
passes  to  the  heirs  of  the  intestate,  subject  to  the  control 
of  the  probate  court,  and  to  the  possession  of  any  ad- 
ministrator appointed  by  the  court  for  the  purposes  of 
administration.  When  a  person  dies  without  disposing 
of  his  property  by  will,  it  is  succeeded  to  and  must  be 
distributed,  subject  to  the  payment  of  his  debts,  in  the 
following  manner : 


954  BUSINESS  LAW  FOIl  BUSINESS  MEN. 

1.  If  the  decedent  leaves  a  surviving  husband  or 
wife,  and  only  one  child,  or  the  lawful  issue  of  one  child, 
in  equal  shares  to  the  surviving  husband,  or  wife  and 
child,  or  issue  of  such  child.    If  the  decedent  leaves  a 
surviving  husband  or  wife,  and  more  than  one  child  liv- 
ing, or  one  child  living  and  the  lawful  issue  of  one  or 
more  deceased  children,  one-third  to  the  surviving  hus- 
band or  wife,  and  the  remainder  in  equal  shares  to  his 
children  and  to  the  lawful  issue  of  any  deceased  child, 
by  right  of  representation;  but  if  there  is  no  child  of 
decedent  living  at  his  death,  the  remainder  goes  to  all 
of  his  lineal  descendants;  and  if  all  of  the  descendants 
are  in  the  same  degree  of  kindred  to  the  decedent,  they 
share  equally,  otherwise  they  take  according  to  the  right 
of  representation.    If  the  decedent  leaves  no  surviving 
husband  or  wife,  but  leaves  issue,  the  whole  estate  goes 
to  such  issue;  and  if  such  issue  consists  of  more  than 
one  child  living,  or  one  child  living  and  the  lawful  issue 
of  one  or  more  deceased  children,  then  the  estate  goes 
in  equal  shares  to  the  children  living,  or  the  child  living 
and  the  issue  of  the  deceased  child  or  children  by  right 
of  representation; 

2.  If  the  decedent  leaves  no  issue,  the  estate  goes 
one-half  to  the  surviving  husband  or  wife,  and  the  other 
half  to  the  decedent's  father  and  mother  in  equal  shares, 
and  if  either  is  dead  the  whole  of  said  half  goes  to  the 
other.     If  there  is  no  father  or  mother,  then  one-half 
goes  in  equal  shares  to  the  brothers  and  sisters  of  de- 
cedent  and   to   the   children   or   grandchildren   of   any 
deceased  brother  or  sister  by  right  of  representation. 
If  the  decedent  leaves  no  issue  nor  husband  nor  wife, 
the  estate  must  go  to  his  father  and  mother  in  equal 
shares,  or  if  either  is  dead  then  to  the  other; 

3.  If  there  is  neither  issue,  husband,  wife,  father, 
nor  mother,  then  in  equal  shares  to  the  brothers  and  sis- 
ters of  decedent  and  to  the  children  or  grandchildren 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  955 

of  any  deceased  brother  or  sister,  by  right  of  representa- 
tion ; 

4.  If  the  decedent  leaves  a  surviving  husband  or 
wife,  and  neither  issue,  father,  mother,  brother,  sister, 
nor  the  children  nor  grandchildren  of  a  deceased  brother 
or  sister,  the  whole  estate  goes  to  the  surviving  husband 
or  wife; 

5.  If  the   decedent  leaves  neither  issue,  husband, 
wife,  father,  mother,  brother  nor  sister,  the  estate  must 
go  to  the  next  of  kin,  in  equal  degree,  excepting  that, 
when  there  are  two  or  more  collateral  kindred,  in  equal 
degree,  but  claiming  through  different  ancestors,  those 
who  claim  through  the  nearest  ancestor  must  be  pre- 
ferred   to    those    claiming   through   an    ancestor   more 
remote ; 

6.  If  the  decedent  leaves  several  children,  or  one 
child  and  the  issue  of  one  or  more  children,  and  any  such 
surviving  child  dies  under   age  and  not  having  been 
married,  all  the  estate  that  came  to  the  deceased  child  by 
inheritance  from  such  decedent  descends  in  equal  shares 
to  the  other  children  of  the  same  parent  and  to  the  issue 
of  any  other  children  who  are  dead,  by  right  of  repre- 
sentation ; 

7.  If,  at  the  death  of  such  child,  who  dies  under 
age,  not  having  been  married,  all  the  other  children  of 
his  parents  are  also  dead,  and  any  of  them  has  left  issue, 
the  estate  that  came  to  such  child  by  inheritance  from  his 
parent  descends  to  the  issue  of  all  other  children  of  the 
same  parent ;  and  if  all  the  issue  are  in  the  same  degree 
of  kindred  to  the  child,  they  share  the  estate  equally, 
otherwise  they  take  according  to  the  right  of  representa- 
tion; 

8.  If  the  deceased  is  a  widow,  or  widower,  and 
leaves  no  issue,  and  the  estate,  or  any  portion  thereof, 
was  common  property  of  such  decedent  and  his  or  her 
deceased  spouse,  while  such  spouse  was  living,  such 
property  goes  in  equal  shares  to  the  children  of  such 
deceased  spouse  and  to  the  decedents  of  such  children 


956  BUSINESS  LAW  FOB  BUSINESS  MEN. 

by  right  of  representation,  and  if  none,  then  one-half  of 
such  common  property  goes  to  the  father  and  mother  of 
such  decedent  in  equal  shares,  or  to  the  survivor  of 
them  if  either  be  dead,  or  if  both  be  dead,  then  in  equal 
shares  to  the  brothers  and  sisters  of  such  decedent  and 
to  the  descendants  of  any  deceased  brother  or  sister  by 
right  of  representation,  and  the  other  half  goes  to  the 
father  and  mother  of  such  deceased  spouse  in  equal 
shares,  or  to  the  survivor  of  them  if  either  be  dead,  or  if 
both  be  dead,  then  in  equal  shares  to  the  brothers  and 
sisters  of  such  deceased  spouse  and  to  the  descendants 
of  any  deceased  brother  or  sister  by  right  of  representa- 
tion. 

If  the  estate,  or  any  portion  thereof,  was  separate 
property  of  such  deceased  spouse,  while  living,  and  came 
to  such  decedent  from  such  spouse  by  descent,  devise, 
or  bequest,  such  property  goes  in  equal  shares  to  the 
children  of  such  spouse  and  to  the  descendants  of  any 
deceased  child  by  right  of  representation,  and  if  none, 
then  to  the  father  and  mother  of  such  spouse,  in  equal 
shares,  or  to  the  survivor  of  them  if  either  be  dead,  or  if 
both  be  dead,  then  in  equal  shares  to  the  brothers  and 
sisters  of  such  spouse  and  to  the  descendants  of  any  de- 
ceased brother  or  sister  by  right  of  representation. 

9.  If  the  decedent  leaves  no  husband,  wife,  or  kin- 
dred, and  there  are  no  heirs  to  take  his  estate  or  any  por- 
tion thereof,  under  subdivision  eight  of  this  section,  the 
same  escheats  to  the  state  for  the  support  of  the  common 
schools. 

Act  of  the  Legislature,  in  effect  May  18,  1907. 

Section  1252. — INHERITANCE  OF  HUSBAND  AND  WIFE 
FROM  EACH  OTHER. — The  above  provisions  of  this  law, 
as  to  the  inheritance  of  the  husband  and  wife  from  each 
other,  apply  only  to  the  separate  property  of  the 
decedent. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  957 

Section  1253. — DISTRIBUTION  OF  COMMUNITY  PROP- 
ERTY ON  DEATH  OF  HUSBAND. — Upon  the  death  of  the  hus- 
band, one-half  of  the  community  property  goes  to  the 
surviving  wife,  and  the  other  half  is  subject  to  the  testa- 
mentary disposition  of  the  husband,  and  in  the  absence 
of  such  disposition,  goes  to  his  descendants  equally,  if 
such  descendants  are  in  the  same  degree  of  kindred  to 
the  deceased,  otherwise  according  to  the  right  of  repre- 
sentation ;  and  in  the  'absence  of  both  such  testamentary 
disposition  and  such  descendants,  is  subject  to  distribu- 
tion in  the  same  manner  as  the  separate  property  of  the 
husband.  In  case  of  the  dissolution  of  the  community 
by  the  death  of  the  husband,  the  entire  community  prop- 
erty is  equally  subject  to  his  debts,  the  family  allowance, 
and  the  charges  and  expenses  of  administration. 

"'*'"       •*&';  '  -z 

Section  1254. — DISTRIBUTION  OF  COMMUNITY  PROP- 
ERTY ON  DEATH  OF  WIFE. — Upon  the  death  of  the  wife, 
the  entire  community  property,  without  administration, 
belongs  to  the  surviving  husband,  unless  the  wife  has 
willed  away  her  half.  If  any  portion  of  the  community 
property  has  been  set  apart  for  the  wife  by  judicial  de- 
cree, for  her  support  and  maintenance,  this  portion  does 
not  go  to  her  husband  upon  her  death,  but  may  be  willed 
away  by  her ;  and  in  the  absence  of  her  testamentary  dis- 
position, it  will  go  to  her  heirs,  exclusive  of  her  husband. 
Civil  Code,  Sections  1400,  1401,  1402. 

Section  1255. — EIGHTS  OF  ILLEGITIMATE  CHILD.— 
Every  illegitimate  child  is  an  heir  of  the  person  who,  in 
writing,  signed  in  the  presence  of  a  competent  witness, 
acknowledges  himself  to  be  the  father  of  such  child. 
An  illegitimate  child  is  in  all  cases  the  heir  of  his  mother, 
whether  the  father  acknowledges  him  or  not.  An  illegiti- 
mate child  cannot  claim  any  part  of  the  estate  of  any 
deceased  children  or  other  heirs  of  his  father  or  mother, 
unless  his  parents  marry,  and  his  father  after  such  mar- 


958  BUSINESS  LAW  FOR  BUSINESS  MEN. 

riage  acknowledges  him  and  adopts  him  into  his  family. 
Civil  Code,  Section  1387. 

Section  1256. — ADVANCEMENTS. — Any  estate,  real  or 
personal,  that  may  have  been  given  by  the  decedent  in 
his  lifetime  as  an  advancement  to  any  child  or  other 
heir,  is  considered  a  part  of  the  estate,  so  far  as  regards 
its  division  and  distribution,  and  must  be  taken  by  the 
person  receiving  it  toward  his  share  of  the  estate.  If  the 
amount  of  the  advancement  exceeds  the  share  of  the  heir, 
lie  will  be  excluded  from  any  further  portion  in  the 
division  and  distribution  of  the  estate,  but  he  will  not  be 
required  to  refund  any  part  of  his  advancement.  If  the 
amount  advanced  be  less  than  his  share,  he  will  be  en- 
titled to  so  much  more  as  will  give  him  his  full  share  of 
the  estate.  All  gifts  and  grants  are  deemed  to  have 
been  made  as  an  advancement,  if  expressed  in  the  gift 
or  grant  to  be  so  made,  or  if  charged  in  writing  by  the 
deceased  as  an  advancement,  or  acknowledged  in  writing 
as  such  by  the  child  or  other  heir. 

Civil  Code,  Sections  1395,  1396,  1397. 

Section  1257. — DISCHABGE  OP  ADMINISTRATOR  OF 
EXECUTOR. — When  the  estate  has  been  fully  administered 
upon,  and  it  is  shown,  by  the  executor  or  administrator, 
by  the  production  of  satisfactory  vouchers,  that  he  has 
paid  all  sums  of  money  due  from  him,  and  delivered  up 
under  order  of  the  court  all  property  of  the  estate  to  the 
persons  entitled  thereto,  the  court  will  make  a  decree 
discharging  him  from  all  liability  to  be  incurred  there- 
after. 

Section  1258. — CLAIMS  PAID  WITHOUT  VOUCHERS.— 
On  the  settlement  of  his  account  the  executor  or  admin- 
istrator may  be  allowed  any  item  of  expenditure  not. 
exceeding  twenty  dollars,  for  which  no  voucher  is  pro- 
duced, if  such  item  be  supported  by  his  own  nncontra- 


BUSINESS  CONTKACTS  AND  LEGAL  OBLIGATIONS.  959 

dicated  oath  positive  to  the  fact  of  payment,  specifying 
when,  where,  and  to  whom  it  was  made ;  but  such  allow- 
ances in  the  whole  must  not  exceed  five  hundred  dollars 
against  any  one  estate,  provided,  that,  if  it  appears  by 
the  oath  to  the  account  and  is  proven  by  competent  evi- 
dence, to  the  satisfaction  of  the  court,  that  a  voucher  for 
any  disbursement  or  disbursements  whatsoever,  has 
been  lost  or  destroyed,  and  that  it  is  impossible  to  obtain 
a  duplicate  thereof,  and  that  such  item  or  items  were 
paid  in  good  faith  and  for  the  best  interests  of  the  estate, 
and  such  item  or  items  were  legal  charges  against  said 
estate,  then  the  executor  or  administrator  shall  be  al- 
lowed such  item  or  items. 

If,  upon  such  settlement  of  accounts,  it  appears  that 
debts  against  the  deceased  have  been  paid  without  affi- 
davit and  allowance  prescribed  by  statute,  and  it  shall  be 
proven  by  competent  evidence  to  the  satisfaction  of  the 
court  that  such  debts  were  justly  due,  were  paid  in  good 
faith,  that  the  amount  paid  was  the  true  amount  of  such 
indebtedness  over  and  above  all  payment  or  set-offs,  and 
that  the  estate  is  solvent,  it  shall  be  the  duty  of  the  said 
court  to  allow  the  said  sums  so  paid  in  the  settlement  of 
said  accounts. 

Act  of  the  Legislature,  approved  April  5,  1911. 

Section  1259. — DISTRIBUTION  WHEN  DECEDENT  WAS 
NOT  A  RESIDENT  OP  THE  STATE. — Upon  application  for 
distribution,  after  final  settlement  of  the  accounts  of 
administration,  if  the  decedent  was  a  non-resident  of  this 
state,  leaving  a  will  which  has  been  duly  proved  or 
allowed  in  the  state  of  his  residence,  and  an  authenticat- 
ed copy  thereof  has  been  admitted  to  probate  in  this 
state,  or  if  the  decedent  died  intestate,  and  an  adminis- 
trator has  been  duly  appointed  and  qualified  in  the  state 
of  his  residence,  and  it  is  necessary,  in  order  that  the 
estate,  or  any  part  thereof,  may  be  distributed  accord- 
ing to  the  will,  or  if  the  court  is  satisfied  that  it  is  for 


960  BUSINESS  LAW  FOR  BUSINESS  MEN. 

the  best  interests  of  the  estate,  that  the  estate  in  this 
state  should  be  delivered  to  the  executor  or  adminis- 
trator in  the  state  or  place  of  the  decedent's  residence, 
the  court  may  order  such  delivery  to  be  made,  and,  if 
necessary,  order  a  sale  of  the  real  estate,  and  a  like  de- 
livery of  the  proceeds.  The  delivery,  in  accordance  with 
the  order  of  the  court,  is  a  full  discharge  of  the  executor 
or  administrator  with  the  will  annexed  or  administrator, 
in  this  state,  in  relation  to  all  property  embraced  in 
such  order,  which,  unless  reversed  on  appeal,  binds  and 
concludes  all  parties  in  interest.  Sales  of  real  estate, 
ordered  by  virtue  of  this  section,  must  be  made  in  the 
same  manner  as  other  sales  of  real  estate  of  decedents 
by  order  of  the  court. 

Act  of  the  Legislature,  approved  April  7,  1911. 

Section  1260. — INHERITANCE  TAX  LAW. — A  tax  shall 
be  and  is  hereby  imposed  upon  the  transfer  of  any  prop- 
erty, real,  personal  or  mixed,  or  of  any  interest  therein 
or  income  therefrom,  in  trust  or  otherwise,  to  persons, 
institutions  or  corporations,  not  hereinafter  exempted, 
to  be  paid  to  the  treasurer  of  the  proper  county,  as  here- 
inafter directed,  for  the  use  of  the  state,  in  the  follow- 
ing cases : 

(1)  By  Will  of  Resident. — When  the  transfer  is  by 
will  or  by  the  intestate  or  homestead  laws  of  this  state, 
from  any  person  dying  seized  or  possessed  of  the  prop- 
erty while  a  resident  of  the  state,  or  by  any  probate 
homestead  set  apart  from  said  property. 

(2)  By  Will  of  Non-resident. — When  the  transfer  is 
by  will  or  intestate  laws  of  property  within  this  state  and 
the  decedent  was  a  non-resident  of  the  state  at  the  time 
of  his  death. 

(3)  Transfer    Without    Adequate    Consideration.— 
When  the  transfer  is  of  property  made  by  a  resident, 
or  by  a  non-resident  when  such  non-resident's  property 
is  within  this  state,  by  deed,  grant,  bargain,  sale,  assign- 


Section  1260,  page  960,  "Business  Law  for  Business  Men" — INHERIT- 
ANCE TAX — On  page  961,  in  line  8,  of  sub-division  4,  change  the  words 
"within  five  years"  so  as  to  read  "within  two  years." 

(a)  On  page  963,  strike  out  sub-divisions  (e)  and  (f)  and  substitute  the 
following:  "Upon  all  in  excess  of  $500,000  twelve  per  centum  of  such  excess." 

On  page  964,  strike  out  sub-divisions  (e)  and  (f)  paragraph  (2)  and  sub- 
stitute the  following:  (e)  "Upon  all  in  excess  of  five  hundred  thousand  dol- 
lars, eighteen  per  centum  of  such  excess." 

On  page  964,  strike  out  sub-divisions  (d),  (e)  and  (f),  paragraph  (3),  and 
substitute  the  following:  (d)  "Upon  all  in  excess  of  two  hundred  thousand 
dollars,  twenty  per  centum  of  such  excess." 

On  page  965,  strike  out  sub-divisions  (c),  (d)  and  (e),  paragraph  (4),  and 
substitute  the  following:  (c)  "Upon  all  in  excess  of  one  hundred  thousand 
dollars,  twenty  per  centum  of  such  excess." 

On  page  965,  under  "Exemptions,"  in  sub-division  (1),  add  the  following: 
"Provided,  however,  that  such  society,  corporation,  institution  or  association 
be  organized  or  existing  under  the  laws  of  this  state  or  that  the  property 
transferred  be  limited  for  use  within  this  state." 

Act  of  the  Legislature  of  California,  approved  June  3,  1921;  in  effect 
August  3,  1921. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  961 

ment  or  gift,  made  without  valuable  and  adequate  con- 
sideration in  contemplation  of  the  death  of  the  grantor, 
vendor,  assignor  or  donor,  or  intended  to  take  effect  in 
possession  or  enjoyment  at  or  after  such  death.  When 
any  such  person,  institution  or  corporation  becomes 
beneficially  entitled  in  possession  or  expectancy  to  any 
property  or  the  income  therefrom,  by  any  such  transfer, 
whether  made  before  or  after  the  passage  of  this  act. 

(4)  Taxes  to  Be  Lien  Against  Property. — Such  taxes 
shall  be  and  remain  a  lien  upon  the  property  passed  or 
transferred  until  paid,  and  the  person  to  whom  the  prop- 
erty passes  or  is  transferred,  and  all  administrators, 
executors,  and  trustees  of  every  estate  so  transferred  or 
passed,  shall  be  liable  for  any  and  all  such  taxes  until 
the  same  shall  have  been  paid;  provided,  that  no  such 
lien  shall  cease  within  five  years  from  the  date  of  the 
passage  of  this  act.    The  tax  so  imposed  shall  be  upon 
the  market  value  of  such  property  at  the  rates  herein- 
after prescribed  and  only  upon  the  excess  over  the  ex- 
emptions hereinafter  granted;  provided,  that  in  deter- 
mining the  market  value  there  shall  be  no  deduction  for 
any  family  allowance  made  out  of  said  estate. 

(5)  Exercise    of    Power    of    Appointment    Deemed 
Transfer. — Whenever  any  person  or  corporation  shall 
exercise  a  power  of  appointment  derived  from  any  dis- 
position of  property  made  either  before  or  after  the 
passage  of  this  act,  such  appointment,  when  made,  shall 
be  deemed  a  transfer  taxable  under  the  provisions  of 
this  act,  in  the  same  manner  as  though  the  property  to 
which  such  appointment  relates  belonged  absolutely  to 
the  donee  of  such  power,  and  had  been  bequeathed  or 
devised  by  such  donee  by  will;  and  whenever  any  person 
or  corporation  possessing  such  power  of  appointment 
so  derived  shall  omit  or  fail  to  exercise  the  same  within 
the  time  provided  therefor,  in  whole  or  in  part,  a  trans- 
fer taxable  under  the  provisions  of  this  act  shall  be 
deemed  to  take  place  to  the  extent  of  such  omission  or 


962  BUSINESS  LAW  FOB  BUSINESS  MEN. 

failure,  in  the  same  manner  as  though  the  persons  or 
corporations  thereby  becoming  entitled  to  the  possession 
or  enjoyment  of  the  property  to  which  such  power  relat- 
ed had  succeeded  thereto  by  a  will  of  the  donee  of  the 
power  failing  to  exercise  such  power,  taking  effect  at  the 
time  of  such  omission  or  failure. 

(a)  Rates  of  Tax. — When  the  property  or  any 
beneficial  interest  therein  so  passed  or  transferred  ex- 
ceeds in  value  the  exemption  hereinafter  specified  and 
shall  not  exceed  in  value  twenty-five  thousand  dollars, 
the  tax  hereby  imposed  shall  be : 

(1)  When  Beneficiary  Is  Husband,  Etc. — Where  the 
person  or  persons  entitled  to  any  beneficial  interest  in 
such  property  shall  be  the  husband,  wife,  lineal  issue, 
lineal  ancestor  of  the  decedent  or  any  child  adopted  as 
such  in  conformity  with  the  laws  of  this  state,  or  any 
child  to  whom  such  decedent  for  not  less  than  ten  years 
prior  to  such  transfer  stood  in  the  mutually  acknowl- 
edged relation  of  a  parent ;  provided,  however,  such  rela- 
tionship began  at  or  before  the  child's  fifteenth  birthday, 
and  was  continuous  for  said  ten  years  thereafter,  or  any 
lineal  issue  of  such  adopted  or  mutually  acknowledged 
child,  at  the  rate  of  one  per  centum  of  the  clear  value 
of  such  interest  in  such  property. 

(2)  When  Brother,  Etc. — When  the  person  or  per- 
sons entitled  to  any  beneficial  interest  in  such  property 
shall  be  the  brother  or  sister  or  a  descendant  of  a  brother 
or  sister  of  the  decedent,  a  wife  or  widow  of  a  son,  or 
the  husband  of  a  daughter  of  the  decedent,  at  the  rate 
of  three  per  centum  of  the  clear  value  of  such  interest 
in  such  property. 

(3)  When  Brother  of  Father,  Etc. — Where  the  per- 
son or  persons  entitled  to  any  beneficial  interest  in  such 
property  shall  be  the  brother  or  sister  of  the  father  or 
mother  or  a  descendant  of  a  brother  or  sister  of  the 
father  or  mother  of  the  decedent,  at  the  rate  of  four  per 
centum  of  the  clear  value  of  such  interest  in  such  prop- 
erty. 


BUSINESS  CONTBACTS  AND  LEGAL  OBLIGATIONS.  'J6.'> 

(4)  Other  Degrees  of  Consanguinity. — Where  the 
person  or  persons  entitled  to  any  beneficial  interest  in 
such  property  shall  be  in  any  other  degree  of  collateral 
consanguinity  than  is  hereinbefore  stated,  or  shall  be  a 
stranger  in  blood  to  the  decedent,  or  shall  be  a  body 
politic  or  corporate,  at  the  rate  of  five  per  centum  of  the 
clear  value  of  such  interest  in  such  property. 

(b)  Rates  on  Property  in  Excess  of  $25,000. — The 
rates  on  property  in  excess  of  $25,000,  applied  to  subdi- 
visions (1),  (2),  (3)  and  (4)  are  as  follows: 

(a)  Upon  all  in  excess  of  twenty-five  thousand  dol- 
lars and  up  to  fifty  thousand  dollars,  two  per  centum 
of  such  excess. 

(b)  Upon  all  in  excess  of  fifty  thousand  dollars  and 
up  to  one  hundred  thousand  dollars,  four  per  centum  of 
such  excess. 

(c)  Upon  all  in  excess  of  one  hundred  thousand  dol- 
lars and  up  to  two  hundred  thousand  dollars,  seven  per 
centum  of  such  excess. 

(d)  Upon  all  in  excess  of  two  hundred  thousand  dol- 
lars and  up  to  five  hundred  thousand  dollars,  ten  per 
centum  of  such  excess. 

(<>}  Upon  all  in  excess  of  five  hundred  thousand  dol- 
lars and  up  to  one  million  dollars,  twelve  per  centum  of 
such  excess. 

(/)  Upon  all  in  excess  of  one  million  dollars,  fifteen 
per  centum  of  such  excess. 

(2)  When  the  market  value  of  such  property  or  in- 
terest passed  or  transferred  to  any  of  the  persons  men- 
tioned in  subdivision  two  exceeds  twenty-five  thousand 
dollars,  the  rates  of  tax  upon  such  excess  shall  be  as 
follows : 

(a)  Upon  all  in  excess  of  twenty-five  thousand  dol- 
lars and  up  to  fifty  thousand  dollars,  six  per  centum  of 
such  excess. 

(b)  Upon  all  in  excess  of  fifty  thousand  dollars  and 
up  to  one  hundred  thousand  dollars,  nine  per  centum  of 


964  BUSINESS  LAW  FOB  BUSINESS  MEN. 

such  excess. 

(c)  Upon  all  in  excess  of  one  hundred  thousand  dol- 
lars and  up  to  two  hundred  thousand  dollars,  twelve  per 
centum  of  such  excess. 

(d)  Upon  all  in  excess  of  two  hundred  thousand  dol- 
lars and  up  to  five  hundred  thousand  dollars,  fifteen  per 
centum  of  such  excess. 

(e)  Upon  all  in  excess  of  five  hundred  thousand  dol- 
lars and  up  to  one  million  dollars,  twenty  per  centum  of 
such  excess. 

(/)  Upon  all  in  excess  of  one  million  dollars,  twenty- 
five  per  centum  of  such  excess. 

(3)  When  the  market  value  of  such  property  or  in- 
terest passed  or  transferred  to  any  of  the  persons  men- 
tioned in  subdivision  three  exceeds  twenty-five  thousand 
dollars,  the  rates  of  tax  upon  such  excess  shall  be  as 
follows : 

(a)  Upon  all  in  excess  of  twenty-five  thousand  dol- 
lars and  up  to  fifty  thousand  dollars,  eight  per  centum 
of  such  excess. 

(b)  Upon  all  in  excess  of  fifty  thousand  dollars  and 
up  to  one  hundred  thousand  dollars,  ten  per  centum  of 
such  excess. 

(c)  Upon  all  in  excess  of  one  hundred  thousand  dol- 
lars and  up  to  two  hundred  thousand  dollars,  fifteen  per 
centum  of  such  excess. 

(d)  Upon  all  in  excess  of  two  hundred  thousand  dol- 
lars and  up  to  five  hundred  thousand  dollars,  twenty  per 
centum  of  such  excess. 

(e)  Upon  all  in  excess  of  five  hundred  thousand  dol- 
lars and  up  to  one  million  dollars,  twenty-five  per  centum 
of  such  excess. 

(/)  Upon  all  in  excess  of  one  million  dollars,  thirty 
per  centum  of  such  excess. 

(4)  When  the  market  value  of  such  property  or  in- 
terest passed  or  transferred  to  any  of  the  persons  men- 
tioned in  subdivision  four  exceeds  twenty-five  thousand 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  965 

dollars,  the  rates  of  tax  upon  such  excess  shall  be  as 
follows : 

(a)  Upon  all  in  excess  of  twenty-five  thousand  dol- 
lars and  up  to  fifty  thousand  dollars,  ten  per  centum  of 
such  excess. 

(b)  Upon  all  in  excess  of  fifty  thousand  dollars  and 
up  to  one  hundred  thousand  dollars,  fifteen  per  centum 
of  such  excess. 

(c)  Upon  all  in  excess  of  one  hundred  thousand  dol- 
lars and  up  to  two  hundred  thousand  dollars,  twenty 
per  centum  of  such  excess. 

(d)  Upon  all  in  excess  of  two  hundred  thousand  dol- 
lars and  up  to  five  hundred  thousand  dollars,  twenty- 
five  per  centum  of  such  excess. 

(e)  Upon  all  in  excess  of  five  hundred  thousand  dol- 
lars, thirty  per  centum  of  such  excess. 

(c)  Exemptions. — The     following     exemptions  .  are 
allowed : 

(1)  All  property  transferred  to  societies,  corpora- 
tions, and  institutions  now  or  hereafter  exempted  by  law 
from  taxation,  or  to  any  public  corporation,  or  to  any 
society,  corporation,  institution,  or  association  of  per- 
sons engaged  in  or  devoted  to  any  charitable,  benevolent, 
educational,  public,  or  other  like  work  (pecuniary  profit 
not  being  its  object  or  purpose),  or  to  any  person,  socie- 
ty, corporation,  institution,  or  association  of  persons  in 
trust  for  or  to  be  devoted  to  any  charitable,  benevolent, 
educational,  or  public  purpose,  by  reason  whereof  any 
such  person  or  corporation  shall  become  beneficially  en- 
titled, in  possession  or  expectancy,  to  any  such  property 
or  to  the  income  thereof,  shall  be  exempt. 

(2)  Property  of  the  clear  value  of  twenty-four  thou- 
sand dollars,  transferred  to  the  widow  or  to  a  minor 
child  of  the  decedent,  and  of  ten  thousand  dollars  trans 
ferred  to  each  of  the  other  persons  described  in  the  first 
subdivision  shall  be  exempt. 


(.)6(j  BUSINESS  LAW  FOB  BUSINESS  MEN. 

(3)  Property  of  the  clear  value  of  two  thousand  dol- 
lars, transferred  to  each  of  the  persons  described  in  the 
second  subdivision  shall  be  exempt. 

(4)  Property  of  the  clear  value  of  one  thousand  dol- 
lars, transferred  to  each  of  the  persons  described  in  the 
third  subdivision  shall  be  exempt. 

(5)  Property  of  the  clear  value  of  five  hundred  dol- 
lars, transferred  to  each  of  the  persons  and  corporations 
described  in  the  fourth  subdivision  shall  be  exempt. 

California  Statutes  of  1913,  1915. 

(d)  When  Taxes  Are  Due. — All  taxes  imposed  by 
this  act  are  due  and  payable  at  the  death  of  the  decedent, 
and  if  the  same  are  paid  within  eighteen  months,  no  in- 
terest shall  be  charged  and  collected  thereon,  but  if  not 
so  paid,  interest  at  the  rate  of  ten  per  centum  per  annum 
shall  be  charged  and  collected  from  the  time  said  tax 
accrued;  provided)  that  if  said  tax  is  paid  within  six 
months  from  the  accruing  thereof  a  discount  of  five  per 
centum  shall  be  allowed  and  deducted  from  said  tax. 

(e)  Executor  to  Deduct  Tax  From  Property  Before 
Delivery  to  Legatee. — Any  administrator,  executor,  or 
trustee  having  in  charge  or  trust  any  legacy  or  prop- 
erty for  distribution,  subject  to  the  said  tax,  shall  deduct 
the  tax  therefrom,  or  if  the  legacy  or  other  property  be 
not  money  he  shall  collect  the  tax  thereon,  upon  the  mar- 
ket value  thereof,  from  the  legatee  or  person  entitled  to 
such  property,  and  he  shall  not  deliver,  or  be  compelled 
to  deliver,  any  specific  legacy  or  property  subject  to  tax 
to  any  person  until  he  shall  have  collected  the  tax  there- 
on ;  and  whenever  any  such  legacy  shall  be  charged  upon 
or  payable  out  of  real  estate,  the  executor,  administra- 
tor, or  trustee  shall  collect  said  tax  from  the  distributee 
thereof,  and  the  same  shall  remain  a  charge  on  such  real 
estate  until  paid;  if,  however,  such  legacy  be  given  in 
money  to  any  person  for  a  limited  period,  the  executor, 
administrator,  or  trustee  shall  retain  the  tax  upon  the 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  9ti 

whole  amount;  but  if  it  be  not  in  money  he  shall  make 
application  to  the  superior  court  to  make  an  apportion- 
ment, if  the  case  require  it,  of  the  sum  to  be  paid  into 
his  hands  by  such  legatees,  and  for  such  further  order 
relative  thereto  as  the  case  may  require. 

California  Statutes  of  1913,  1915,  1917. 

A.  J.  BLEDSOE,  ATTORNEY-AT-LAW,  Los  Angeles,  Cal.— 
Proof  of  Wills,  Letters  of  Administration,  Settlement  of 
Estates.  See  title  page  of  this  book  for  office  address 
of  A.  J.  Bledsoe. 


PART  XIII. 
AUTOMOBILE  LAW  OF  CALIFORNIA 

Section  1261. — AUTOMOBILE  DEFINED. — The  word 
"automobile"  is  compounded  of  other  words  taken  from 
the  Greek  and  Latin  languages,  and  modernized  in  the 
French  language.  "Auto"  is  taken  from  the  Greek,  and 
means  self.  "Mobile"  originates  from  the  Latin  mobilis, 
movable,  and  comes  to  us  from  the  French.  The  two 
joined  make  the  word  "automobile,"  resulting  in  the 
expression  of  something  movable,  to  which  we  attach 
by  implication  the  idea  of  a  vehicle. 

In  the  statutory  law  of  California,  the  word  "automo- 
bile" includes  all  vehicles  excepting  motorcycles. 

Section  1262. — AUTOMOBILE  ACT  OF  1919. — The  Legis- 
lature passed  a  law  in  1919  regulating  the  use  of  motor 
vehicles  in  the  State  of  California,  the  provisions  of 
which  are  stated  in  the  following  sections.  The  law  went 
into  effect  at  midnight  January  31,  1920. 

Section  1263. — REGISTRATION  OF  AUTOMOBILES.— 
Every  owner  of  a  motor  vehicle  which  shall  be  operated 
or  driven  upon  the  public  highways  shall,  for  each  motor 
vehicle  owned,  except  as  herein  otherwise  expressly  pro- 
vided, cause  to  be  filed,  by  mail,  or  otherwise,  with  the 
motor  department  an  application  for  registration  on  a 
blank  to  be  furnished  by  said  department  for  that  pur- 
pose, containing,  in  addition  to  such  other  particulars 
as  may  be  required  by  said  department,  a  statement  of 
the  name  and  postoffice  address  of  the  applicant  and  the 

968 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  969 

name  and  postoffice  address  of  the  legal  owner,  a  descrip- 
tion of  such  motor  vehicle,  including  the  name  of  the 
maker,  the  number,  if  any,  affixed  to  the  motor  or  engine 
by  the  maker,  the  character  of  the  motive  power,  and 
the  diameter  of  the  cylinder  bore  and  the  number  of 
cylinders;  and  with  such  application  the  applicant  shall 
deposit  the  proper  registration  fee;  provided,  that  for 
all  the  purposes  of  this  act  the  horsepower  of  any  motor 
vehicle,  except  electric  or  steam-driven  vehicles,  shall 
be  determined  by  the  formula  commonly  known  as  that 
of  the  association  of  licensed  automobile  manufacturers 
(A.  L.  A.  M.)  being  as  follows:  Square  the  diameter  of 
the  cylinder  in  inches,  multiply  by  the  number  of  cylin- 
ders, and  divide  by  two  and  five-tenths;  provided,  fur- 
ther, that  for  the  purpose  of  this  act  the  horsepower  of 
any  steam-driven  motor  vehicle  shall  be  the  horsepower 
rating  fixed  and  advertised  by  the  manufacturer  thereof ; 
provided,  further,  that  in  case  the  motor  vehicle  sought 
to  be  registered  shall  be  a  specially  constructed  or  a 
reconstructed  motor  vehicle,  t-hat  fact  must  be  stated  by 
the  applicant  in  his  application  for  registration  and  he 
shall  furnish  the  department  on  demand  such  additional 
information  relating  to  said  motor  vehicle  as  shall  be 
satisfactory  to  the  department  before  it  may  register 
such  vehicle;  and  provided,  further,  that  in  case  the 
motor  vehicle  sought  to  be  registered  shall  be  an  im- 
ported motor  vehicle,  within  the  meaning  of  this  act,  that 
fact  must  be  stated  by  the  applicant  in  his  application 
for  registration,  and  he  shall  furnish  the  department  on 
demand  such  additional  information  relating  to  said 
motor  vehicle  as  shall  be  satisfactory  to  the  department 
before  it  may  register  such  vehicle,  and  in  case  such 
vehicle  shall  have  been  theretofore  registered  in  any 
other  state  or  country,  the  applicant  shall  with  his  orig- 
inal application  for  registration  supply  the  department 
with  full  information  relating  to  such  former  registra- 
tion and  shall  surrender  to  the  department  any  number 


970  BUSINESS  LAW  FOB  BUSINESS  MEN. 

plates,  seals,  certificates  of  registration  or  other  evi- 
dences of  such  former  registration  as  may  be  in  the  ap- 
plicant's possession  or  control. 

(a)  Trailers. — Every  owner  of  a  trailer  or  trailers 
which  shall  be  drawn  upon  a  public  highway  when  any 
such  trailer  shall  exceed  one  ton  in  weight  shall  cause  to 
be  filed  by  mail  or  otherwise,  with  the  department,  an 
application  for  registration  on  a  blank  to  be  furnished 
by  said  department  for  that  purpose,  containing  in  addi- 
tion to  such  other  particulars  as  may  be  required  by  said 
department,  a  statement  of  the  name  and  postoffice  ad- 
dress of  the  applicant,  and  with  such  application  the 
applicant  shall  deposit  the  proper  registration  fee. 

(b)  Notice   of  Change   of  Address. — Whenever   the 
owner  of  any  motor  vehicle  shall  after  making  applica- 
tion for  registration  of  any  motor  vehicle  move  from  the 
address  named  in  such  application  or  change  his  post- 
office  address  he  shall  within  ten  days  after  such  moving 
or  change  of  address  notify  the  department  in  writing 
of  such  change  and  of  his  new  postoffice  address.    Fail- 
ure to  so  notify  the  department  shall  constitute  a  mis- 
demeanor. 

(c)  The  Registration. — Upon  the  receipt  by  the  de- 
partment of  an  application  for  registration  of  a  motor 
vehicle  or  trailer  or  trailers  accompanied  by  the  fee  re- 
quired, the  department  shall  file  such  application  and  if 
satisfied  that  the  applicant  is  entitled  to  registration  of 
said  vehicle  or  vehicles  as  the  owner  thereof,  and  if  all 
fees  theretofore  payable  to  the  department  in  connec- 
tion with  the  registration,  or  any  renewal  thereof,  of 
said  vehicle  or  vehicles  shall  have  been  duly  paid,  shall 
alphabetically,  and  also  numerically,  register  such  motor 
vehicle  or  trailer  or  trailers  with  the  name  and  postoffice 
of  the  owner,  and  of  the  legal  owner,  together  with  the 
facts  stated  in  such  application,  in  a  book  or  on  index 
cards  to  be  kept  for  the  purpose,  under  a  distinctive 
number  assigned  to  such  motor  vehicle  or  trailer  or  trail- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  97 1 

ers  by  the  department,  which  book  or  index  cards  shall 
be  open  to  inspection  by  the  public  during  reasonable 
business  hours. 

(d)  Assignment  of.  Number. — Upon  the  filing  of  such 
application  and  the  payment  of  the  fee  provided  in  this 
act,  the  department  shall  upon  registration  assign  to 
such  motor  vehicle  or  trailer  or  trailers,  a  distinctive 
registration  number. 

(e)  Number  Plates. — The  department  shall  furnish 
to  every  person  whose  motor  vehicle  or  trailer  or  trail- 
ers shall  be  registered  as  aforesaid,  on  original  regis- 
tration, one  number  plate  for  motorcycles  and  trailers, 
and  two  number  plates  for  automobiles,  the  same  to  have 
displayed  upon  them  the  registration  number  assigned 
to  such  vehicle,  together  with  the  abbreviation  "Cal."; 
provided,  however,  that  number  plates   furnished  for 
trailers  and  for  such  motor  vehicles  as  are  exempted 
from  the  payment  of  the  fees  prescribed  shall  contain 
suitable  distinguishing  marks  or  symbols,  and  the  num- 
bers assigned  in  such  cases  shall  run  in  different  numer- 
ical series  from  the  numbers  assigned  to  other  vehicles ; 
and  provided,  further,  that  it  shall  not  be  necessary  to 
apply  for  registration  of  implements  of  husbandry  tem- 
porarily drawn,  moved  or  otherwise  propelled  upon  the 
public  highway,  nor  shall  it  be  necessary  for  the  depart- 
ment to  assign  any  distinguishing  numbers  to  such  im- 
plements of  husbandry  or  to  furnish  number  plates  for 
display  thereon;  the  number  plates  assigned  as  herein 
provided  shall  be  and  remain  with  the  motor  vehicle  for 
the  period  of  registration  mentioned  in  the  application 
therefor;  such  number  plates  shall  be  changed  annually 
and  shall  be  of  a  distinctly  different  color  each  year,  and 
there  shall  be  a  marked  contrast  between  the  color  of  the 
number   plates    and   that    of   the   numerals    or   letters 
thereon. 

(f)  Renewal    of    Registration. — All    motor    vehicle 
registrations  under  this  act  shall  expire  January  31  of 


972  BUSINESS  LAW  FOR  BUSINESS  MEN. 

each  year  and  shall  be  renewed  annually  in  the  same 
manner  and  upon  the  payment  of  the  same  fee  as  pro- 
vided for  original  registration,  such  renewal  to  take  ef- 
fect on  the  first  day  of  February  of  each  year.  The 
plates  and  certificates  of  registration  furnished  by  the 
said  department  as  heretofore  provided  shall  be  valid 
during  the  year  only  in  which  they  are  furnished  or 
issued. 

(g)  Registration  Fees. — The  following  fees  shall  be 
paid  to  the  department  upon  the  registration  of  a  vehi- 
cle, and  shall  accompany  the  application  hereinabove 
provided  for :  For  the  registration  of  every  motorcycle, 
two  dollars;  for  the  registration  of  every  automobile, 
except  electric  automobiles,  the  sum  of  forty  cents  for 
each  horsepower,  or  major  fraction  thereof,  according  to 
the  formula  specified  in  section  three  of  this  act;  for 
the  registration  of  every  motor  vehicle  equipped  with 
other  than  pneumatic  tires,  and  used  for  commercial  pur- 
poses, weighing  under  four  thousand  pounds  unladen, 
five  dollars  in  addition  to  the  fees  provided  herein  for 
horsepower  rating  or  for  electric  motor  vehicles;  for 
every  such  vehicle  weighing  four  thousand  pounds  and 
over  and  less  than  six  thousand  pounds  unladen,  ten  dol- 
lars in  addition  to  the  fees  provided  herein  for  horse- 
power rating  or  for  electric  motor  vehicles;  for  every 
such  vehicle,  weighing  six  thousand  pounds  and  over  and 
less  than  ten  thousand  pounds  unladen,  fifteen  dollars  in 
addition  to  the  fees  provided  herein  for  horsepower  rat- 
ing or  for  electric  motor  vehicles;  for  every  such  vehicle 
weighing  ten  thousand  pounds  and  over  unladen,  twenty 
dollars  in  addition  to  the  fees  provided  herein  for  horse- 
power rating  or  for  electric  motor  vehicles ;  for  the  reg- 
istration of  every  electric  motor  vehicle,  five  dollars; 
for  the  registration  of  motor  vehicles  owned  by  or  under 
the  control  of  a  manufacturer  of,  or  dealer  in,  motor 
vehicles,  ten  dollars  for  the  first  set  of  number  plates, 
and  five  dollars  for  each  additional  set;  two  number 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  973 

plates  of  the  same  kind  shall  constitute  a  set;  for  the 
registration  of  the  motorcycles  owned  by  or  under  the 
control  of  a  manufacturer  of  or  dealer  in  motorcycles, 
five  dollars  for  the  first  number  plate  and  one  dollar 
for  each  additional  number  plate;  for  every  registration 
number  plate  for  trailers,  two  dollars;  for  every  chauf- 
feur's license,  two  dollars;  for  an  original  operator's 
license  no  fee  shall  be  charged;  for  the  registration  of 
every  transfer  of  ownership  shall  be  charged  a  fee  of  one 
dollar.  Upon  the  filing  of  an  affidavit  showing  the  fact 
of  loss  or  mutilation  or  illegibility,  the  fees  for  addi- 
tional number  plates,  duplicate  container,  certificate  of 
registration,  chauffeur's  badge,  chauffeur's  certificate,  or 
duplicate  operator's  license  shall  be  as  follows;  provid- 
ed, that  no  affidavit  will  be  required  for  duplicate  oper- 
ator's license :  For  every  such  number  plate,  one  dollar ; 
for  every  such  duplicate  container,  twenty-five  cents; 
for  every  such  certificate  of  registration,  fifty  cents ;  for 
every  such  chauffeur's  badge,  one  dollar;  for  every  such 
chauffeur's  certificate,  fifty  cents;  for  every  such  oper- 
ator's license,  twenty-five  cents. 

If  application  for  the  registration  of  a  motor  vehicle 
or  for  chauffeur's  license  is  made  during  the  period  be- 
ginning on  the  first  day  of  May  and  ending  on  the  thirty- 
first  day  of  July  in  any  year,  three-fourths  of  the  annual 
fee  shall  be  paid;  if  application  is  made  during  the 
period  beginning  the  first  day  of  August  and  ending  the 
thirty-first  day  of  October,  one-half  of  such  annual  fee; 
if  application  is  made  during  the  period  beginning  on 
the  first  day  of  November  and  ending  on  the  thirty-first 
day  of  January,  one-fourth  of  such  annual  fee. 

(h)  Certificate  of  Registration. — The  department 
shall  also  furnish  with  each  number  plate  for  motor- 
cycles and  with  each  pair  of  number  plates  for  auto- 
mobiles, and  on  each  annual  renewal  of  registration,  a 
certificate  of  registration  which  shall  contain  upon  the 
face  thereof  the  following  data :  The  name  of  the  regis- 


974  BUSINESS  LAW  FOB  BUSINESS  MEN. 

tered  owner  of  tlie  motor  vehicle,  his  postoffice  address, 
the  name  and  address  of  the  legal  owner,  and  the  make 
of  the  vehicle,  the  year  model  denoted  by  the  manufac- 
turer, the  model  or  letter  denoted  by  the  manufacturer, 
if  any,  the  engine  or  motor  number,  the  registered  horse- 
power, the  registration  number  and  the  amount  of  an- 
nual registration  fee,  together  with  the  date  of  issue  of 
the  certificate ;  provided,  however,  the  name  and  address 
of  the  legal  owner  shall  appear  on  the  bottom  line  of 
the  certificate  of  registration.  In  case  of  motorcycles, 
the  manufacturer's  serial  number  shall  be  stated  in  lieu 
of  the  engine  number.  Such  certificate  shall  contain  a 
blank  space  for  the  signature  of  the  registered  owner 
and  shall  be  signed  by  such  owner.  The  reverse  side  of 
said  certificate  shall  contain  forms  (a)  for  notice  to  the 
department  by  the  registered  owner  and  the  legal  owner 
in  case  of  transfer  of  ownership,  as  hereinafter  required, 
and  (b)  for  application  to  the  department  by  the  trans- 
feree, in  case  of  transfer  of  said  motor  vehicle,  for  regis- 
tration thereof  in  his  name,  said  application  to  be  in  the 
form  of  a  joint  statement  to  be  signed  by  both  transferor 
and  transferee  and  the  legal  owner  and  to  contain  in 
addition  to  such  other  particulars  as  may  be  required  by 
said  department,  a  statement  of  the  postoffice  address 
of  the  transferee  so  applying  for  registration.  Said  cer- 
tificate shall  contain  the  identical  registration  number 
denoted  on  the  number  plate  or  plates  in  connection 
with  which  such  certificate  is  issued,  and  it  shall  be  valid 
only  for  the  year  in  which  it  is  issued.  Said  certificate 
shall  be  enclosed  in  a  suitable  container,  to  be  furnished 
by  the  department,  such  container  to  have  a  frame  of 
aluminum  or  other  metal  and  to  have  a  cover  of  isinglass 
or  other  transparent  material,  through  which  such  cer- 
tificate can  be  easily  inspected,  and  with  such  container 
said  department  shall  furnish  screws  or  other  suitable 
means  of  attachment  to  the  motor  vehicle.  Said  number 
plates,  certificates  and  containers  shall  be  furnished  by 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  975 

the  department  without  further  charge  than  the  fees 
specified  in  this  act,  with  transportation  prepaid,  and 
shall  be  of  substantial  character  and  suitable  form  and 
design,  to  be  determined  by  the  department. 

(i)  Transfer  of  Ownership. — Upon  the  transfer  of 
ownership  of  any  motor  vehicle  registered  under  this 
act  the  person  in  whose  name  such  vehicle  is  registered 
shall  forthwith  (a)  file  with  the  department  a  notice, 
upon  the  form  furnished  by  the  department  and  attached 
to  the  certificate  of  registration,,  containing  the  date  of 
such  transfer  of  ownership  and  the  name  and  postoffice 
address  of  the  transferee,  and  upon  such  transfer  the 
title  of  the  number  plates  shall  vest  in  the  transferee. 

(j)  Joint  Statement. — Upon  the  transfer  of  owner- 
ship of  any  motor  vehicle,  the  person  in  whose  name 
such  vehicle  is  registered  and  the  person  to  whom  owner- 
ship of  such  vehicle  is  to  be  transferred  shall  forthwith 
join  in  a  statement  of  said  transfer  endorsed  upon  the 
reverse  side  of  the  certificate  of  registration  of  said 
motor  vehicle  in  the  space  provided  for  said  purpose, 
which  statement  shall  be  signed  by  the  transferor  and 
the  legal  owner  in  the  manner  and  form  of  his  signature 
contained  on  the  face  of  said  certificate  and  which  state- 
ment shall  likewise  be  signed  by  the  transferee,  who  shall 
also  set  forth  below  his  signature  his  postoffice  address. 
Said  statement  shall  include  an  application  by  the  trans- 
feree for  registration  of  said  vehicle  in  his  name.  Said 
certificate  so  endorsed  and  bearing  upon  the  reverse 
side  thereof  the  signatures  of  the  transferor  and  trans- 
feree, shall  be  forwarded  by  the  transferee  within  ten 
days  to  the  department  together  with  fee  of  one  dollar. 
The  department  shall  file  said  certificate  so  jointly  en- 
dorsed by  transferor  and  transferee  and  upon  receipt  of 
the  fee  as  above  provided,  the  department,  if  satisfied 
of  the  genuineness  and  regularity  of  said  transfer,  shall 
register  said  motor  vehicle  in  the  name  of  said  trans- 
feree. 


976  BUSINESS  LAW  FOB  BUSINESS  MEN. 

(k)  New  Registration  Certificate. — Upon  such  regis- 
tration the  department  shall  issue  and  forward  to  the 
applicant  without  further  charge  a  new  registration 
certificate.  Until  said  transferee  has  received  said  cer- 
tificate of  registration  and  has  written  his  name  upon  the 
face  thereof  in  the  blank  space  provided  for  said  purpose 
by  the  department,  delivery  of  said  motor  vehicle  shall 
be  deemed  not  to  have  been  made  and  title  thereto  shall 
be  deemed  not  to  have  passed  and  said  intended  trans- 
fer shall  be  deemed  to  be  incomplete  and  not  to  be  valid 
or  effective  for  any  purpose;  provided,  that  where  such 
transfer  is  made  to  a  manufacturer  or  dealer  to  whom 
has  been  assigned  a  general  distinguishing  number  and 
who  intends  to  resell  or  otherwise  retransf er  said  vehicle, 
the  provisions  of  this  act  relative  to  the  joint  statement 
of  transferor  and  transferee  endorsed  thereon,  shall  be 
complied  with  upon  such  sale  or  transfer. 

(1)  Transfer  by  Operation  of  Laiv. — In  case  of  trans- 
fer of  ownership  of  a  motor  vehicle,  by  operation  of  law, 
as  upon  inheritance,  devise  or  bequest,  order  in  bank- 
ruptcy or  insolvency,  execution  sale,  repossession  upon 
default  in  performance  of  the  terms  of  a  lease  or  execu- 
tory sales  contract,  or  otherwise  than  by  the  voluntary 
act  of  the  registered  owner,  the  notice  of  transfer  as 
well  as  the  joint  statement  hereinabove  provided  for 
shall  be  signed  by  the  executor,  administrator,  receiver, 
trustee,  sheriff,  or  other  representative  or  successor  in 
interest  of  the  registered  owner,  in  lieu  of  such  owner, 
and  the  transferee's  application  for  registration  shall 
l>e  accompanied  by  a  statement  of  the  special  facts  in  the 
premises;  provided,  that  the  department  may  in  its  dis- 
cretion require  from  the  transferee,  before  registering- 
such  motor  vehicle,  such  additional  information  respect- 
ing such  involuntary  loss  of  ownership  by  the  former 
registered  owner  as  may  be  satisfactory  to  the  depart- 
ment. •  f;'f??  II 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  977 

(m)  When  Vehicle  Not  to  Be  Operated  on  Highway. 
Upon  the  transfer  of  ownership  of  any  motor  vehicle  to 
a  person  not  intending  either  to  operate  the  same  or  to 
cause  or  permit  the  same  to  be  operated  upon  the  public 
highways,  and  not  intending  to  transfer  such  motor  ve- 
hicle to  another  person,  a  statement  by  said  transferee 
of  such  fact  or  intent  shall  accompany  the  application 
for  registration,  in  which  case  no  fee  for  registration 
need  be  paid  by  the  applicant,  whereupon  the  depart- 
ment, if  satisfied  of  the  genuineness  and  regularity  of 
said  transfer  and  if  satisfied  of  the  facts  stated  in  said 
application  for  registration,  shall  register,  without  any 
charge  whatever,  such  motor  vehicle  in  the  name  of  said 
transferee  and  shall  issue  and  forward  to  him  a  new 
registration  certificate  in  a  distinctive  form  to  be  deter- 
mined by  the  department ;  provided,  that  until  transferee 
has  received  said  registration  certificate,  delivery  of  said 
motor  vehicle  shall  be  deemed  not  to  have  been  made, 
and  title  thereto  shall  be  deemed  not  to  have  passed  and 
said  intended  transfer  shall  be  deemed  to  be  incomplete 
and  not  to  be  valid  or  effective  for  any  purpose ;  and  pro- 
vided, further,  that  nothing  herein  contained  shall  be  so 
construed  as  to  permit  such  motor  vehicle  to  be  operated 
upon  the  public  highway  under  such  distinctive  certifi- 
cate of  registration. 

(n)  Registration  Refused  or  Revoked. — If  the  de- 
partment shall  determine,  at  any  time,  that  for  any  rea- 
son a  motor  vehicle  or  trailer  is  unsafe  or  is  improperly 
equipped  or  is  otherwise  unfit  to  be  operated,  or  that  the 
applicant  for  registration  thereof  is  not  entitled  as  own- 
er thereof  to  such  registration,  the  department  may  re- 
fuse to  register  such  vehicle  and  may,  for  a  like  reason, 
revoke  any  registration  already  acquired. 

(o)  Dealer's  Registration. — Every  manufacturer  of, 
or  dealer  in,  motor  vehicles  may  make  application  to  the 
department,  by  mail  or  otherwise,  upon  a  blank  provided 
by  the  department,  for  a  general  distinguishing  number 


978  BUSINESS  LAW  FOR  BUSINESS  MEN. 

or  symbol,  instead  of  registering  each  motor  vehicle 
owned  by  him,  and  with  such  application  he  shall  deposit 
the  proper  registration  fee  as  provided  in  this  act;  and 
the  department  shall  grant  the  application  if  satisfied 
of  the  facts  stated  in  the  application  and  shall  issue  to 
the  applicant  a  certificate  of  registration  containing  the 
name  and  business  address  of  the  applicant  and  the 
general  distinguishing  number  or  symbol  assigned  to 
him,  and  made  in  such  form  and  containing  such  further 
information  as  the  department  may  determine;  and 
every  motor  vehicle  owned  or  controlled  by  such  manu- 
facturer or  dealer  shall  be  regarded  as  registered  under 
such  general  distinguishing  number  or  symbol  until  ten 
days  after  being  sold,  or  until  let  for  hire,  or  until  loaned 
for  a  period  of  more  than  ten  successive  days.  The 
department  shall  furnish  to  every  manufacturer  of  or 
dealer  in  automobiles  or  motorcycles  applying  therefor, 
one  pair  of  automobile  plates  or  one  single  motorcycle 
number  plate,  of  suitable  design,  the  plates  to  have  dis- 
played upon  them  the  registration  number  which  is  as- 
signed to  the  motor  vehicles  of  such  manufacturer  or 
dealer,  with  a  different  symbol  on  each  pair  of  automo- 
bile number  plates  and  on  each  single  motorcycle  plate. 
The  department  shall  furnish  such  additional  number 
plates  as  required  for  any  dealer,  upon  the  payment  of 
the  fee  therefor.  If  the  department  shall  determine  at 
any  time  for  due  cause  that  any  such  manufacturer  or 
dealer  to  whom  the  certificate  of  registration  has  been 
issued  and  to  whom  such  general  distinguishing  number 
or  symbol  has  been  assigned,  has  failed  to  comply  with 
the  requirements  with  reference  to  notices  or  reports 
of  transfer  of  motor  vehicles,  or  has  caused  or  suffered, 
or  is  causing  or  suffering,  the  unlawful  use  of  such  cer- 
tificate or  number,  the  department  may  revoke  said  cer- 
tificate of  registration  and  recall  and  cancel  said  general 
distinguishing  number  or  symbol,  in  which  event  said 
manufacturer  or  dealer,  after  notice  of  such  action  on 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  979 

part  of  the  department,  shall,  without  further  demand, 
return  to  the  department  any  and  all  number  plates  that 
may  have  been  furnished  him  by  the  department  under 
said  certificate  so  revoked;  provided,  that  no  manufac- 
turer or  dealer  or  any  employee  of  such  manufacturer  or 
dealer,  shall  cause  or  permit  the  display,  or  other  use,  of 
any  number  plate,  or  certificate  of  registration  which 
may  have  been  furnished  to  such  manufacturer  or  dealer 
under  the  general  distinguishing  number  or  symbol  here- 
inbefore provided  for,  excepting  upon  motor  vehicles 
owned  by  such  manufacturer  or  dealer;  provided,  fur- 
ther, that  no  person  shall  display  or  otherwise  use  or 
have  in  his  possession  any  number  plate,  or  certificate 
of  registration  furnished  by  the  department  under  a  gen- 
eral manufacturer's  or  dealer's  distinguishing  number 
or  symbol,  except  such  manufacturer  or  dealer  or  his  em- 
ployees ;  and  provided,  further,  that  if  the  department, 
upon  receiving  from  any  manufacturer  or  dealer  an  ap- 
plication for  the  issuance  for  an  ensuing  calendar  year 
of  the  certificate  of  registration  and  g'eneral  distinguish- 
ing number  or  symbol  provided  for  in  this  section,  shall 
determine  upon  due  cause  that  such  manufacturer  or 
dealer  during  the  previous  calendar  year  has  failed  to 
comply  with  the  requirements  respecting  the  filing  of  no- 
tices or  reports  of  transfer  of  motor  vehicles,  or  has 
caused  or  suffered,  or  is  causing  or  suffering,  the  unlaw- 
ful use  of  such  certificate  or  number,  the  department 
may  refuse  such  application. 

(p)  Moving  Unregistered  Vehicle. — When  it  shall  be- 
come necessary  for  a  manufacturer  of,  or  dealer  in,  or 
consignee  of,  motor  vehicles  to  move  any  vehicles  owned 
by  or  consigned  to  him,  not  being  registered,  from  any 
vessel,  railroad  depot,  or  warehouse,  to  the  salesrooms  or 
other  place  of  business  of  such  manufacturer  or  dealer, 
or  to  a  warehouse  or  other  place  of  storage,  over  the  pub- 
lic highways,  he  may  operate  such  vehicle,  either  under 
its  own  power  or  otherwise,  over  such  public  highways  as 
nro  necessary  for  said  purpose,  without  first  registering 


980  BUSINESS  LAW  FOB  BUSINESS  MEN. 

said  motor  vehicle  or  affixing  thereto  any  number  plates 
issued  to  him  under  the  general  distinguishing  number 
or  symbol  hereinabove  specified ;  provided,  however,  that 
in  such  event  he  shall  first  obtain  from  the  police  author- 
ities or  marshal  of  the  city  or  town  in  which  said  vessel, 
railroad  depot  or  warehouse  is  situated,  a  written  permit 
authorizing  such  operation;  and  there  is  hereby  con- 
ferred upon  police  authorities,  including  town  marshals, 
within  the  State  of  California,  authority  to  issue  such 
permits  in  proper  cases  as  hereinbefore  provided. 

(q)  Dealer's  Notice  of  Sale. — Upon  the  transfer  of 
any  motor  vehicle  by  manufacturer  or  dealer,  whether 
by  sale,  lease  or  otherwise,  such  motor  vehicle  not  being 
registered,  such  manufacturer  or  dealer  shall,  forthwith 
upon  such  transfer,  file  with  the  department,  upon  a 
blank  to  be  furnished  by  the  department,  a  notice  or  re- 
port containing  the  date  of  such  transfer,  a  description 
of  such  motor  vehicle,  and  the  name  and  postoffice  of  the 
purchaser,  lessee  or  other  transferee. 

(r)  Notice  of  Dismantling. — Before  any  person, 
firm  or  corporation  shall  wreck,  dismantle  or  dissemble 
any  motor  vehicle,  or  substantially  alter  the  form  there- 
of, such  person,  firm  or  corporation  shall  give  notice  in 
writing  upon  forms  to  be  furnished  by  the  motor  vehicle 
department  of  the  intention  so  to  do  to  the  chief  of  police 
or  marshal  of  the  city  or  town  in  which  such  work  is  to 
be  done,  or  if  such  work  is  to  be  done  outside  of  an  incor- 
porated city  or  town,  such  notice  shall  be  given  to  the 
sheriff  of  the  county  in  which  the  work  is  to  be  done. 

(s)  Notice  of  Transfer  of  Engine. — Upon  the  trans- 
fer of  any  automobile  engine  or  motor,  except  a  new  en- 
gine or  motor  transferred  with  intent  that  the  same  be 
installed  in  a  new  automobile,  and  whether  such  transfer 
be  made  by  a  manufacturer  or  dealer  or  otherwise,  and 
whether  by  sale,  lease  or  otherwise,  the  transferor  shall 
within  three  days  after  such  transfer  file  with  the  depart- 
ment, upon  n  blank  to  lie  furnished  by  the  department, 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  981 

a  notice  or  report  containing  the  date  of  such  transfer 
and  a  description,  together  with  the  maker's  number  of 
said  engine  or  motor,  the  name  and  postffice  address  of 
the  purchaser,  lessee  or  other  transferee. 

(t)  Display  of  Number  Plates. — Except  as  otherwise 
provided,  no  person  shall  operate  or  drive,  or  cause  to 
be  operated  or  driven,  a  motor  vehicle,  or  cause  a  trailer 
to  be  drawn  by  a  motor  vehicle,  on  the  public  highways 
unless  such  vehicle  shall  at  all  time  have  displayed  the 
number  plate  or  plates  furnished  for  it  as  hereinbefore 
provided ;  in  case  of  automobiles,  each  such  vehicle  shall' 
display  one  number  plate  on  the  front  and  the  other  on 
the  back  thereof;  in  case  of  motorcycles  and  trailers,  but 
one  number  plate  shall  be  required  to  be  displayed  and 
such  number  plate  upon  motorcycles  and  trailers  shall 
be  at  the  rear  thereof;  in  all  cases  such  number  plates 
shall  be  securely  fastened  to  the  motor  vehicle  or  trailer 
so  as  to  prevent  said  plates  from  swinging,  and  at  a  min- 
imum distance  of  sixteen  inches  from  the  ground.  Noth- 
ing in  this  act  shall  be  construed  to  require  the  display 
of  any  number  plate  on  other  than  the  rear  trailer,  when 
more  than  one  trailer  is  drawn  by  a  motor  vehicle.  No 
person  shall  attach  to,  or  display  on,  such  motor  or  other 
vehicle,  any  number  plate,  or  registration  seal  or  certif- 
icate other  than  as  assigned  to  it  for  the  current  year, 
or  a  fictitious,  or  altered  number  plate,  registration  cer- 
tificate, or  a  number  plate,  or  registration  certificate  that 
shall  have  been  canceled  by  the  department.  All  letters, 
numbers,  printing,  writing  and  other  identification  marks 
upon  said  plates,  and  certificates,  shall  be  kept  clear  and 
distinct  and  free  from  grease,  dust  or  other  blurring  mat- 
ter, so  that  they  shall  be  plainlv  visible  at  all  times  dur- 
ing davlisrht  and  under  artificial  light  in  the  niarht  time ; 
provided,  that  in  case  any  such  plate,  or  certificate  of 
registration,  operator's  license  or  chauffeur's  license  or 
badge  shall  be  lost,  mutilated  or.  shall  have  become  illegi- 
ble, the  person  to  whom  such  plate,  seal,  certificate,  li- 


982  BUSINESS  LAW  FOE  BUSINESS  MEN. 

cense  or  badge  shall  have  been  furnished  shall  immediate- 
ly apply  to  the  department  for  a  duplicate  thereof,  ac- 
companying his  application  with  the  fee. 

(u)  Display  of  Registration  Certificates. — No  person 
shall  operate  or  drive  a  motor  vehicle  on  the  public  high- 
way unless  such  vehicle  shall  at  all  times  carry  in  or  upon 
it,  subject  to  inspection  by  any  peace  officer,  or  employee 
of  the  department,  the  registration  certificate  furnished 
for  it,  which  in  case  of  an  automobile  shall  be  affixed,  in 
the  container  furnished  by  the  department,  in  plain  sight 
in  the  driver's  compartment  of  the  automobile,  and 
which,  in  case  of  a  motorcycle,  shall  be  carried  either  in 
plain  sight  affixed  to  said  motorcycle,  or  in  the  tool  bag 
or  some  other  convenient  receptacle  attached  to  said 
motorcycle. 

(v)  Added  Penalty  for  Failure  to  Register. — The 
registration  fee  required  to  be  paid  upon  a  motor  vehicle 
or  trailer  shall  become  delinquent  in  the  case  of  any  such 
vehicle  forthwith  upon  the  operation  of  the  vehicle  on  the 
public  highways  without  the  registration  fee  first  having 
been  paid  to  the  department,  accompanied  by  the  appli- 
cation for  registration.  It  is  hereby  provided,  in  addi- 
tion to  any  and  all  other  penalties,  that  if,  at  the  expira- 
tion of  thirty  days  after  any  registration  fee  becomes  de- 
linquent, such  fee  has  not  been  paid  and  registration 
applied  for,  a  penalty  shall  be  added  to  the  amount  of 
such  fee  in  an  amount  equal  to  twenty-five  per  cent  of 
the  fee,  and  that  such  fee,  together  with  the  amount  of 
said  penalty,  shall  be  a  lien  upon  the  motor  vehicle  or 
trailer  in  regard  to  which  said  registration  fee  is  delin- 
quent, and  the  department  shall  have  power  and  it  is 
hereby  made  its  duty  to  collect  the  said  registration  fee, 
together  with  the  penalty,  by  seizure  of  such  motor  vehi- 
cle or  trailer  from  the  person  in  possession  thereof,  if 
any,  and  by  the  sale  thereof.  The  seizure  and  sale  herein 
authorized  shall  be  conducted  and  carried  out  by  the  de- 
partment in  the  same  manner  as  is  provided  by  law  for 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  983 

the  seizure  and  sale  of  personal  property  by  the  county 
tax  collector  for  the  collection  of  taxes  due  on  said  per- 
sonal property. 

(w)  Operation  Pending  Renewal  of  Registration.— 
In  case  of  annual  renewal  of  registration,  where  the  ap- 
plicants have  in  all  things  complied  with  the  require- 
ments of  this  act  and  have  duly  applied  for  such  annual 
renewal  of  registration  before  the  commencement  of  the 
ensnuing  calendar  year,  accompanying  their  applications 
with  the  proper  fees  for  such  registration,  they  shall  be 
entitled  to  operate  said  vehicles  during  the  month  of 
February  without  displaying  the  registration  certificates 
of  the  current  year,  on  condition  that  they  have  at  all 
times  displayed  upon  said  vehicles  the  number  plates  as- 
signed to  said  vehicles  respectively,  together  with  the 
registration  seals  and  certificates  assigned  thereto  for 
the  previous  year. 

Section  1264. — LIGHTS. — Where  there  is  not  sufficient 
light  within  the  lateral  boundaries  of  the  public  highway 
to  reveal  all  persons,  vehicles  or  other  substantial  objects 
within  said  boundaries  for  a  distance  of  at  least  two  hun- 
dred feet,  and  at  all  times  during  the  period  from  a  half 
hour  after  sunset  to  a  half  hour  before  sunrise,  every 
automobile  while  on  the  public  highway  shall  carry  at  the 
front  at  least  two  lighted  lamps,  and  every  such  auto- 
mobile and  every  trailer,  shall  carry  at  the  rear  a  lighted 
lamp  exhibiting  a  red  light  plainly  visible,  under  normal 
atmospheric  conditions,  for  a  distance  of  five  hundred  feet 
toward  the  rear,  and  so  constructed  and  placed  that  the 
number  plate  carried  on  the  rear  of  such  automobile  or 
trailer  shall  be  illuminated  by  a  white  light  in  such  man- 
ner that  the  number  thereon  can  be  plainly  distinguished 
under  normal  atmospheric  conditions  at  a  distance  of 
not  less  than  fifty  feet  toward  the  rear;  provided,  how- 
ever, that  where  more  than  one  trailer  is  attached  to  a 
motor  vehicle,  only  the  rear  trailer  shall  be  required  to 
exhibit  said  light.  All  other  vehicles,  except  bicycles, 


984  BUSINESS  LAW  FOB  BUSINESS  MEN. 

motorcycles  and  motor  trucks  of  two  tons  carrying  capac- 
ity or  over,  which  are  so  governed  or  mechanically  con- 
structed or  controlled  that  they  cannot  exceed  a  speed  of 
fifteen  miles  per  hour,  shall  carry  one  or  more  lighted 
red  lamps  or  lanterns  so  arranged  that  said  red  lamp  or 
lamps  shall  be  visible  from  every  direction  for  a  distance 
of  not  less  than  two  hundred  feet. 

(a)  Bicycles. — Every  bicycle  while  on  the  public  high- 
way shall  carry  a  lighted  lamp  visible  under  normal  at- 
mospheric conditions  at  least  three  hundred  feet  in  the 
direction  toward  which  such  bicycle  is  faced,  and  shall 
also  carry  at  the  rear  of  such  bicycle  a  reflex  mirror  or  a 
lighted  lamp  exhibiting  a  red  light  plainly  visible  under 
normal  atmospheric  conditions  for  a  distance  of  at  least 
two  hundred  feet  toward  the  rear. 

(b)  Motorcycles. — Every    motorcycle    while    on    the 
public  highway  shall  carry  at  the  front  at  least  one  light- 
ed lamp,  and  shall  also  carry  at  the  rear  of  such  motor- 
cycle a  lighted  lamp,  exhibiting  a  red  light  plainly  visible 
under  normal  atmospheric  conditions  for  a  distance  of  at 
least  two  hundred  feet  towards  the  rear. 

(c)  Motor  Trucks. — Every  motor  truck  of  two  tons 
carrying  capacity  or  over,  which  is  so  governed  or  me- 
chanically constructed  or  controlled  that  it  cannot  exceed 
a  speed  of  fifteen  miles  per  hour,  shall  carry  at  the  front 
at  least  two  lighted  lamps  which  shall  be  visible  at  least 
two  hundred  feet  in  the  direction  in  which  the  motor 
truck  is  proceeding,  and  when  the  vehicle  is  proceeding 
on  a  street  or  highway  not  so  lighted  as  to  reveal  any 
person,  vehicle  or  substantial  object  on  the  street  or  high- 
way straight  ahead  of  such  motor  truck  for  a  distance  of 
at  least  two  hundred  feet,  such  front  light  shall  be  suf- 
ficient to  reveal  any  person,  vehicle  or  substantial  object 
on  the  road  straight  ahead  for  a  distance  of  seventy-five 
feet  or  over,  and  shall  be  equipped  with  a  tail  light  such 
as  is  required  on  other  motor  vehicles. 

(d)  Overhanging  Loads. — In  any  case  where  a  motor 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  985 

or  other  vehicle  shall  be  loaded  with  any  material  in  such 
a  manner  that  any  portion  of  such  load  extends  toward 
the  rear  four  feet  or  more  beyond  the  rear  of  the  bed  or 
body  of  the  vehicle,  there  shall  be  displayed  at  the  ex- 
treme end  of  the  load,  in  addition  to  the  ordinary  rear  or 
tail  lights  hereinbefore  required  to  be  displayed  on  sucn 
vehicle,  a  red  light  plainly  visible  under  normal  atmos- 
pheric conditions  at  least  two  hundred  feet  from  the  rear ; 
provided,  further,  that  at  other  times  while  such  vehicle 
is  upon  the  highway  a  red  flag  or  cloth  not  less  than  six- 
teen inches  in  length  nor  less  than  sixteen  inches  in  width 
shall  be  displayed  at  the  extreme  rear  end  of  said  load  as 
a  warning  signal  to  persons  operating  vehicles  approach- 
ing from  the  rear. 

(e)  Headlights. — The  headlights  of  all  automobiles 
upon  the  highways  shall  give  a  light  of  sufficient  power 
and  so  distributed  as  provided  herein  in  addition  to  and 
irrespective  of  any  other  requirements  concerning  head- 
lights in  this  section  contained.  The  term  '"headlight" 
as  used  herein,  shall  denote  any  light,  located  upon  any 
portion  of  the  said  motor  vehicle  other  than  on  the  wind- 
shield, the  windshield  supports  or  top  thereof,  the  rays 
of  which  are  projected  forwards,  except  sidelights  of  not 
to  exceed  four  candle  power;  provided,  further,  that 
where  there  is  sufficient  light  within  the  lateral  bound- 
aries of  the  public  highway  within  any  incorporated  city, 
town  or  city  and  county,  to  reveal  all  persons,  vehicles 
or  substantial  objects  within  said  boundaries  for  a  dis- 
tance of  two  hundred  feet,  no  lights  shall  be  required  to 
be  displayed  on  any  vehicle  while  the  same  is  not  in  oper- 
ation, providing  that  a  wheel  of  such  standing  vehicle 
nearest  the  sidewalk  is  located  within  twelve  inches  of 
such  sidewalk. 

The  headlights  of  motor  vehicles  shall  be  so  arranged, 
adjusted,  and  constructed  when  the  car  is  fully  loaded, 
that  any  pair  of  headlights  under  the  conditions  of  use 
must  produce  a  light  which : 

1.    When  measured  on  a  level  surface  on  which  the 


986  BUSINESS  LAW  FOE  BUSINESS  MEN. 

vehicle  stands  at  a  distance  of  two  hundred  feet  directly 
in  front  of  the  car  and  at  some  point  between  the  said 
level  surface  and  a  horizontal  passing  through  the  top 
of  the  headlight  reflector  or  lens,  is  not  less  than  one 
thousand  two  hundred  apparent  candle  power. 

2.  When  measured  at  a  point  one  hundred  feet  di- 
rectly in  front  of  the  car,  and  at  a  height  of  sixty  inches 
above  the  level  surface  on  which  the  vehicle  stands,  does 
not  exceed  two  thousand  four  hundred  apparent  candle 
power  nor  shall  this  value  be  exceeded  at  a  greater  height 
than  sixty  inches. 

3.  When  measured  at  a  distance  of  one  hundred 
feet  ahead  of  the  car  and  seven  feet  or  more  to  the  left 
of  the  axis  of  same,  and  at  a  height  of  sixty  inches  above 
the  level  surface  on  which  the  vehicle  stands,  does  not 
exceed  eight  hundred  apparent  candle  power. 

(f)  Testing  Lighting  Devices. — All  lighting  devices, 
before  being  put  on  the  market  by  the  manufacturer 
must  be  tested  by  a  skilled  testing  agency  appointed  by 
the  superintendent  of  the  motor  vehicle  department. 

(g)  Spotlights. — The    term    "spotlights"    as    used 
herein  shall  denote  any  light  fastened  to  the  windshield, 
the  windshield  support  or  top  of  motor  vehicle,  the  rays 
of  which  are  projected  forward,  except  sidelights  of  not 
to  exceed  four  candle  power. 

All  spotlights  used  upon  motor  vehicles  shall  be  so 
constructed  or  arranged  that  no  portion  of  the  main,  sub- 
stantially parallel  beam  of  light  when  measured  one  hun- 
dred feet  or  more  ahead  of  said  lights  shall  rise  or  shall 
be  capable  of  being  raised  from  the  driver's  seat,  to  more 
than  forty-two  inches  above  the  level  surface  upon  which 
the  vehicle  stands  directly  ahead  of  such  vehicle. 

Section  1265. — CLEATS,  ETC.,  ON  TIKES. — Other  than 
on  vehicles  actually  engaged  at  the  time  in  construction 
or  repair  work  on  public  highways,  no  tire  on  any  motor 
or  other  vehicle  operated  on  or  over  any  public  highway 
or  bridge  shall  have  on  its  periphery  any  block,  stud, 


Section  1266,  sub-division  (a),  page  987,  "Business  Law  for  Business 
Men,"  strike  out  all  of  said  sub-division  beginning  with  the  word  "no  motor" 
on  page  987,  and  ending  with  the  words  "without  first  obtaining  a  permit" 
on  page  988,  and  substitute  the  following:  "No  motor  or  other  vehicle  or 
other  object,  or  contrivance  for  moving  loads,  except  as  hereinafter  otherwise 
provided,  shall  be  operated  or  moved  upon  or  over  any  public  highway  or 
bridge,  the  weight  (including  the  load)  of  which  resting  upon  the  surface  of 
said  highway  or  bridge  exceeds  seven  hundred  pounds  upon  any  inch  of  the 
channel  base  width  of  tire,  when  said  vehicle  is  equipped  with  tires  made  of 
other  material  than  metal;  and  no  motor  or  other  vehicle,  object,  or  contriv- 
ance for  moving  loads  shall  be  operated  or  moved  upon  or  over  any  public 
highway  or  bridge  the  weight  including  the  load  of  which  resting  upon  the 
surface  of  said  highway  or  bridge  exceeds  five  hundred  pounds  upon  any  indi 
of  width  of  tire,  roller,  wheel,  or  other  object  supported  on  the  surface  thereof, 
when  such  tires  or  the  rolling  surface  of  such  rollers,  wheels,  or  other  objects 
are  made  in  whole  or  in  part  of  metal,  without  first  obtaining  a  permit  as 
hereinafter  in  this  section  provided. 

"No  solid  rubber  tires  shall  be  used  on  any  motor  or  other  vehicle  or  con- 
trivance for  moving  loads  over  any  public  highway  or  bridge  unless  such  tire 
has  rubber  on  its  entire  traction  surface  at  least  one  inch  thick  above  the  edge 
of  the  flange." 

Section  1269,  page  990— LIMITING  MAXIMUM  LOAD— In  line  9  of 
section  1269,  strike  out  all  after  the  words  "not  less"  and  substitute  the  fol- 
lowing: "than  100  feet  or  more  than  150  feet  from  the  approaches  to  such 
bridge,  causeway,  viaduct,  trestle  or  dam." 

Anything  to  the  contrary  in  this  act  notwithstanding,  the  owner  and  the 
operator,  driver  or  mover  of  any  vehicle,  object  or  contrivance  over  a  public 
highway  or  bridge,  shall  be  jointly  and  severally  responsible  for  all  damages 
which  said  highway  or  bridge  may  sustain  as  the  result  of  so  operating  or 
driving  or  moving  such  vehicle  and  the  amount  of  such  damages  may  be  re- 
covered in  an  action  at  law  by  the  authorities  in  control  of  such  highway  or 
bridge. 

Act  of  the  Legislature  of  California,  approved  May  3,  1921;  in  effect 
July  3,  1921. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  987 

flange,  cleat,  ridge,  bead  or  any  other  protuberance  of 
metal  or  wood,  which  projects  beyond  the  tread  or  trac- 
tion surface  of  the  tire ;  but  this  shall  not  be  so  construed 
as  to  prohibt  the  use  of  tire  chains  of  reasonable  pro- 
portions on  motor  vehicles  when  required  for  safety  be- 
cause of  snow,  ice,  or  other  conditions  tending  to  cause 
such  motor  vehicle  to  slide  or  skid;  provided,  however, 
that  traction  engines  or  tractors  the  propulsive  power  of 
which  is  exerted  not  through  wheels  resting  upon  the 
ground  but  by  means  of  a  flexible  band  or  chain,  known 
as  a  movable  track,  may  be  operated  upon  the  public 
highways  with  transverse  corrugations  upon  the  periph- 
xry  of  said  movable  tracks,  on  condition  that  a  permit 
•  hall  first  have  been  obtained. 

Section  1266. — TOTAL  WEIGHT  LIMIT. — No  motor  or 
ther  vehicle  shall  be  operated  on  or  over  any  public 
highway  or  bridge,  nor  shall  any  object  be  moved  over 
*•  upon  any  public  highway  or  bridge  on  wheels,  rollers, 
•  otherwise,  except  when  transported  in  or  upon  vehi- 
!es  running  exclusively  on  stationary  rails  or  tracks,  in 
xcess  of  a  total  weight,  including  load,  of  thirty  thou- 
and  pounds,  when  said  motor  or  other  vehicle  or  con- 
trivance is  equipped  with  four  wheels  running  on  the 
highway,  or  in  excess  of  a  total  weight,  including  load, 
of  forty  thousand  pounds  when  said  motor  or  other  vehi- 
cle or  contrivance  shall  be  equipped  with  six  wheels  run- 
ning on  the  highway  and  with  three  axles  not  less  than 
ninety-six  inches  apart,  without  first  obtaining  a  permit, 
(a)   Weight  Limit  Per  Inch  of  Tire  Width. — No  motor 
or  other  vehicle  or  other  object,  or  contrivance  for  mov- 
ing loa^ds  shall  be  operated  or  moved  upon  or  over  any 
public  highway  or  bridge,  the  weight  of  which  resting 
upon  the  surface  of  said  highway  or  bridge  exceeds  eight 
hundred  pounds  upon  any  inch  of  width  of  tire,  when 
said  vehicle  is  equipped  with  tires  made  of  other  mate- 
rial than  metal;  and  no  other  vehicle,  object,  or  contriv- 


BUSINESS  LAW  FOB  BUSINESS  MEN. 

ance  for  moving  loads  shall  be  operated  or  moved  upon 
or  over  any  public  highway  or  bridge  the  weight  of  which 
resting  upon  the  surface  of  said  highway  or  bridge  ex- 
ceeds six  hundred  pounds  upon  any  inch  of  width  of  tire, 
roller,  wheel  or  other  object  supported  on  the  surface 
thereof  when  such  tires  or  the  rolling  surface  of  such 
rollers,  wheels  or  other  objects  are  made  in  whole  or  in 
part  of  metal,  without  first  obtaining  a  permit ;  provided, 
hoivever,  that  traction  engines  or  tractors  the  propulsive 
power  of  which  is  exerted  not  through  wheels  resting 
upon  the  ground  but  by  means  of  a  flexible  band  or  chain, 
known  as  a  movable  track,  shall  not  be  subject  to  the 
foregoing  limitations  upon  permissible  weights  per  inch 
of  width  of  tire  if  the  portions  of  the  movable  tracks  in 
contact  with  the  surface  of  the  highway  present  plane 
surfaces ;  and  provided,  further,  that  cities  heretofore  or 
hereafter  organized  under  freeholders'  charters  .may 
permit  or  prohibit  the  increase,  beyond  the  maximum 
weight  per  inch  in  width  of  tire  hereinabove  prescribed, 
of  the  weight  of  loads  carried  within  the  limits  of  such 
cities  in  or  upon  metal-tired  vehicles  drawn  by  muscular 
power,  but  where  any  such  city  has  not  by  proper  and 
suitable  ordinance  or  other  regulation  permitted  or  pro- 
hibited such  increase  of  maximum  weight  of  loads,  the 
regulations  and  limitations  prescribed  by  this  act  shall 
not  apply. 

The  supervisors  of  any  county  shall  have  power  to 
require  a  lighter  load  on  county  roads  in  their  respective 
counties. 

(b)  Penalty. — Any  person  violating  these  provisions 
shall  be  guilty  of  a  misdemeanor  and  is  liable  to  a  pen- 
alty of  twenty  dollars  for  each  full  ton  in  excess  of  the 
limitation  herein  imposed,  and  any  peace  officer  making 
the  arrest  of  the  owner  or  driver  of  any  vehicle  shall 
keep  said  vehicle  with  its  load  in  his  custody  until  such 
time  as  said  penalty  shall  have  been  paid ;  provided,  that 
the  owner  or  driver  of  any  such  vehicle  may  give  to  said 


BUSINESS  CONTKACTS  AND  LEGAL  OBLIGATIONS.  989 

peace  officer  a  bond  in  favor  of  the  State  of  California  in 
case  of  state  highways,  and  in  the  name  of  the  county 
in  which  the  offense  has  occurred  in  the  case  of  county 
roads,  conditioned  to  secure  the  payment  of  said  penalty 
within  the  time  prescribed  in  said  bond.  Furthermore, 
any  peace  officer  may  require  the  owner  or  the  driver  to 
drive  any  such  vehicle  to  the  nearest  public  scales  to  be 
designated  by  such  peace  officer  for  the  purpose  of  estab- 
lishing the  weight  and  the  load  of  any  such  vehicle. 

Section  1267. — TRAILER  LIMITATION. — No  motor  vehi- 
cle shall  be  operated  or  driven  over  any  public  highway 
or  bridge  drawing  or  having  attached  thereto  more  than 
two  trailers;  provided,  that  all  four-wheeled  trailers  ex- 
cepting light  camping  trailers  shall  be  equipped  with 
suitable  brakes. 

Section  1268. — PERMITS  BY  DEPARTMENT  OF  ENGINEER- 
ING.— Upon  application  in  writing  to  the  state  depart- 
ment of  engineering,  said  department  of  engineering  in 
its  discretion  may  issue  a  special  permit  to  the  owner  or 
operator  of  any  vehicle  allowing  heavier  or  wider  loads 
than  in  this  act  permitted  to  be  moved  or  carried  over 
and  on  the  public  highways  and  bridges,  or  allowing 
more  than  two  trailers  to  be  drawn  by  a  motor  vehicle ; 
and  may  also  issue  such  special  permit  to  increase  the 
permissible  weights  per  inch  of  width  of  tire,  and  also 
permit  the  use  of  corrugations  on  the  periphery  of  the 
movable  tracks  of  traction  engines  or  tractors  propelled 
not  by  wheels  resting  upon  the  ground  but  by  flexible 
bands  or  chains.  All  such  special  permits  shall  be  car- 
ried in  the  vehicles  to  which  they  refer  and  shall  upon 
demand  be  open  to  the  inspection  of  any  peace  officer, 
any  authorized  agent  of  the  department  of  engineering 
or  of  the  motor  vehicle  department,  or  any  officer  or  em- 
ployee charged  with  the  care  or  protection  of  the  public 
highways.  It  shall  be  unlawful  for  any  person  to  violate, 


990  BUSINESS  LAW  FOB  BUSINESS  MEN. 

or  to  cause  or  permit  to  be  violated,  the  limitations  or 
conditions  of  such  special  permits. 

Section  1269. — WEIGHT  ON  BRIDGES,  ETC. — The  state 
department  of  engineering  may  in  its  discretion  limit 
the  maximum  load  to  be  carried  over  or  on  any  public 
bridge,  causeway,  viaduct,  trestle  or  dam,  below  the 
maximum  established  by  law ;  provided,  however,  that  in 
such  event  said  department  of  engineering  shall  cause 
suitable  signs  to  be  erected  and  maintained,  specifying 
such  limitations  of  load,  such  signs  wto,  ^e  j^aced  uat  a 
distance  of  not  less  than  one  hundred/fifty  feet  fronTthe 
approaches  to  such  bridge,  causeway,  viaduct,  trestle  or 
dam. 

Section  1270. — LIABILITY  FOR  DAMAGES. — The  owner 
and  the  operator,  driver  or  mover  of  any  vehicle,  ob- 
ject or  contrivance  over  a  public  highway  or  bridge,  shall 
be  jointly  and  severally  responsible  for  all  damages 
which  said  highway  or  bridge  may  sustain  as  the  result 
of  so  operating  or  driving  or  moving  such  vehicle,  and  the 
amount  of  such  damages  may  be  recovered  in  an  action 
at  law  by  the  authorities  in  control  of  such  highway  or 
bridge. 

Section  1271. — INTOXICATED  DRIVER,  PENALTY. — No 
person  who  is  under  the  influence  of  intoxicating  liquor 
and  no  person  who  is  an  habitual  user  of  narcotic  drugs 
shall  operate  or  drive  a  motor  or  other  vehicle  on  any 
public  highway  within  this  state.  Any  person  violating 
the  provisions  of  this  section  shall  be  punished  by  im- 
prisonment in  the  county  jail  of  not  less  than  six  months 
nor  more  than  one  year,  or  by  imprisonment  in  the  state 
prison  for  not  less  than  one  or  more  than  three  years,  or 
by  a  fine  of  not  less  than  five  hundred  dollars  nor  more 
than  five  thousand  dollars. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  991 

Section  1272. — RULES  OF  THE  ROAD. — The  driver  or 
operator  of  any  vehicle  in  or  upon  any  public  highway 
shall  drive  or  operate  such  vehicle  in  a  careful  manner 
with  due  regard  for  the  safety  and  convenience  of  pedes- 
trians and  of  all  other  vehicles  or  traffic  upon  such  high- 
way, and  wherever  practicable  shall  travel  on  the  right- 
hand  side  of  such  highway.  Two  vehicles  which  are  pass- 
ing each  other  in  opposite  directions  shall  have  the  right 
of  way,  and  no  other  vehicle  to  the  rear  of  either  of  such 
two  vehicles  shall  pass  or  attempt  to  pass  such  two  vehi- 
cles. On  all  occasions  the  driver  or  operator  of  any  vehi- 
cle in  or  upon  any  public  highway  shall  travel  upon  the 
right  half  of  such  highway  unless  the  road  ahead  on  the 
left-hand  side  is  clear  and  unobstructed  for  at  least  one 
hundred  yards  ahead,  and  in  all  cases  while  crossing  an 
intersecting  highway.  For  the  purposes  of  this  section 
and  its  subdivisions,  an  animal  or  animals  attached  to 
any  conveyance  shall,  with  such  conveyance,  be  deemed 
to  constitute  one  vehicle. 

(a)  Passing  Vehicles. — Vehicles  proceeding  in  oppo- 
site directions  shall  pass  each  other  to  the  right,  each 
giving   to   the    other    one-half   the   road    as   nearly  as 
possible. 

(b)  Overtaking  Vehicles. — Vehicles  overtaking  other 
vehicles  proceeding  in  the  same  direction  shall  pass  to 
the  left  thereof  and  shall  not  again  drive  to  the  right 
until  reasonably  clear  of  such  overtaken  vehicle. 

It  shall  be  the  duty  of  the  driver,  rider  or  operator 
of  a  vehicle  about  to  be  overtaken  and  passed  to  give  way 
to  the  right  in  favor  of  the  overtaking  vehicle,  on  suitable 
and  audible  signal  being  given  by  or  on  behalf  of  the 
operator,  driver  or  other  person  in  charge  and  control 
of  such  overtaking  vehicle  if  such  overtaking  vehicle  be 
a  motor  vehicle. 

(c)  Distance  Between   Vehicles. — Vehicles  must  be 
operated  so  as  to  allow  a  safe  distance  between  such  vehi- 
cles and  any  persons,  vehicles  or  animals  preceding  them 


992  BUSINESS  LAW  FOR  BUSINESS  MEN. 

upon  the  highway,  and  outside  of  the  business  district  of 
any  county,  incorporated  city  and  county,  city  or  town, 
contiguous  to  a  public  highway  as  such  business  district 
is  denned  in  this  act,  no  vehicle  shall,  while  in  motion, 
be  closer  than  fifteen  feet  to  any  vehicle,  person  or  ani- 
mal in  front  thereof. 

(d) Intersections,  Right  of  Way. — Excepting  where 
controlled  by  such  traffic  ordinances  or  regulations  as 
are  permitted  under  this  act  the  operator  of  a  vehicle 
shall  yield  the  right  of  way  at  the  intersection  of  their 
paths  to  a  vehicle  approaching  from  the  right,  unless  such 
vehicle  approaching  from  the  right  is  further  from  the 
point  of  the  intersection  of  their  paths  than  such  first 
named  vehicle. 

Any  vehicle  traveling  on  a  public  highway  which  is 
divided  longitudinally  by  a  parkway  or  an  isle  of  safety, 
shall  keep  to  the  right  of  such  parkway  or  isle  of  safety 
unless  otherwise  directed  by  the  provisions  of  any  or- 
dinance, rule  or  regulation  of  competent  local  authorities. 

It  shall  be  the  duty  of  the  person  operating  or  in 
charge  of  an  overtaking  vehicle  to  sound  audible  and 
suitable  signal  before  passing  a  vehicle  proceeding  in 
the  same  direction. 

(e)  Turning  at  Intersections. — All  vehicles  approach- 
ing an  intersection  of  a  public  highway,  with  the  intention 
of  turning  thereat,  shall  in  turning  to  the  right  keep  to 
the  right  of  the  center  of  such  intersection,  and  in  turn- 
ing to  the  left  shall  run  beyond  the  center  of  such  inter- 
section, passing  to  the  right  thereof,  before  turning  such 
vehicle  toward  the  left.     The  "center  of  such  intersec- 
tion" shall  be  held  to  mean  the  meeting  point  of  the 
medial  lines  of  the  two  highways  traversed  by  the  vehicle 
making  the  turn. 

(f)  Horses,  Precautions  on  Meeting. — In  all  passing 
and  overtaking  such  assistance  shall  be  given  by  the  occu- 
pants of  each  vehicle  respectively  to  the  other  as  the 
circumstances  shall  reasonably  demand  in  order  to  obtain 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  993 

clearance  and  avoid  accidents ;  every  person  having  con- 
trol or  charge  of  any  motor  vehicle  or  other  vehicle  upon 
any  public  highway  and  approaching  any  vehicle  drawn 
by  a  horse  or  horses,  or  any  horse  upon  which  any  person 
is  riding,  shall  operate,  manage  and  control  such  motor 
vehicle  or  other  vehicle  in  such  manner  as  to  exercise 
every  reasonable  precaution  to  prevent  the  frightening 
of  any  such  horse  or  horses  and  to  insure  the  safety  and 
protection  of  any  person  riding  or  driving  the  same ;  and 
if  such  horse  or  horses  appear  frightened  the  person  in- 
control  of  such  motor  vehicle  or  other  vehicle  shall  re- 
duce its  speed,  and  if  requested  by  signal  or  otherwise 
by  the  driver  or  rider  of  such  horse  or  horses  shall  not 
proceed  further  toward  such  animal  or  animals  unless 
such  movement  be  necessary  to  avoid  accident  or  injury, 
until  such  animal  or  animals  be  under  the  control  of  the 
driver  or  rider  thereof. 

The  operator  of  any  vehicle  shall  not  operate  or  drive 
the  same  so  as  to  pass  or  overtake  any  other  vehicle 
going  in  the  same  direction  at  any  street  intersection 
unless  directed  so  to  do  by  a  traffic  or  police  officer. 

(g)  Slowly-moving  Vehicle. — The  person  in  control 
of  any  vehicle  moving  slowly  along  and  upon  any  public 
highway  shall  keep  such  vehicle  as  closely  as  practicable 
to  the  right-hand  boundary  of  the  highway,  allowing 
more  swiftly  moving  vehicles  reasonably  free  passage  to 
the  left. 

(h)  Mirror  Required. — No  person  shall  operate  or 
drive  any  motor  vehicle  that  is  so  covered,  loaded  or  con- 
structed as  to  obscure  the  driver's  view  of  the  highway 
to  the  rear,  nor  any  vehicle  which  is  so  covered,  loaded 
or  constructed  that  any  portion  thereof  to  the  rear  of  the 
driver  projects  more  than  twelve  inches  beyond  the  ex- 
treme left  side  of  the  driver's  seat,  unless  there  is  placed 
on  said  vehicle  a  mirror  so  located  as  to  reflect  to  the 
driver  a  view  of  the  highway  for  at  least  two  hundred 
feet  behind  such  vehicle. 


994  BUSINESS  LAW  FOR  BUSINESS  MEN. 

(i)  Arm  signals. — The  person  in  charge  of  any  ve- 
hicle in  or  upon  any  public  highway,  before  turning,  stop- 
ping, or  changing  the  course  of  such  vehicle,  and  before 
turning  such  vehicle  when  starting  the  same,  shall  see 
first  that  there  is  sufficient  space  for  such  movement  to 
be  made  in  safety,  and  if  the  movement  or  operation  of 
other  vehicles  may  reasonably  be  affected  by  such  turn- 
ing, stopping  or  changing  of  course,  shall  give  plainly 
visible  signal  to  the  persons  operating,  driving  or  in 
charge  of  such  vehicles  of  his  intention  so  to  turn,  stop, 
or  change  his  course,  either  by  the  use  of  his  hand  and 
arm,  which  shall  be  visible  from  the  rear,  or  by  the  use 
of  an  approved  mechanical  or  electrical  device.  Any 
such  device  shall  upon  application  to  the  motor  vehicle 
department  be  tested  and  certified  as  adequate  to  give 
the  signal  herein  required,  in  the  same  manner  and  upon 
the  payment  of  the  same  fee  as  in  the  case  of  headlights. 

When  the  signal  required  by  this  section  is  given  by 
the  use  of  the  hand  and  arm  the  intention  to  turn  such 
vehicle  toward  the  right  or  the  left  shall  be  indicated  by 
extending  the  hand  and  arm  horizontally  from  and  be- 
yond the  side  of  the  vehicle  toward  which  the  turn  is  to 
be  made  or  by  extending  the  hand  and  arm  vertically 
with  the  hand  pointing  upward  from  the  side  opposite 
the  direction  toward  which  the  turn  is  to  be  made ;  when 
the  signal  to  be  given  is  to  indicate  the  intention  to  stop 
a  vehicle  or  to  abruptly  or  suddenly  check  its  speed,  such 
signal  if  given  with  the  hand  and  arm  shall  be  given  by 
extending  the  hand  and  arm  out  from  and  beyond  either 
side  of  the  vehicle  and  pointed  in  a  downward  direction. 

(k)  Passing  Street  Cars. — In  passing  any  railroad, 
interurban  or  street-car  while  passengers  are  alighting 
from  or  boarding  the  same,  vehicles  shall  be  operated  or 
driven  on  the  right  hand  side  of  such  cars  and  at  a  rate 
of  speed  not  exceeding  ten  miles  an  hour,  and  no  portion 
thereof  or  of  any  load  thereon  shall  come  within  six  feet 
of  the  running  board  of  steps  of  such  cars,  and  shall  at 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.  995 

all  times  be  operated  with  due  care  and  caution  so  that 
the  safety  of  such  passengers  shall  be  assured ;  provided, 
however,  that  where  local  authorities  have  plainly 
marked  upon  the  surface  of  the  highway  safety  zones  for 
the  protection  of  such  passengers,  vehicles  shall  not,  at 
any  time,  be  operated  or  driven  within  such  zones ;  pro- 
vided, further,  that  said  safety  zones  shall  only  be 
marked  at  street  corners  or  at  other  regularly  established 
stations  or  stopping  places  of  such  railroad,  or  inter- 
urban,  or  street  cars,  and  shall  not  extend  beyond  seven 
feet  toward  the  boundary  of  the  highway  from  the  outer 
rail  of  such  railroad,  interurban  or  street  car  line. 

Every  motor  vehicle  when  moving  in  denies,  canyons, 
or  mountain  passes  where  the  curvature  of  the  road  or 
highway  prevents  a  clear  view  for  a  distance  of  one  hun- 
dred yards  shall  be  held  under  control  and  not  permitted 
to  coast,  and  the  operator  thereof  in  approaching  curves 
shall  give  a  warning  of  his  gong  or  other  adequate  sig- 
naling device. 

No  vehicle  except  vehicles  operated  by  the  fire  depart- 
ment or  police  department  of  any  incorporated  city  and 
county,  city  or  town,  shall  be  turned  so  as  to  proceed  in 
the  opposite  direction  except  at  an  intersection  of  the 
public  highway.  In  so  turning  vehicles  shall  pass  beyond 
and  around  the  center  of  such  intersection.  This  pro- 
vision shall  not  apply  except  in  a  business  district  or 
closely  built  up  territory. 

(1)  Police  and  Fire  Department  Vehicles. — Police 
and  fire  department  vehicles  shall  at  all  times  be 
equipped  with  a  siren,  and  it  shall  be  unlawful  for  any 
other  vehicle  to  be  equipped  with  or  use  such  a  device. 

Vehicles  of  the  police  or  fire  department  of  any  in- 
corporated city  or  county,  city  or  town,  shall  in  all  cases 
while  being  operated  as  such,  have  right  of  way  over  all 
other  vehicles  with  due  regard  to  the  safety  of  the  public ; 
but  this  provision  shall  not  protect  the  driver  or  operator 
of  any  such  vehicle  or  his  employer  or  principal  from  the 
consequence  of  the  arbitrary  exercis^  «f  this  right,  nor 


996  BUSINESS  LAW  FOR  BUSINESS  MEN. 

shall  it  be  construed  as  permitting  the  violation  by  the 
operators  of  any  such  vehicles  of  any  of  the  provisions 
of  this  act,  except  the  operators  of  police  vehicles  when 
such  vehicles  are  being  operated  in  the  chase  or  appre- 
hension of  violators  of  the  law  or  of  persons  charged 
with  or  suspected  of  any  such  violation. 

Upon  the  approach  of  any  police  or  fire  department 
vehicle  it  shall  be  the  duty  of  the  operator  of  any  street 
car,  upon  the  sounding  of  a  signal  by  such  police  or  fire 
department  vehicle,  to  stop  such  street  car  forthwith, 
unless  at  the  time  such  street  car  is  crossing  an  inter- 
section of  the  public  highways,  in  which  event  it  shall  be 
operated  so  as  to  clear  the  intersection  of  the  highways 
and  then  stopped,  and  every  other  vehicle  shall  imme- 
diately be  moved  to  a  position  as  near  as  possible  and 
parallel  to  the  right-hand  curb,  and  shall  remain  there 
until  the  police  or  fire  department  apparatus  has  passed 
such  vehicle. 

(m)  Fire  Hydrants  Protected. — No  person  shall  hitch 
or  leave  standing,  or  cause  or  permit  to  be  hitched  or  left 
standing,  any  animal,  or  leave  standing  or  cause  or  per- 
mit to  be  left  standing,  any  vehicle,  or  stop  or  cause  or 
permit  to  be  stopped  any  animal  or  vehicle  at  any  time 
upon  the  public  highway  within  fifteen -feet  of  any  public 
fire  hydrant  located  upon  the  public  highway  or  sidewalk, 
unless  such  animal  is  under  the  charge  of  some  person 
capable  of  driving  the  same  or  unless  such  vehicle  is  in 
the  charge  of  some  person  capable  of  operating  or 
driving  the  same. 

(n)  Width  of  Vehicle. — No  motor  or  other  vehicle  as 
defined  in  this  act  shall  be  operated  or  driven  on  or  over 
any  public  highway  or  bridge  if  the  outside  width  of 
tread  exceeds  one  hundred  twelve  inches  or  if  the  total 
outside  width  of  the  bed  of  said  vehicle  and  any  load 
thereon  shall  exceed  one  hundred  two  inches,  nor  shall 
any  pleasure  type  automobile  be  operated  on  or  over  any 
public  highway  or  bridge  if  any  luggage,  package,  trunk, 


BUSINESS  CONTEACTS  AND  LEGAL  OBLIGATIONS.  997 

crate,  box  or  other  load  carried  thereon  extends  to  the 
left  side  more  than  twelve  inches  beyond  the  body  of  such 
automobile;  provided,  however,  that  any  city  now  or 
hereafter  organized  under  freeholders'  charter  may  per- 
mit or  prohibit  an  increase  beyond  the  maximum  herein- 
before prescribed  of  the  total  outside  width  of  the  beds 
of  vehicles  and  any  loads  thereon,  where  such  vehicles 
are  operated  or  driven  and  said  loads  are  carried  wholly 
within  the  limits  of  said  city,  but  where  any  such  city 
shall  not  by  proper  and  suitable  ordinance  or  other  regu- 
lation permit  or  prohibit  such  increased  width,  the  regu- 
lations and  limitations  prescribed  by  this  act  shall  not 
apply;  and  provided,  that  the  regulations  and  limitations 
prescribed  by  this  act  relative  to  the  maximum  widths  of 
vehicles  and  their  loads  shall  not  apply  to  implements 
of  husbandry  temporarily  drawn,  propelled  or  moved 
upon  the  highway;  and  provided,  further,  that  loads  not 
exceeding  ten  feet  in  width  of  loosely-piled  material  not 
crated,  baled,  boxed,  sacked  or  carried  otherwise  than 
loosely  in  bulk,  may  be  carried  upon  vehicles  on  the  high- 
way; provided,  that  the  extreme  width  of  such  vehicles, 
including  any  loading  racks  thereon,  shall  not  exceed  one 
hundred  twenty  inches,  as  hereinbefore  prescribed. 

(o)  Repairing  Vehicle  on  Highway. — No  person  shall 
leave  standing,  or  cause  or  permit  to  be  left  standing 
upon  the  main  traveled  portion  of  any  public  highway,  a 
vehicle  undergoing  repair,  or  which  has  been  stopped  for 
the  purpose  of  having  repairs  made  thereon,  or  for  the 
purpose  of  camping;  provided,  hoivever,  that  this  pro- 
vision shall  not  apply  to  a  vehicle  which  shall  be  dis- 
abled, while  on  such  main  traveled  portion  of  the  high- 
way, in  such  manner  and  to  such  extent  that  it  shall  be 
impossible  to  avoid  stopping  such  vehicle  on  said  main 
traveled  portion  of  the  highway,  and  impracticable  to 
remove  the  same  therefrom  until  repairs  shall  have 
been  made. 


998  BUSINESS  LAW  FOB  BUSINESS  MEN. 

(p)  Livestock  on  Highway. — No  person  owning,  or 
controlling  the  possession  of,  any  horse,  cow,  mule,  ass, 
sheep,  goat,  hog  or.  other  live  stock,  shall  voluntarily  or 
negligently  permit  such  animal  to  stray  upon  or  remain 
unaccompanied  by  a  herder  or  other  person  in  charge  or 
control  thereof  upon  a  public  highway,  either  side  of 
which  is  adjoined  by  property  which  is  separated  from 
such  highway  by  a  fence,  wall,  hedge,  sidewalk,  curb, 
lawn  or  building,  or  shall  permit  the  tether  or  any  portion 
thereof  to  which  such  animal  may  be  attached,  to  lie 
across  or  upon  any  public  highway,  and  no  person  shall 
feed,  pasture  or  camp  any  such  live  stock  upon  any  public 
highway  between  the  hours  of  sunset  and  sunrise  without 
keeping  a  sufficient  number  of  herders  on  continual  duty 
to  keep  open  the  road  so  as  to  admit  at  all  times  of  the 
ready  passage  of  vehicles,  and  also  keeping  red  lanterns 
or  lights  burning  to  warn  the  public  of  the  presence  of 
such  stock. 

(q)  Firearms. — No  person  shall  discharge  any  fire- 
arms on  any  public  highway. 

(r)  Leaking  Contents,  Etc. — No  vehicle  shall  be  oper- 
ated on  any  public  highway  unless  it  is  so  constructed  as 
to  prevent  its  contents  from  dropping,  sifting,  leaking, 
or  otherwise  escaping  from  such  vehicle. 

(s)  Wind  Shields. — Every  motor  vehicle  used  for 
commercial  purposes  shall  be  equipped  with  an  adequate 
wind  shield. 

Section  1273. — SPEED  LIMITS. — Any  person  operating 
or  driving  a  motor  or  other  vehicle  on  the  public  high- 
ways shall  operate  or  drive  the  same  in  a  careful  and 
prudent  manner  and  at  a  rate  of  speed  not  greater  than 
is  reasonable  and  proper,  having  regard  to  the  traffic  and 
use  of  the  highway,  and  no  person  shall  operate  or  drive 
a  motor  vehicle  or  other  vehicle  on  a  public  highway  at 
such  rate  of  speed  as  to  endanger  the  life  or  limb  of  any 
person  or  the  safety  of  any  property;  provided,  that  it 


BUSINESS  CONTEAOTS  AND  LEGAL  OBLIGATIONS.  999 

shall  be  unlawful  to  operate  or  drive  at  a  rate  of  speed 
in  excess  of  thirty  miles  an  hour,  except  in  the  daytime 
and  except  when  the  operator  or  driver  has  a  clear  and 
uninterrupted  view  of  the  highway  on  which  he  is  travel- 
ing in  the  direction  toward  which  he  is  traveling  and  of 
all  highways  which  intersect  such  highway  within  four 
hundred  feet  ahead  of  such  operator  or  driver,  to  a  dis- 
tance of  at  least  four  hundred  feet  from  the  highway  on 
which  he  is  traveling,  and  there  is  no  person,  vehicle 
or  other  object  visible  ahead  on  such  highway  on  which 
such  operator  or  driver  is  traveling  within  four  hundred 
feet  of  such  operator  or  driver  or  on  any  such  intersect- 
ing highway  within  four  hundred  feet  of  the  point  of  the 
intersection  of  the  center  lines  of  such  highways;  pro- 
vided, also,  that  in  no  case  shall  any  vehicle  be  operated 
at  a  rate  of  speed  in  excess  of  thirty-five  miles  an  hour; 
and  provided,  further,  that  in  any  event  no  person  shall 
operate  or  drive  a  motor  vehicle  or  other  vehicle  on  any 
public  highway  where  the  territory  contiguous  thereto 
is  closely  built  up,  at  a  greater  rate  of  speed  than  twenty 
miles  an  hour,  or  in  the  business  district  of  any  incor- 
porated city  and  county,  city  or  town,  at  a  greater  rate 
of  speed  than  fifteen  miles  an  hour;  provided,  further, 
that  no  person  shall  operate  or  drive  a  motor  vehicle  or 
other  vehicle  on  any  public  highway  at  a  greater  rate  of 
speed  than  fifteen  miles  an  hour  in  approaching  any 
steam,  electric  or  other  railway  crossing  at  grade,  or  in 
approaching  or  traversing  an  intersecting  highway,  or 
crossing  or  intersection  of  highways,  or  in  approaching 
or  going  around  corners  or  curves  in  the  highway,  when 
in  any  of  the  foregoing  cases  the  operator's  or  driver's 
view  of  the  road  or  railway  traffic  is  obstructed,  but  any- 
thing to  the  contrary  herein  notwithstanding,  no  person 
shall  operate  or  drive  a  motor  vehicle  or  other  vehicle 
on  any  public  highway  at  a  greater  rate  of  speed  than 
ten  miles  an  hour  in  traversing  any  steam,  electric  or 
other  railway  crossing  at  grade  when  the  operator's  or 


1  000  BUSINESS  LAW  FOR  BUSINESS  MEN. 

driver's  view  of  the  crossing  or  of  any  traffic  on  such 
railway  within  four  hundred  feet  of  such  crossing  is  ob- 
structed; provided,  further,  that  the  board  of  super- 
visors of  any  county  and  city  and  county  within  this 
state,  and  the  board  of  trustees,  city  council  or  other 
governing  body  of  every  municipality  within  this  state, 
within  six  months  after  the  passage  of  this  act,  shall 
place  and  thereafter  maintain  warning  signs  on  every 
public  highway  approaching  a  crossing  at  grade  of  such 
highway  and  the  tracks  of  any  railway,  at  a  reasonable 
distance,  not  less  than  three  hundred  feet,  from  such 
crossing,  and  on  either  side  thereof.  Such  sign  shall 
consist  of  a  metal  disc  twenty-four  inches  in  diameter, 
the  field  enameled  white,  with  an  enameled  black  border 
line  one  inch  wide,  and  with  an  enameled  black  vertical 
and  horizontal  cross-line  two  and  one-half  inches  wide; 
the  reverse  side  of  such  disc  to  be  colored  black.  In  each 
of  the  upper  quarters  shall  appear  in  black  enamel  the 
letter  "R,"  five  inches  high,  three  and  three-quarter 
inches  wide,  lines  one  inch  stroke.  Anyone  defacing,  in- 
juring, knocking  down  or  removing  any  such  sign  shall 
be  guilty  of  a  misdemeanor;  provided,  further,  that  the 
maximum  rate  of  speed  over  any  bridge,  dam,  trestle, 
culvert,  causeway  or  viaduct  as  well  as  the  maximum 
rate  of  speed  over  any  state  highway  or  portion  of  state 
highway  may  be  established  by  the  state  highway  com- 
mission at  less  than  the  rate  established  by  law,  when  in 
the  judgment  of  said  commission  the  safety  of  persons 
using  the  highway  or  the  protection  of  the  highwav  shall 
be  promoted  thereby,  but  whenever  any  such  different 
rate  of  speed  is  so  established  by  said  commission,  the 
commission  shall  cause  to  be  erected  suitable  signs  to 
mark  the  location  and  limits  of  the  highway  to  which 
said  different  rate  of  speed  shall  apply,  and  such  signs 
shall  be  placed  at  a  distance  of  not  less  than  one  hundred 
feet  or  at  a  greater  distance  than  one  hundred  fifty  feet 
from  the  highway  or  portion  of  highway  or  from  the 


BUSINESS  CONTEACTS  AND  LEGAL  OBLIGATIONS.          1001 

approaches  of  any  bridge,  dam,  trestle,  culvert,  cause- 
way or  viaduct  with  respect  to  which  such  different  rate 
of  speed  may  be  so  established.  In  the  case  of  a  bridge, 
dam,  trestle,  culvert,  causeway  or  viaduct,  such  maximum 
rate  of  speed  so  established  by  said  commission  shall  not 
be  less  than  ten  miles  an  hour,  and  in  the  case  of  any 
other  highway  or  portion  of  highway,  such  maximum  rate 
of  speed  so  established  shall  not  be  less  than  fifteen 
miles  an  hour. 

(a)  Speed  Limit  of  Trucks. — No  motor  or  other 
vehicle  carrying  a  weight  in  excess  of  nine  thousand 
pounds,  including  the  vehicle,  shall  be  operated,  driven 
drawn  or  otherwise  moved  on  any  public  highway  or 
bridge  at  a  rate  of  speed  greater  than  twenty -five  miles 
an  hour ;  no  motor  or  other  vehicle  carrying  a  weight  in 
excess  of  twelve  thousand  pounds,  including  the  vehicle, 
shall  be  operated,  driven,  drawn  or  otherwise  moved  on 
any  public  highway  or  bridge  at  a  rate  of  speed  greater 
than  fifteen  miles  an  hour;  no  motor  or  other  vehicle 
carrying  a  weight  in  excess  of  twenty-four  thousand 
pounds,  including  the  vehicle,  shall  be  operated,  driven, 
drawn  or  otherwise  moved  on  any  public  highway  or 
bridge  at  a  rate  of  speed  greater  than  ten  miles  an  hour ; 
provided,  hoivever,  that  no  motor  vehicle  or  trailer 
equipped  with  tires  made  wholly  or  partly  of  metal  shall 
be  operated,  driven,  drawn  or  otherwise  moved  on  any 
public  highway  or  bridge  at  a  rate  of  speed  greater  than 
six  miles  an  hour ;  provided,  further,  that  any  such  motor 
vehicle  or  trailer,  with  tires  made  wholly  or  partly  of 
metal,  may  be  operated,  driven,  drawn  or  otherwise 
moved,  subject  to  the  other  provisions  of  this  act,  up  to 
ten  miles  an  hour,  if  it  be  equipped  with  springs  and  if 
the  rear  wheels  be  not  less  than  forty-six  inches  in 
diameter,  with  a  bearing  surface  of  not  less  than  eighteen 
inches ;  and  provided,  further,  however,  anything  to  the 
contrary  herein  notwithstanding,  that  no  motor  or  other 
vehicle  constructed  or  otherwise  adapted  for  carrying 
loads  weighing  four  tons  or  more,  exclusive  of  such 


1002  BUSINESS  LAW  FOE  BUSINESS  MEN. 

vehicle,  shall  be  operated,  driven,  drawn  or  otherwise 
moved  upon  the  public  highway,  whether  laden  or  un- 
laden, at  a  rate  of  speed  exceeding  fifteen  miles  an  hour ; 
and  provided,  further,  that  nothing  contained  in  this  sub- 
division shall  apply  to  motor  vehicles  equipped  with 
pneumatic  tires. 

(b)  Arrests  for  Speeding. — In  case  of  any  person 
arrested  for  violation  of  the  provisions  of  this  section, 
unless  such  person  shall  demand  that  he  be  taken  forth- 
with before  the  most  accessible  magistrate,  the  arrest- 
ing officer  shall  take  the  name  and  address  of  such  person 
and  the  number  of  his  motor  vehicle  and  notify  him  in 
writing  to  appear  before  a  magistrate  of  the  township 
in  which  the  offense  for  which  such  person  is  arrested  is 
alleged  to  have  been  committed  at  a  time  and  place  to 
be  specified  in  such  writing  at  least  five  days  subsequent 
to  the  date  of  such  notice ;  upon  the  promise  in  writing  of 
such  person  to  appear  at  such  time  and  place,  such  officer 
shall  forthwith  release  him  from  custody.  In  the  event 
that  any  person  arrested  for  any  violation  of  the  pro- 
visions of  this  section,  demands  to  be  or  is  taken  forth- 
with after  his  arrest  before  a  magistrate  he  shall  be  en- 
titled to  at  least  five  days  continuance  of  his  case  within 
which  time  to  prepare  to  plead  or  prepare  for  trial,  and 
he  shall  not  be  required  to  plead  or  to  be  tried  within 
such  five  days  unless  he  waives  such  time  in  writing  or 
in  open  court;  provided,  that  he  promises  in  writing, 
after  notice  in  writing  of  the  time  and  place  for  his 
further  appearance  in  court  to  appear  at  such  time  and 
place.  Upon  the  giving  of  such  written  promise,  or,  if 
he  refuse  to  give  such  promise,  on  bail  fixed  by  the 
magistrate  he  shall  thereupon  be  forthwith  released  from 
custody.  Any  person  wilfully  violating  such  promise 
shall  be  guilty  of  a  misdemeanor  regardless  of  the  dis- 
position of  the  charge  upon  which  he  was  originally 
arrested. 


BUSINESS  CONTEACTS  AND  LEGAL  OBLIGATIONS.         1003 

Section  1274. — OPERATOR'S  AND  CHAUFFEUR'S  LI- 
CENSES.— It  shall  be  unlawful  for  any  person  to  operate 
or  drive  a  motor  vehicle  upon  the  public  highway  unless 
licensed  by  the  department  as  hereinafter  provided; 
provided,  however,  that  the  requirements  of  this  section 
shall  not  apply  to  the  operators  or  drivers  of  any  imple- 
ments of  husbandry  temporarily  drawn,  propelled  or 
moved  on  the  public  highway.  Before  operating  a  motor 
vehicle  upon  the  public  highway,  application  for  a  license 
to  operate  such  vehicle  shall  be  made  by  mail  or  other- 
wise to  the  department  upon  a  blank  to  be  prepared  and 
furnished  on  request  by  said  department. 

(a)  Certificates. — To  each  person  shall  be  assigned 
some  distinguishing  number  or  mark  and  the  department 
shall  issue  to  the  licensee  a  certificate  in  such  form  as 
the  department  shall  determine;  it  shall  contain  the  dis- 
tinguishing number  or  mark  assigned  to  the  licensee,  his 
name,  age,  place  of  residence,  business  address  if  any, 
and  a  brief  description  of  the  licensee  for  the  purpose 
of  identification,  and  such  other  information  as  the  said 
department  shall  deem  necessary.  Every  person  licensed 
to    operate   motor   vehicles    as    aforesaid,   whether    as 
chauffeur  or  operator,  shall  indorse  his  usual  signature 
in  the  space  on  the  license  certificate  provided  for  the 
purpose,  immediately  upon  the  receipt  of  said  certificate, 
and  his  license  shall  not  be  valid  until  the  certificate  is 
HO  indorsed.    Licenses  to  chauffeurs  shall  be  valid  dur- 
ing the  calendar  year  only  in  which  issued.     Licenses 
issued  to  operators  shall  be  valid  until  revoked. 

(b)  Chauffeur's  Badge. — The  department  shall  fur- 
nish to  every  chauffeur  licensed  a  suitable  metal  badge 
with  the  distinguishing  number  assigned  to  him  stamped 
thereon,  without  extra  charge  therefor,  such  badge  to 
have  stamped  thereon  the  words  "Begistered  Chauffeur 

No ,  Cal."  with  the  said  license  number  and 

year  of  issue  inserted  therein.    This  badge  shall  there- 
after be  worn  by  such  chauffeur,  affixed  to  his  clothing 


1004  BUSINESS  LAW  FOR  BUSINESS  MEN. 

in  a  conspicuous  place,  at  all  times  when  he  is  operating 
or  driving  a  motor  vehicle  upon  the  public  highway,  and 
the  license  certificate  issued  to  each  chauffeur  or  oper- 
ator, under  the  provisions  of  this  section,  shall  be  car- 
ried by  the  licensee  at  all  times  when  he  is  operating  or 
driving  a  motor  vehicle  upon  the  public  highway  and 
shall  be  produced  by  him  for  inspection  upon  request  of 
any  peace  officer.  In  case  of  the  loss  of  such  badge  or 
certificate  a  duplicate  will  be  issued  by  the  department 
on  the  filing  of  an  affidavit  showing  the  fact  of  loss,  and 
on  payment  of  a  fee  of  one  dollar  to  the  department  in 
the  case  of  a  badge  and  fifty  cents  in  case  of  a  certificate. 
Duplicate  license  certificates  shall  be  issued  by  the  de- 
partment to  operators  other  than  chauffeurs  upon  appli- 
cation therefor,  whether  in  case  of  loss  or  otherwise, 
upon  payment  of  a  fee  of  twenty-five  cents  to  the  depart- 
ment. Applications  for  the  annual  renewal  of  licenses 
by  chauffeurs  shall  be  accompanied  by  the  fee  required, 
(c)  Minor's  License. — No  chauffeur's  license  badge 
shall  be  issued  to  any  applicant  under  the  age  of  eighteen 
years;  provided,  that  it  shall  be  unlawful  for  any  person 
to  cause  or  knowingly  to  permit  his  or  her  child,  ward  or 
employee  to  operate  or  drive  a  motor  vehicle  upon  the 
public  highway,  whether  as  a  chauffeur  or  operator,  with- 
out having  first  obtained  such  license  as  is  hereinbefore 
specified ;  provided,  that  the  application  to  the  depart- 
ment of  a  minor  to  operate  or  drive  a  motor  vehicle, 
whether  as  chauffeur  or  operator,  shall  not  be  granted 
by  the  department  unless  the  parent  or  parents  having 
the  custody  of  such  applicant  or  the  guardian  of  such 
applicant  shall  have  joined  in  said  application  by  signing 
the  same;  and  provided,  further,  that  any  negligence  of 
a  minor,  so  licensed,  in  operating  or  driving  a  motor 
vehicle  upon  the  public  highway,  whether  as  chauffeur 
or  operator,  shall  be  imputed  to  the  person  or  persons 
who  shall  have  signed  the  application  of  such  minor  for 
said  license,  which  person  or  persons  shall  be  jointly  and 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.          1005 

severally  liable  with  such  minor  for  any  damages  caused 
by  such  negligence. 

Section  1275. — USING  CAR  WITHOUT  OWNER'S  CON- 
SENT.— It  shall  be  unlawful  for  any  person  to  drive  or 
operate,  or  cause  to  be  driven  or  operated,  upon  the  pub- 
lic highway  any  motor  vehicle  not  his  own,  whether  with 
or  without  intent  to  steal  the  same,  in  the  absence  of  the 
owner  thereof  without  such  owner's  consent;  provided, 
such  consent  shall  not  be  implied  in  any  instance  because 
of  the  fact  that  upon  a  previous  occasion  such  owner  had 
consented  to  the  use  of  the  same  or  another  motor  vehi- 
cle by  such  person.  Any  person  violating  any  of  the  pro- 
visions of  this  section  shall  be  punished  by  imprison- 
ment in  the  state  prison  for  not  less  than  one  year  nor 
more  than  five  years. 

Section  1276. — GENERAL  PENALTIES. — Excepting  where 
a  different  penalty  is  expressly  fixed  by  this  act,  any  per- 
son violating  any  of  its  provisions,  or  knowingly  making 
a  false  statement  or  knowingly  concealing  a  material 
fact  or  otherwise  committing  a  fraud  in  an  application 
for  the  registration  of  a  vehicle,  or  in  an  application  for 
an  operator's  or  chauffeur's  license,  shall  be  guilty  of  a 
misdemeanor,  and  upon  conviction  thereof,  shall  be  pun- 
ished by  a  fine  not  exceeding  five  hundred  dollars  or  by 
imprisonment  in  the  county  jail  not  exceeding  six 
months,  or  by  both  such  fine  and  imprisonment. 

Section  1277. — EEVOCATION  OF  LICENSE. — Immediately 
upon  receipt  by  the  department  of  information  concern- 
ing the  conviction  of  any  person  for  the  violation  of  this 
act,  or  concerning  the  third  conviction  within  one  year 
of  any  person  for  the  violation  of  this  act,  the  depart- 
ment shall  forthwith  revoke  the  operator's  or  chauffeur's 
license  issued  to  such  person  by  the  department,  and  shall 
issue  no  operator's  or  chauffeur's  license  to  any  such 


1000  BUSINESS  LAW  FOE  BUSINESS  MEN. 

person  within  one  year  thereafter. 

Upon  the  suspension  or  revocation  of  any  chauffeur 's 
or  operator's  license,  the  department  shall  demand  the 
surrender  of  the  license  certificate,  and  any  duplicates 
thereof  that  may  have  been  issued,  and  also  the  license 
badge,  if  any,  and  it  shall  be  unlawful  for  any  person 
whose  license  has  been  suspended  or  revoked  as  herein 
provided  to  fail  or  neglect  forthwith  to  surrender  to  the 
department  any  such  certificates  or  badge  in  his  posses- 
sion or  under  his  control. 

(a)  Complaints  of  Reckless  Driving. — Upon  receiv- 
ing within  one  year  verified  written  complaints  made  by 
one  or  more  persons  of  two  or  more  separate  instances  or 
reckless,  negligent  or  unlawful  operation  of  a  vehicle 
on  any  public  highway  in  this  state  by  any  person  to 
whom  the  department  has  issued  a  valid  unrevoked  oper- 
ator's or  chauffeur's  license  the  department  may,  in  the 
discretion  of  the  superintendent  thereof,  fix  a  time  and 
place  for  a  hearing  to  determine  whether  or  not  the  oper- 
ator's  or  chauffeur's  license  held  by  such  person  should 
be  revoked  on  the  ground  that  such  person  is  an  unfit 
person  to  be  so  licensed.  The  person  so  complained  of 
shall  be  served  with  a  written  notice,  at  least  ten  days 
prior  to  the  date  of  said  hearing,  to  appear  and  show 
cause,  at  such  hearing,  why  his  license  to  operate  a  motor 
vehicle  upon  the  public  highways  should  not  be  suspencr- 
ed  or  revoked.  Such  hearing  shall  be  held  by  the  super- 
intendent of  the  department  or  by  any  person  or  per- 
son's not  exceeding  three,  officers  or  employees  of  the 
department  whom  he  may  designate.  If  upon  such  hear- 
ing it  is  determined  that  there  is  good  and  sufficient  rea- 
son therefor  findings  and  an  order  shall  be  made  by  the 
superintendent  or  by  the  person  or  persons  holding  such 
hearing  on  his  behalf  to  the  effect  that  such  license  should 
be  revoked.  The  department  shall  thereupon  cause  sucn 
person's  license  as  an  operator  or  chauffeur  to  be  forth- 
with revoked  if  the  findings  hereinbefore  provided  for 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.          1007 

show  or  declare  that  such  operator  or  chauffeur  is  a 
reckless  or  negligent  driver,  or  that  he  is  incompetent 
or  unfit  to  operate  a  motor  vehicle  because  of  mental  or 
physical  infirmities  or  disabilities. 

If  in  any  case  the  respondent  shall  fail  to  appear  at 
the  time  and  place  fixed  for  any  such  hearing  as  is  pro- 
vided in  this  section,  he  shall  be  in  default,  and  if  in  the 
opinion  of  the  superintendent  or  of  the  person  or  per- 
sons holding  such  hearing  on  his  behalf,  there  is  sufficient 
reason  therefor,  the  license  of  the  respondent  may  be 
ordered  revoked  or  suspended,  whereupon  the  depart- 
ment shall  upon  notice  of  such  order,  revoke  or  suspend, 
as  the  case  may  be,  such  license. 

Act  of  the  Legislature,  approved  May  2,  1919 ; 
in  effect  at  midnight  January  31, 1920. 

Section  1278. — GARAGES  AND  GARAGE  KEEPERS. — The 
word  "garage"  is  of  French  origin,  and  signifies  a  depot 
for  the  storage  and  repairs  of  motor  cars.  And  in  this 
country  it  is  often  used  to  mean  a  place  not  only  for  the 
storage  and  repair  of  cars,  but  also  for  the  sale  of  auto- 
mobiles. The  garage  occupies  with  relation  to  automo- 
biles the  same  place  that  livery  stables  do  with  respect 
to  horses. 

Section  1279. — EELATION  OF  GARAGE  KEEPER  TO  His 
CUSTOMER. — The  storage  of  an  automobile  in  a  garage 
constitutes  the  keeper  a  bailee  for  hire.  The  liability  of 
the  bailee  in  this  class  of  bailments  is  for  the  care  and 
custody  of  the  property  placed  in  his  possession  and 
control;  it  therefore  follows,  that  his  liability  does  not 
begin  until  he  has  the  possession  and  control  of  the  prop- 
erty, and  continues  until  the  possession  and  control  is 
surrendered  to  the  bailor,  or  his  assigns,  or  to  the  right- 
ful owner.  The  garage  keeper  holds  the  property  for  no 
other  purpose  than  to  care  for  it  during  the  continuance 
of  the  relation  in  accordance  with  the  contract,  and  to 


1008  BUSINESS  LAW  FOR  BUSINESS  MEN. 

redeliver  it  to  the  bailor  upon  the  termination  of  the  con- 
tract. He  has  no  title  to  the  property  except  the  posses- 
sory interest  given  him  as  bailee,  and  his  right  to  the 
possession  ceases  whenever  he  is  guilty  of  fraud  or  bad 
faith,  or  any  misuse  of  the  property.  The  contract  for 
the  storage  can  be  terminated  at  the  will  of  the  person 
putting  the  car  into  the'  garage.  The  garage  keeper 
must  at  all  times  upon  reasonable  demand  and  notice  be 
ready  to  deliver  the  property  to  the  person  who  placed 
it  with  him. 

Section  1280. — FAILURE  TO  EEDELIVER  TO  CUSTOMER.— 
Not  only  is  the  garage  keeper  required  to  deliver  the  car 
lie  has  had  in  his  possession  to  the  bailor  at  the  termina- 
tion of  the  bailment,  but  for  a  misdelivery,  whether  by 
mistake  or  negligence,  he  will  be  liable  for  damages. 
For  a  mistake  or  negligence  in  the  performance  of  his 
duty  which  renders  it  impossible  for  him  to  deliver  the 
property,  he  will  be  held  accountable  the  same  as  if  he 
had  converted  the  property  to  his  own  use.  He  will  be 
held  to  know  who  his  bailor  is,  and  can  have  no  legal 
reason  for  making  a  mistake  in  delivery. 

Van  Zile  on  Bailments,  Second  Edition,  Section 
208. 

Section  1281. — LIABILITY  FOR  THEFT  OF  ARTICLES  LEFT 
IN  GARAGE. — The  garage  keeper  is  bound  to  exercise  ordi- 
nary care  and  prudence  according  to  the  circumstances, 
regarding  goods  entrusted  to  him.  This  liability  extends 
not  only  to  the  storage  of  the  automobile  itself,  but  also 
to  the  goods  or  property  of  the  owner  left  in  connection 
with  the  machine,  even  though  responsibility  for  such 
goods  is  not  covered  by  the  express  terms  of  the  bail- 
ment. But  it  is  doubtful  if  the  garage  keeper  would  be 
liable  for  lost  articles,  left  in  the  car,  such  as  robes,  coats, 
etc.,  unless  his  attention  were  especially  called  to  them 
when  the  car  was  brought  in.  If,  however,  a  car  is 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.          1009 

brought  into  a  garage,  and  the  garage  keeper  allows  it 
to  be  left  in  the  garage  with  such  articles  in  it,  with 
notice  that  they  are  there,  he  will  be  liable  for  the  value 
of  such  articles  if  they  are  stolen  while  in  his  place. 

Section  1282. — LIABILITY  OF  GARAGE  KEEPERS  FOR 
DAMAGE  TO  CAR  TAKEN  OUT  WITHOUT  LEAVE. — The  garage 
keeper  will  be  liable  in  a  civil  action  for  damages,  if  by 
reason  of  his  negligence  the  car  is  taken  out  of  the  garage 
without  the  owner's  consent,  and  damaged  on  the  road. 
It  is  the  duty  of  the  garage  keeper  to  take  reasonable 
care  of  the  car. 

Section  1283. — LIABILITY  FOR  Loss  OF  GAR. — The 
garage  keeper  is  not  liable  for  loss  of  a  car  that  is  caused, 
(1)  by  the  act  of  God,  as  by  lightning,  earthquake,  tor- 
nadoes, storms,  and  the  like ;  or  (2)  by  the  act  of  the  pub- 
lic enemy;  or  (3)  by  unavoidable  accident,  as  by  fire, 
burglary,  etc.,  unless  by  exercising  ordinary  diligence 
such  loss  could  have  been  averted.  The  garage  keeper  is 
bound  to  maintain  a  safe  building,  with  reasonable  care 
and  guard  of  the  property,  and  he  is  bound  to  maintain 
reasonable  protection  against  fire.  If  he  does  not  do 
this,  and  by  reason  of  an  unsafe  building,  or  by  reason  of 
fire  which  ordinary  prudence  would  have  prevented  or 
put  out,  or  by  reason  of  theft  of  the  car,  which  could 
have  been  prevented  by  ordinary  care  on  the  garage 
keeper's  part,  he  will  be  liable  for  the  loss  of  the  car  by 
any  of  these  events.  He  is  not  an  insurer  against  loss, 
and  if  he  keeps  a  safe  house,  and  uses  the  care  in  keep- 
ing the  car  and  guarding  it  which  an  ordinarily  prudent 
man  should  use  under  the  same  circumstances,  he  will 
not  be  liable,  even  though  burglars  should  break  in  and 
drive  it  away,  or  an  earthquake  should  tumble  the  build- 
ing down  about  it  and  break  it  up,  or  a  fire  should  sweep 
away  the  garage  and  destroy  its  contents. 


1010  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Section  1284. — LIABILITY  AS  A  RENTER  OF  MACHINES. — 
The  garage  keeper  is  not  a  common  carrier,  merely  be- 
cause he  keeps  machines  for  hire.  But  if  he  lets  a  car, 
it  then  becomes  his  duty  to  exercise  that  degree  of  care 
and  skill  which  a  prudent  man,  having  regard  to  the  cir- 
cumstances, would  exercise.  It  is  his  duty  to  provide  a 
safe  car ;  he  is  bound  to  know  the  condition  of  the  car  he 
sends  out  of  his  garage  on  hire;  and  if  he  sends  out  a 
chauffeur  with  a  car  he  is  bound  to  provide  a  competent 
chauffeur.  In  a  business  involving  the  personal  safety 
and  lives  of  others,  due  care,  reasonable  diligence,  is 
nothing  less  than  the  most  watchful  care  and  the  most 
active  diligence,  and  anything  short  of  this  is  negligence 
and  carelessness.  If  a  garage  keeper,  therefore,  should 
send  out  an  unsafe  car,  and  it  should  break  down  on  the 
road  and  injure  the  person  to  whom  he  let  it,  it  would 
be  no  defense  on  his  part  that  he  did  not  know  that  defect 
in  the  machine  which  caused  the  breakdown.  He  is 
bound  at  all  times  to  know  the  condition  of  his  machines. 
It  is  no  excuse  for  a  garage  keeper  that  he  did  not  know 
of  any  defect,  if  he  could  have  known  it  by  reasonable 
examination  and  inspection.  It  is  presumed  that  he  can 
at  all  times,  by  examination  and  inspection  of  his  ma- 
chines, know  their  condition;  and  this  being  so,  it  is  the 
same  as  if  he  did  know  it,  so  far  as  regards  the  lessee's 
right  to  recover  for  damages  when  injured. 

Section  1285. — LIABILITY  OF  LESSEE  FOR  CARE  OF  HIRED 
AUTOMOBILE. — The  hirer  of  an  automobile  is  liable  to  the 
garage  keeper,  from  whom  he  hires  a  machine,  for  want 
of  reasonable  care  and  skill  in  driving,  and  for  fail- 
ure to  exercise  such  prudence  and  caution  as  the  cir- 
cumstances require.  If  a  person  hires  an  automobile 
from  a  garage,  and  breaks  it  up  or  otherwise  damages 
it  by  unskillful  or  reckless  driving,  leading  to  a  collision 
or  other  cause  of  damage,  he  will  be  liable  to  the  garage 
keeper  for  whatever  damages  the  latter  sustains.  If  the 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.          1011 

garage  keeper  must  be  careful  in  letting  a  car,  it  is  no 
less  true  that  the  hirer  must  also  be  careful  in  using  it. 
Babbitt's  The  Law  Applied  to  Motor  Vehicles, 
pages  515,  516. 

Section  1286. — LIABILITY  FOR  KEPAIR  WORK. — Where  a 
garage  keeper  maintains  a  repair  shop  for  motor  vehicles, 
contracting  to  make  repairs  generally,  rebuilding  ma- 
chines, or  supplying  new  parts  or  attachments  and  appli- 
ances, he  is  liable  for  all  defects  in  the  work  of  repair, 
whether  due  to  his  own  want  of  skill  or  to  that  of  his 
workmen.  He  is  bound  to  do  the  work  contracted  for 
reasonably  well,  that  is,  in  a  workmanlike  manner,  using 
such  skill  and  judgment  as  the  undertaking  requires,  and 
such  as  he  claims  his  workmen  to  possess ;  making  the 
repairs  within  the  time  stipulated  without  waste  or  dam- 
age to  the  employer;  using  the  material  furnished  in  a 
proper  manner;  and  withal  exercising  good  faith  in  the 
performance  of  the  work. 

Section  1287. — LIEN  FOR  STORAGE  AND  REPAIRS. — A 
garage  keeper  has  a  special  lien  for  storage  or  repair  of 
an  automobile,  dependent  on  possession,  for  the  compen- 
sation, for  any  balance  which  is  due  to  him  from  the 
owner  for  such  repairs  or  storage.  If  a  car  is  brought 
into  his  garage  by  an  agent  of  the  owner,  with  authority 
to  order  repairs,  the  lien  of  the  garage  keeper  will  also 
attach  to  the  car.  The  lien  will  be  for  the  storage 
charges,  and  for  reasonable  charges  for  the  work  done 
and  materials  furnished.  The  statute  provides  in  plain 
terms,  that  "keepers  of  garages  for  automobiles  shall 
have  a  lien  dependent  on  possession,  for  their  compen- 
sation in  caring  for  and  safe  keeping  of  such  automo- 
biles." The  same  statute  also  provides  a  lien  in  favor 
of  any  person  who  makes,  alters,  or  repairs  any  article 
of  personal  property,  at  the  request  of  the  owner,  or 
legal  possessor  of  the  property. 

Act  of  the  Legislature,  approved  April  12,  1911. 


1012  BUSINESS  LAW  FOE  BUSINESS  MEN. 

Section  1288. — POSSESSION  ESSENTIAL  TO  VALIDITY  OF 
LIEN. — To  complete  the  right  of  lien,  it  is  essential  that 
the  possession  and  right  of  possession  of  the  automobile 
should  be  continued  and  uninterrupted.  A  relinquish- 
ment  of  the  possession  to  the  owner  is  an  abandonment 
of  the  lien,  and  operates  as  an  immediate  release  of  it. 
A  lien  may  perhaps  be  renewed  by  the  return  and  resti- 
tution of  the  car;  but  in  such  cases  it  would  be  subordi- 
nate to  any  intervening  encumbrance  to  which  the  car  in 
the  meantime  had  become  subject. 

Section  1289. — SALE  OF  CAR  TO  SATISFY  LIEN. — If  the 
garage  keeper  is  not  paid  the  amount  due  him  for  stor- 
age or  repairs,  within  twenty  days  after  his  bill  becomes 
due,  then  he  may  proceed  to  sell  the  automobile,  at  public 
auction.  He  must  give  at  least  ten  days'  previous  notice 
of  such  sale,  by  advertising  in  some  newspaper  published 
in  the  county  in  which  such  property  is  situated,  or  if 
there  be  no  newspaper  published  in  such  county,  then  by 
posting  notices  of  the  sale  in  three  of  the  most  public 
places  in  the  town  or  place  where  such  automobile  is  to 
be  sold,  for  ten  days  previous  to  the  date  of  the  sale.  The 
proceeds  of  the  sale  must  be  applied  to  the  discharge  of 
his  lien  and  the  cost  of  keeping  and  selling  the  property ; 
and  the  remainder,  if  any,  must  be  paid  over  to  the  owner 
of  the  car. 

Civil  Code,  Section  3052. 

Section  1290. — FORM  OF  NOTICE  OF  SALE. — The  follow- 
ing is  a  form  of  notice  of  sale  by  a  garage  keeper,  to  be 
published  in  a  newspaper  as  directed  in  the  preceding 
section,  or  to  be  posted  in  three  public  places  if  there  is 
no  newspaper  published  in  the  county  where  the  sale  is 
to  be  had: 

NOTICE  OF  SALE  OF  AUTOMOBILE  AT  PUB- 
LIC AUCTION.— Notice  is  hereby  given  that  on  the 

day  of ,  19 ,  at  10  o'clock 

A.  M.,  at  the  garage  of  James  &  Smith,  No.  700  Van  Ness 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.          1013 

Avenue,  in  the  City  and  County  of  San  Francisco,  State 
of  California,  there  will  be  offered  for  sale  and  sold  at 
public  auction  to  the  highest  bidder  for  cash,  payable  at 
the  time  of  the  sale,  one  automobile,  which  said  automo- 
bile is  particularly  described  as  follows,  to-wit : 


(Here  insert  full  description  of  the  automobile  to  be  sold.) 


and  that  said  sale  is  to  be  had  as  aforesaid  to  satisfy  the 

lien  of  said  James  &  Smith  for  the  sum  of  $ , 

and  costs  and  expenses  of  sale,  upon  said  automobile  for 
its  storage  and  repairs  thereon. 

Dated ,   19 

JAMES  &  SMITH. 
By 

Section  1291. — REMOVING  AUTOMOBILE  SUBJECT  TO 
LIEN. — Any  person  who  surreptitiously  or  by  false  pre- 
tenses obtains  or  removes  from  any  garage  or  repair 
shop  any  automobile  or  other  personal  property  upon 
which  the  proprietor  or  manager  thereof  would  be  en- 
titled to  a  lien,  is  guilty  of  a  misdemeanor. 

Act  of  the  Legislature,  approved  May  7,  1917; 
in  effect  July  27,  1917. 

A.  J.  BLEDSOE,  ATTOENEY-AT-LAW,  Los  Angeles,  Cal. — • 
General  practice  in  all  courts.  Office  advice,  and  written 
opinions  by  mail.  See  the  title  page  of  this  book  for 
office  address  of  A.  J.  Bledsoe. 


PART  XIV. 
TRUST  DEEDS. 

Section  1292. — EXTENT  OF  THIS  SUBJECT. — It  is  not 
intended  to  include  in  this  subject  any  of  the  law  about 
trusts  created  by  last  wills,  or  trusts  in  personal  prop- 
erty, or  trusts  created  by  operation  of  law.  It  is  only 
intended  to  give  here  the  most  important  points  about 
trust  deeds  of  real  estate,  and  particularly  about  trusts 
created  by  deed  for  the  benefit  of  creditors  of  the  grantor. 

Section  1293. — TRUST  DEED  DEFINED. — A  trust  deed  is 
a  conveyance  to  a  person  in  trust,  to  do  the  things  speci- 
fied in  it.  The  legal  title  passes  to  the  grantee.  A  trust 
creates  an  obligation  upon  a  person,  arising  out  of  a  con- 
fidence reposed  in  one  who  has  the  legal  title  to  prop- 
erty conveyed  to  him,  that  he  will  faithfully  apply  and 
deal  with  such  property  according  to  the  confidence 
reposed,  as  expressed  in  the  conditions  named  in  the 
deed. 

Section  1294. — TRUST  DEED  MUST  BE  IN  WRITING. — A 
trust  deed  must  be  in  writing,  and  must  be  subscribed 
by  the  grantor  and  by  the  trustee,  or  by  the  agent  of  the 
trustee  authorized  by  writing. 

Civil  Code,  Section  852. 

Section  1295. — PURPOSES  FOR  WHICH  TRUST  DEED  MAY 
BE  MALE. — Trusts  may  be  created  by  deed  for  any  of  the 
following  purposes : 

1.     To  sell  real  property,  and  to  apply  or  dispose  of 

1014 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.         1015 

the  proceeds  in  accordance  with  the  instrument  creating 
the  trust. 

2.  To  mortgage  or  lease  real  property  for  the  bene- 
fit of  annuitants  or  other  legatees,  or  for  the  purpose  of 
satisfying  any  charge  thereon. 

3.  To  receive  the  rents  and  profits  of  real  property, 
and  pay  them  to  or  apply  them  to  the  use  of  any  person, 
whether  ascertained  at  the  time  of  the  creation  of  the 
trust  or  not,  for  himself  or  for  his  family,  during  the 
life  of  such  person,  or  for  any  shorter  term. 

4.  To  receive  the  rents  and  profits  of  real  property 
and  to  accumulate  the  same  for  the  purposes  and  within 
the  limits  named  in  the  deed. 

Civil  Code,  Section  857. 

Section  1296. — PROFITS  OF  LAND  LIABLE  TO  CREDITORS 
Where  a  trust  is  created  to  receive  the  rents  and  profits 
of  real  property,  and  no  direction  for  accumulation  is 
given,  the  surplus  of  such  rents  and  profits,  beyond  the 
sum  that  may  be  necessary  for  the  education  and  sup- 
port of  the  person  for  whose  benefit  the  trust  is  created, 
is  liable  to  the  claims  of  the  creditors  of  the  beneficiary, 
and  may  be  garnisheed  in  the  hands  of  the  trustee 
Civil  Code,  Section  859. 

Section  1297. — NUMBER  OF  TRUSTEES. — The  law  does 
not  limit  the  number  of  trustees  named  in  a  deed  of  trust. 
The  grantor  may  appoint  any  number  he  desires. 

Section  1298. — ACTION  BY  TRUSTEES. — Where  the  trust 
is  vested  by  the  deed  in  several  trustees,  they  must  all 
unite  in  the  execution  of  the  trust ;  but,  in  case  any  one 
or  more  of  them  is  dead,  the  trust  may  be  executed  by  the 
survivors,  unless  the  deed  creating  the  trust  directs 
otherwise. 

Civil  Code,  Section  860. 


1016  BUSINESS  LAW  FOB  BUSINESS  MEN. 

Section  1299.  —  BENEFICIARIES  TAKE  No  TITLE  BY  DEED. 
The  deed  of  trust  vests  the  whole  estate  in  the  trustees, 
subject  only  to  the  execution  of  the  trust.  The  bene- 
ficiaries take  no  estate  or  interest  in  the  property,  but 
may  enforce  the  performance  of  the  trust. 
Civil  Code,  Section  863. 


Section  1300.  —  DEVISE  AND  TKANSFEE  OF  TRUST 
ERTY.  —  The  grantor  in  a  trust  deed  may  direct  to  whom 
the  real  property  to  which  the  trust  relates  shall  belong, 
in  the  event  of  the  failure  or  termination  of  the  trust. 
He  may  also  transfer  the  property  by  deed,  or  devise  it 
by  his  will,  subject  to  the  execution  of  the  trust.  The 
devisee  or  grantee  of  trust  property  acquires  a  legal 
estate  in  the  property,  as  against  all  persons  except  the 
trustees  and  those  lawfully  claiming  under  them. 
Civil  Code,  Sections  864,  865. 

Section  1301.  —  WHEN  BENEFICIABY  CANNOT  DISPOSE 
OF  His  INTEREST  IN  TRUST  ESTATE.  —  Where  a  trust  is  cre- 
ated by  deed,  to  pay  the  beneficiary  the  rents  and  profits 
of  real  property,  or  an  annuity  out  of  such  rents  ana 
profits,  the  deed  may  lawfully  contain  the  condition  that 
the  beneficiary  must  not  dispose  of  his  interest  in  the 
trust  during  his  life,  or  for  a  term  of  years. 
Civil  Code,  Section  867. 

Section  1302.  —  POWER  OF  TRUSTEE.  —  The  trustees  have 
only  power  to  carry  out  the  directions  and  purposes  of 
the  trust.  They  cannot  go  outside  of  the  provisions  of 
the  deed.  Every  transfer  or  other  act  of  the  trustees, 
contrary  to  the  terms  of  the  trust,  is  absolutely  void. 

A  trustee  is  a  general  agent  for  the  trust  property. 
Where  there  are  several  co-trustees,  all  must  unite  in 
any  act  to  bind  the  trust  property,  unless  the  deed  of 
trust  otherwise  provides. 

Civil  Code,  Sections  870,  2258,  2267,  2268. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.          1017 

Section  1303. — LIABILITY  FOR  BREACH  OF  TRUST. — A 
trustee  who  uses  or  disposes  of  the  trust  property  for 
his  own  advantage,  and  not  in  furtherance  of  the  pur- 
poses of  the  trust  deed,  must  account  for  all  profits  so 
made  by  him,  or  pay  the  value  of  his  use  of  the  trust 
fund;  or,  if  he  has  disposed  of  the  trust  property,  he 
must  replace  it,  or  account  for  its  proceeds,  with  inter- 
est. If  a  trustee  makes  an  honest  mistake  in  the  perform- 
ance of  his  duty,  but  goes  outside  of  his  legitimate  pow- 
ers, he  is  liable  to  make  good  to  the  beneficiary  whatever 
is  lost  by  his  error. 

Civil  Code,  Sections  2237,  2238. 

Section  1304. — COMPENSATION  OF  TRUSTEE. — A  trus- 
tee is  entitled  to  the  repayment,  out  of  the  trust  prop- 
erty, of  all  expenses  actually  and  properly  incurred  by 
him  in  the  performance  of  his  trust.  He  is  entitled  to 
the  repayment  of  even  unlawful  expenditures,  if  they 
were  productive  of  actual  benefit  to  the  estate. 

Sums  expended  by  a  trustee,  in  payment  of  taxes,  are 
valid  charges  on  the  property,  though  the  deed  contains 
no  express  authority  for  such  payments.  (Decided  by 
the  Supreme  Court  of  California,  in  the  case  of  Savings 
&  Loan  Society  vs.  Burnett,  which  decision  is  printed  in 
Volume  39  of  the  Pacific  Eeporter,  page  922.) 

When  a  deed  of  trust  is  silent  upon  the  subject  of 
compensation,  the  trustee  is  entitled  to  the  same  com- 
pensation as  an  executor.  If  it  specifies  the  amount  of 
his  compensation,  he  is  entitled  to  the  amount  thus  speci- 
fied and  no  more.  If  it  directs  that  he  shall  be  allowed 
a  compensation,  but  does  not  specify  the  rate  or  amount, 
he  is  entitled  to  such  compensation  as  may  be  reasonable 
under  the  circumstances.  If  there  are  two  or  more  trus- 
tees the  compensation  shall  be  apportioned  among  the 
trustees  according  to  the  services  rendered  by  them  re- 
spectively. 

Civil  Code,  Sections  2273,  2274. 


1018  BUSINESS  LAW  FOB  BUSINESS  MEN. 

Section  1305. — TERMINATION  OF  THE  TEUST. — A  trust 
is  extinguished  by  the  entire  fulfillment  of  its  object,  or 
by  such  object  becoming  impossible  or  unlawful. 

A  trust  cannot  be  revoked  by  the  trustor  after  its 
acceptance,  actual  or  presumed,  by  the  trustee  and  bene- 
ficiaries, except  by  the  consent  of  all  the  beneficiaries, 
unless  the  deed  of  trust  reserves  a  power  of  revocation 
to  the  trustor. 

Civil  Code,  Sections  2279,  2280. 

Section  1306. — DISCHARGE  OF  TRUSTEE. — A  trustee 
can  be  discharged  from  his  trust  only  as  follows : 

1.  By  the  extinction  of  the  trust; 

2.  By  the  completion  of  his  duties  under  the  trust; 

3.  By  such  means  as  may  be  prescribed  by  the  deed 
of  trust; 

4.  By  the  consent  of  the  beneficiary,  if  he  have  ca- 
pacity to  contract; 

5.  By  the  judgment  of  a  competent  tribunal,  in  a  di- 
rect proceeding  for  that  purpose,  that  he  is  of  unsound 
mind;  or, 

6.  By  the  superior  court. 

The  superior  court  may  remove  any  trustee  who  has 
violated  or  is  unfit  to  execute  the  trust,  or  may  accept 
the  resignation  of  a  trustee. 

Civil  Code,  Sections  2282,  2283. 

Section  1307. — APPOINTMENT  OF  TRUSTEE  IN  CASE  or 
VACANCY. — The  superior  court  may  appoint  a  trustee 
whenever  there  is  a  vacancy  and  the  deed  of  trust  does 
not  provide  a  practicable  method  of  appointment.  If 
the  beneficiary  of  the  trust  is  of  the  age  of  fourteen 
years,  he  may  nominate  such  trustee,  and  if  such  nom- 
inee is  found  competent  to  discharge  the  duties,  he  is 
entitled  to  be  appointed  such  trustee  in  preference  to 
any  other  person. 

Act  of  the  Legislature,  approved  February  15, 
1911. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.          1019 

The  deed  of  trust  may  provide  for  some  other  method 
of  appointing  trustees ;  as  a  trust  deed  to  secure  a  note 
to  a  bank,  providing  that  the  bank  may  from  time  to 
time  appoint  other  trustees  on  the  death  of  those  named 
in  the  deed.  (Decided  by  the  Supreme  Court  of  Cali- 
fornia, in  the  case  of  Sacramento  Bank  vs.  Murphy, 
which  decision  is  printed  in  Volume  115  of  the  Pacific 
Reporter,  page  232.) 

Section  1308. — SURVIVORSHIP  BETWEEN  CO-TRUSTEES. 
On  the  death,  renunciation,  or  discharge  of  one  of  several 
co-trustees  the  trust  survives  to  the  others. 
Civil  Code,  Section  2288. 

Section  1309. — CREDITOR  AS  TRUSTEE. — A  creditor  of 
the  grantor  may  be  named  in  the  trust  deed  as  trustee, 
and  may  be  given  the  power  to  sell  property  and  apply 
the  proceeds  to  payment  of  the  debt.  When  the  debt  and 
expenses  of  sale  are  paid,  the  remainder  must  go  to  the 
grantor.  (Decided  by  the  Supreme  Court  of  California, 
in  the  case  of  Gary  vs.  Brown,  which  decision  is  printed 
in  Volume  62  of  the  California  Eeports,  page  373.) 

Section  1310. — BANK  MAY  BUY  PROPERTY  FROM 
STOCKHOLDER  TRUSTEES. — Stockholders  of  a  bank  are  not 
the  bank,  even  if  they  are  trustees  of  a  trust  deed  to  the 
bank ;  and  a  sale  to  the  bank  by  the  trustees  is  not  a  sale 
to  themselves.  If  there  is  a  deficiency,  after  the  sale 
upon  a  promissory  note  for  which  the  trust  deed  was 
security,  an  action  lies  upon  it  to  recover  the  balance 
due  after  crediting  the  amount  received  from  the  sale 
less  the  costs  of  sale.  (Decided  by  the  Supreme  Court 
of  California,  in  the  case  of  Copsey  vs.  Sacramento 
Bank,  which  decision  is  printed  in  Volume  133  of  the 
California  Eeports,  page  659.) 

Section  1311. — RECONVEYANCE  TO  GRANTOR. — When 
the  trust  is  satisfied  before  the  sale  of  the  property,  it  is 


1020  BUSINESS  LAW  FOK  BUSINESS  MEN. 

the  duty  of  the  trustee  to  convey  the  property  back  to 
the  grantor.  Thus,  if  a  trust  deed  is  made  of  property, 
with  power  of  sale  to  dispose  of  the  property  and  apply 
the  proceeds  to  the  debt  of  the  grantor;  if  the  grantor 
pays  the  debt  before  the  trustee  sells,  the  latter  cannot 
keep  the  property,  for  the  debt  is  wiped  out,  and  the 
object  of  the  trust  is  ended.  (Decided  by  the  Supreme 
Court  of  California,  in  the  case  of  Boswick  vs.  McEvary, 
which  decision  is  printed  in  Volume  62  of  the  California 
Reports,  page  496.) 

Section  1312. — REVOCATION  BY  DEED. — Where  a  trust 
deed  provides  that  the  grantor  may  revoke  the  trust  by 
another  deed  made  at  a  later  date,  the  grantor,  if  he 
wishes  to  take  advantage  of  the  provision,  must  strictly 
comply  with  the  trust  deed.  He  cannot  revoke  the  trust 
by  his  will.  (Decided  by  the  Supreme  Court  of  Cali- 
fornia, in  the  case  of  Carpenter  vs.  Cook,  which  decision 
is  printed  in  Volume  60  of  the  Pacific  Reporter,  page 
475.) 

Section  1313. — POSSESSION  OF  ESTATE  UPON  TERMINA- 
TION OF  TRUST. — Upon  the  termination  of  a  trust,  that 
has  been  created  to  manage  and  hold  the  property  for 
the  benefit  of  another  during  a  limited  period,  the  bene- 
ficiary is  entitled  to  the  immediate  possession  and  enjoy- 
ment of  the  trust  estate,  as  against  all  the  trustees ;  and 
to  have  their  account,  as  well  as  the  amount  of  the  estate 
in  their  hands,  settled  and  determined;  and  such  pos- 
session and  enjoyment  must  not  be  postponed  for  the 
purpose  of  determining  the  rights  of  the  trustees  as  be- 
tween themselves.  (Decided  by  the  Supreme  Court  of 
California,  in  the  case  of  Bermingham  vs.  Wilcox,  which 
decision  is  printed  in  Volume  52  of  the  Pacific  Reporter, 
page  822.) 

Section  1314. — SUIT  FOR  BALANCE  AFTER  SALE. — -After 
a  sale  under  a  trust  deed  securing  a  note,  if  the  sale  does 
not  bring  enough  to  pay  the  note,  a  suit  may  be  brought 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.          1021 

by  the  creditor  for  any  unsatisfied  balance.  (Decided 
by  the  Supreme  Court  of  California  in  the  case  of  Kraft 
vs.  Bryan,  which  decision  is  printed  in  Volume  73  of  the 
Pacific  Reporter,  page  745.) 

Section  1315. — LEASE  OF  TRUST  PROPERTY. — Where 
the  deed  creates  the  trust  for  a  limited  period,  the  trus- 
tees have  no  right  to  lease  the  property  for  a  longer 
period.  The  lease  will  end  when  the  trust  ends,  even 
if  made  for  a  longer  term,  because  the  trustees  had  no 
power  to  make  a  lease  for  a  longer  time  than  the  life  of 
the  trust  estate.  (Decided  by  the  Supreme  Court  oi 
California,  in  the  case  of  South  End  Warehouse  Co.  vs. 
Lavery,  which  decision  is  printed  in  Volume  107  of  the 
Pacific  Reporter,  page  1008.) 

Section  1316. — SALE  OF  TRUST  PROPERTY. — Where  the 
deed  gives  the  trustees  power  to  sell,  they  may  sell,  with- 
out any  court  proceedings  whatever.  Notice  of  the  sale 
must  be  given,  in  the  manner  provided  by  the  terms  of 
the  deed.  The  sale  must  be  made  in  the  manner  speci- 
fied in  the  deed. 

There  is  no  foreclosure,  and  no  redemption. 

Section  1317. — FORM  OF  TRUST  DEED. — The  following 
is  a  form  of  trust  deed: 

This  deed  of  trust,  made  this day  of , 

in  the  year  one  thousand  nine  hundred  and ,  be- 
tween  ,  of  Alameda  County,  California, 

the  party  of  the  first  part,  and ,  of 

San  Francisco,  California,  the  party  of  the  second  part, 

and ,  of  San  Francisco,  California,  the 

party  of  the  third  part,  witnesseth :  That  whereas  the 
said  party  of  the  first  part  has  borrowed  of  the  said  party 
of  the  third  part  the  sum  of  twenty-five  thousand 
(25,000)  dollars,  in  gold  coin  of  the  United  States,  and  has 

agreed  to  repay  the  same  on  the day  of , 

in  the  vear  ono  thousand  nine  hundred  and 


1022  BUSINESS  LAW  FOR  BUSINESS  MEN. 

to  the  said  party  of  the  third  part,  in  like  gold  coin  with 
interest  according  to  the  terms  of  a  certain  promissory 
note,  of  even  date  herewith,  executed  and  delivered  there- 
for by  the  said  party  of  the  first  part. 

Now  this  indenture  witnesseth,  that  the  said  party  of 
the  first  part,  in  consideration  of  the  aforesaid  indebted- 
ness to  the  said  party  of  the  third  part;  and  for  the  pur- 
pose of  securing  the  payment  of  said  promissory  note, 
and  of  any  sum  or  sums  of  money,  with  interest  thereon, 
that  may  now  or  hereafter  be  paid  or  advanced  by,  or 
may  otherwise  be  due  to,  the  parties  of  the  second  or 
third  part  under  the  provisions  of  this  instrument,  does 
by  these  presents  grant  unto  the  party  of  the  second 
part,  and  to  his  successors  and  assigns,  the  piece  or  par- 
col  of  land  situated  in  the  County  of  Alameda,  and 
State  of  California,  described  as  follows: 


(Description.) 


And  also,  all  the  interest,  or  other  claim  or  demand, 
which  the  said  party  of  the  first  part  now  has  or  may 
hereafter  acquire  of,  in  and  to  said  premises  with  the 
appurtenances. 

To  have  and  to  hold,  the  same  to  the  party  of  the 
second  part  and  to  his  successors  and  assigns  upon  the 
trusts  and  confidence  hereinafter  expressed,  to-wit: 

Firstly,  during  the  continuance  of  these  trusts,  the 
party  of  the  second  part  and  the  party  of  the  third  part, 
their  successors  and  assigns,  are  hereby  authorized  to 
pay,  without  previous  notice  all  or  any  liens,  and  all  or 
any  incumbrances  now  subsisting,  or  that  may  hereafter 
exist  upon  said  premises  (excepting  taxes  and  assess- 
ments imposed  upon  this  deed  of  trust  or  the  money  se- 
cured hereby)  which  may  in  their  judgment,  affect  said 
premises  or  these  trusts;  and  they  may  in  their  discre- 
tion at  the  expense  of  said  party  of  the  first  part,  contest 
the  payments  of  any  such  liens  or  encumbrances,  or  may 
defend  any  suit  or  proceeding  that  they  may  consider 
proper  to  protect  the  title  to  said  premises,  and  may 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.         1023 

insure  buildings  on  said  premises,  and  these  trusts  shall 
be  and  continue  as  security  to  the  party  of  the  third  part, 
and  his  assigns,  for  the  repayment,  in  gold  coin  of  the 
United  States,  of  the  money  so  borrowed  by  the  said 
party  of  the  first  part  and  the  interest  thereon,  and  of 
all  amounts  so  paid  out  and  costs  and  expenses  incurred, 
as  aforesaid,  with  interest  on  such  payment  at  the  rate 
of  one  per  cent  per  month  until  final  payment. 

Secondly,  in  case  the  said  party  of  the  first  part  shall 
well  and  truly  pay,  or  cause  to  be  paid  at  maturity,  in 
gold  coin  as  aforesaid,  all  sums  of  money  so  borrowed,  as 
aforesaid,  and  the  interest  thereon,  and  shall  upon  de- 
mand repay  all  other  moneys  secured  or  intended  to  be 
secured  hereby  and  also  the  reasonable  expenses  of  this 
trust,  then  the  party  of  the  second  part,  his  successors 
and  assigns,  shall  reconvey  all  the  estate  in  the  premises 
aforesaid  to  the  party  of  the  first  part  at  his  request 
and  cost. 

Thirdly,  if  default  shall  be  made  in  the  payment  of 
any  of  said  sums  of  principal  or  interest,  when  due,  in 
the  manner  stipulated  in  said  promissory  note,  or  in  the 
reimbursements  of  any  amounts  herein  provided  to  be 
paid,  or  of  anv  interest  thereon,  then  the  said  party  of 
the  second  part,  his  successors  or  assigns,  on  application 
of  the  party  of  the  third  part,  or  his  assigns,  shall  sell 
the  above-granted  premises,  or  such  part  thereof  as  in 
his  discretion,  he  shall  find  it  necessary  to  sell  in  order 
to  accomplish  the  objects  of  these  trusts,  in  the  manner 
following,  namely:  He  shall  first  publish  the  time  and 
place  of  such  sale,  with  a  description  of  the  property  to 
be  sold,  at  least  once  a  week  for  four  weeks,  in  some 
newspaper  published  in  said  County  of  Alameda,  and 
may  from  time  to  time  postpone  such  sale  by  publication ; 
and  on  the  day  of  sale  so  advertised,  or  any  day  to  which 
such  sale  may  be  postponed,  he  may  sell  the  property,  so 
advertised,  or  any  portion  thereof  at  public  auction,  in 
any  county  where  any  part  of  said  property  may  be  sit- 
uated, to  the  highest  cash  bidder ;  and  the  holder  or  hold- 
ers of  said  promissory  note,  his  agents  or  assigns,  and  the 


1024  BUSINESS  LAW  FOB  BUSINESS  MEN. 

party  of  the  second  part  may  bid  and  purchase  at  such 
sale. 

And  the  party  of  the  second  part,  or  assigns,  shall 
establish  as  one  of  the  conditions  of  such  sale,  that  all 
bids  and  payments  for  said  property  shall  be  made  in 
like  gold  coin  as  aforesaid,  and  upon  such  sale  he  shall 
make,  execute,  and  after  due  payment  made,  shall  deliver 
to  the  purchaser  or  purchasers,  his  or  their  heirs  and 
assigns,  a  deed  or  deeds  of  grant,  bargain  and  sale  of  the 
above-granted  premises,  and  out  of  the  proceeds  thereof 
shall  pay, 

First,  the  expenses  thereof,  together  with  the  reason- 
able expenses  of  this  trust,  including  counsel  fees  of  five 
hundred  dollars,  in  gold  coin,  which  shall  bcome  due 
upon  any  default  made  by  the  said  party  of  the  first  part 
in  any  of  the  payments  aforesaid. 

Second,  all  sums  which  may  have  been  paid  by  the 
said  party  of  the  second  or  third  part,  their  successors 
or  assigns,  or  the  holders  of  the  note  aforesaid,  and  not 
reimbursed,  and  which  may  then  be  due,  whether  paid  on 
account  of  encumbrances  or  insurance,  as  aforesaid,  or 
in  the  performance  of  any  of  the  trusts  herein  created, 
and  with  whatever  interest  may  have  accrued  thereon; 
next  the  amount  due  and  unpaid  on  said  promissory  note, 
with  whatever  interest  may  have  accrued  thereon;  and 
lastly  the  balance  or  surplus  of  such  proceeds,  if  any, 
to  said  party  of  the  first  part,  his  heirs  or  assigns. 

And  in  the  event  of  the  sale  of  said  premises  or  any 
part  thereof,  and  the  execution  of  a  deed  or  deeds  there- 
for, under  these  trusts,  then  the  recitals  therein  of  de- 
fault and  publication  shall  be  conclusive  proof  of  such 
default  and  of  the  due  publication  of  such  notice;  and 
any  such  deed  or  deeds  with  such  recitals  therein  shall  be 
effectual  and  conclusive  against  the  said  party  of  the 
first  part,  his  heirs  or  assigns,  and  all  other  persons ;  and 
the  receipt  for  the  purchase  money  contained  in  any 
deeds  executed  to  the  purchaser,  as  aforesaid,  shall  be 
a  sufficient  discharge  to  such  purchaser  from  all  obliga- 
tions to  see  to  the  proper  application  of  the  purchase 
money,  according  to  the  trusts  aforesaid. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.         1025 

In  witness  whereof,  we  have  hereunto  set  our  hands 
seals  the  day  and  year  first  above  written. 

(Seal.) 
..(Seal.) 

(Seal.) 

(Acknowledgment  in  usual  form.) 
A.  J.  BLEDSOE,  ATTORNEY-AT-LAW,  Los  Angeles,  Cal.— 
General  practice  in  all  courts.    Office  advice,  and  written 
opinions  by  mail.    See  title  page  of  this  book  for  office 
address  of  A.  J.  Bledsoe. 


PART  XV. 

ASSIGNMENT  OF  CONTKACTS,  GUARANTY  OF 

ACCOUNTS,  AND  POWER  OF  ATTORNEY 

ASSIGNMENT  OF  CONTRACTS 

.Section  1318. — WHAT  CAN  BE  ASSIGNED. — All  con- 
tracts may  be  assigned,  in  California,  with  certain  excep- 
tions. The  law  seeks  to  do  away  with  restrictions  upon 
the  power  of  the  parties  to  assign  their  ordinary  con- 
tracts. But  the  law  does  not  intend  to  render  assignable 
all  contracts  whatever,  regardless  of  their  nature  or 
effect,  and  hence  the  rule  of  assignability  must  be  taken 
with  some  qualifications. 

In  the  first  place,  it  was  not  intended  to  render  null 
an  agreement  that  the  parties  may  have  made  on  the 
subject.  For  if  the  contract  itself  provides  in  terms  that 
it  is  not  transferable,  it  cannot  be  transferred  by  an 
assignment,  although  it  otherwise  might  be  so.  Leases, 
and  the  tickets  usually  issued  by  railroad  companies,  are 
familiar  instances  of  this.  And  if  the  contract  does  not 
in  so  many  words  forbid  the  assignment,  yet,  if  there  are 
equivalent  expressions,  or  language  which  excludes  the 
idea  of  performance  by  another,  the  contract  is  not 
assignable.  The  question  in  every  case  must  turn  at  last 
upon  the  intention  of  the  parties. 

If  a  contract  provides  that  it  shall  not  be  assigned  to 
a  particular  person,  naming  him,  it  cannot  be  assigned  to 
that  person. 

In  the  next  place,  although  the  language  used  may 

not  show  an  intention  that  the  contract  should  not  be 

1026 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.          1027 

assigned,  yet  the  nature  of  the  case  may  be  such  that 
performance  by  another  would  be  an  essentially  differ- 
ent thing  from  that  contracted  for.  Thus,  a  picture  by 
one  artist  is  an  essentially  different  thing  from  a  pic- 
ture on  the  same  subject  by  another  artist;  and  so  of  a 
book  composed  by  an  author;  or  any  other  act  or  thing 
where  the  skill,  credit,  or  other  personal  quality  or  cir- 
cumstance of  the  party,  is  a  distinctive  characteristic  of 
the  thing  contracted  for,  or  a  material  inducement  of  the 
contract. 

Therefore,  if  a  contract  comes  within  either  of  the 
qualifications  above  stated,  then  it  is  not  assignable. 
But,  if  it  does  not — that  is  to  say,  if  the  language  used 
does  not  exclude  the  idea  of  performance  by  another; 
and  the  nature  of  the  thing  contracted  for,  or  the  circum- 
stances of  the  case,  do  not  show  that  the  skill,  credit,  or 
other  personal  quality  or  circumstance  of  the  party,  was 
a  distinctive  characteristic  of  the  thing  stipulated  for 
or  material  inducement  to  the  contract — then  the  con- 
tract is  assignable  under  the  law  of  California.  (Decided 
by  the  Supreme  Court  of  Calif onria,  in  the  case  of  Larue 
vs.  Groezinger,  which  decision  is  printed  in  Volume  24 
of  the  Pacific  Eeporter,  page  42.) 

Section  1319. — ASSIGNMENT  WITHOUT  CONSENT.—- 
Since  a  party  cannot  release  himself  from  an  obligation 
without  the  consent  of  the  other  party,  it  is  only  the 
benefit  of  a  contract  which  can  be  assigned.  Thus,  a  con- 
tractor for  the  erection  of  a  building  (if  not  prohibited 
by  the  terms  of  the  contract),  may  assign  his  contract  to 
another  contractor ;  and  if  his  assignee  goes  on  and  com- 
pletes the  contract,  he  may  recover  the  price  from  the 
owner ;  but  the  original  contractor,  his  assignor,  will  still 
be  liable  on  the  contract,  unless  the  owner  consents  to 
hold  responsible  only  the  assignee.  (Decided  by  the 
Supreme  Court  of  California,  in  the  case  of  Anderson 
vs.  De  Urioste,  which  decision  is  printed  in  Volume  31 


1028  BUSINESS  LAW  FOR  BUSINESS  MEN. 

of  the  Pacific  Reporter,  page  266.) 
Civil  Code,  Section  1457. 

Section  1320. — VERBAL  OR  WRITTEN  ASSIGNMENTS.— 
An  assignment  of  a  written  contract  must  be  in  writing. 

An  open  account,  or  debt,  not  evidenced  by  a  contract 
in  writing,  may  be  assigned  verbally. 

An  ordinary  contract  may  be  assigned  by  writing  on 
the  back  of  the  contract,  or  by  a  more  formal  and  sepa- 
rate paper,  at  the  option  of  the  parties. 

Section  1321. — TIME  OF  ASSIGNMENT. — It  is  immate- 
rial when  the  assignment  is  made.  An  indebtedness  due 
for  services  may  be  assigned  either  before  or  after  the 
services  are  completed,  and  it  will  be  a  good  assignment. 
(Decided  by  the  District  Court  of  Appeals,  in  the  case  of 
Union  Collection  Co.  vs.  National  Fertilizer  Co.,  which 
decision  is  printed  in  Volume  82  of  the  Pacific  Eeporter, 
page  1129.) 

Section  1322. — ASSIGNMENT  OF  WIFE'S  EABNINGS. — A 
wife 's  earnings  may  be  her  separate  property,  by  agree- 
ment with  her  husband,  or  because  of  her  living  separate 
from  him ;  and  where  this  is  so,  she  may  assign  her  claim 
for  wages.  (Decided  by  the  District  Court  of  Appeals, 
in  the  case  of  Greve  vs.  Echo  Oil  Co.,  which  decision  is 
printed  in  Volume  96  of  the  Pacific  Eeporter,  page  904.) 

Section  1323. — ASSIGNMENT  OF  WAGES. — An  assign- 
ment of  wages  or  salary  to  be  earned,  under  an  existing 
employment,  may  be  made,  and  will  be  valid  if  made  in 
good  faith  and  for  a  valuable  consideration.  The  assign- 
ment will  be  good,  although  the  assignor  works  from 
day  to  day,  and  is  hired  for  no  specified  time,  or  may 
work  by  the  piece,  and  his  wages  per  month  vary,  and  he 
may  be  discharged  at  any  time.  (Decided  by  the  Dis- 
trict Court  of  Appeals,  in  the  case  of  Cox  vs.  Hughes, 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.          1029 

which  decision  is  printed  in  Vohune  .102  of  the  Pacific 
Reporter,  page  956.) 

Section  1324. — ORDER  DRAWN  ON  DEBTOR.— An  order 
drawn  by  a  creditor  on  his  debtor,  for  the  whole  amount 
of  the  indebtedness,  operates  as  an  equitable  assignment 
of  the  debt  to  the  payee,  and  a  verbal  acceptance  of  the 
order  by  the  debtor  is  valid.  (Decided  by  the  Supreme 
Court  of  California,  in  the  case  of  Joyce  vs.  Wing  Yet 
Lung,  which  decision  is  printed  in  Volume  25  of  the 
Pacific  Eeporter,  page  545.) 

Section  1325. — NON-NEGOTIABLE  CONTRACTS. — A  non- 
negotiable  written  contract  for  the  payment  of  money  or 
personal  property  may  be  transferred  by  indorsement, 
in  like  manner  with  negotiable  instruments.  Such  in- 
dorsement shall  transfer  all  the  rights  of  the  assignor 
under  the  instrument  to  the  assignee,  subject  to  all 
equities  and  defenses  existing  in  favor  of  the  maker  at 
the  time  of  the  indorsement. 

Civil  Code,  Section  1459. 

Section  1326. — ASSIGNMENT  BY  CORPORATION. — The 
secretary  and  general  manager  of  a  corporation  may 
assign  accounts,  under  a  general  authorization,  the  adop- 
tion of  a  special  resolution  authorizing  it  being  unneces- 
sary. (Decided  by  the  Supreme  Court  of  California,  in 
the  case  of  Fuller  vs.  Arnold,  which  decision  is  printed 
in  Volume  33  of  the  Pacific  Reporter,  page  445.) 

Section  1327. — DAMAGES  FOR  TORT. — A  claim  for  dam- 
ages for  tort,  as,  for  libel,  or  slander,  or  personal  injuries 
by  reason  of  accident,  cannot  be  assigned.  A  claim,  in 
order  to  be  an  assignable  claim,  must  be  one  which  is 
founded  upon  a  contract. 

Section  1328. — FORM  OF  ASSIGNMENT  OF  CONTRACT.— 
The  following  is  a  form  of  assignment,  to  be  annexed  to 
a  written  contract.  If  the  contract  itself  is  acknowl- 
edged, the  assignment  should  be  acknowledged. 


1030  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Know  all  Men  by  these  Present :  That  we 

and : ,  named  in  the  annexed  instrument, 

in  consideration  of  the  sum  of dollars,  gold 

coin  of  the  United  States,  to  us  in  hand  paid  by . 

and ,  of  the  City  and  County  of 

San  Francisco,  and  State  of  California,  the  receipt  where- 
of is  hereby  acknowledged,  do,  by  these  presents,  sell  and 

transfer,  to  the  said and , 

their  heirs  and  assigns,  the  said  instrument,  and  all  our 
right,  title,  and  interest  in  and  to  the  same,  authorizing 
them  in  our  names,  or  otherwise,  but  at  their  own  cost, 
charge,  and  expense,  to  enforce  the  same  according  to 
the  tenor  thereof,  and  to  take  all  measures  which  may 
be  necessary  for  the  recovery  of  the  within  instrument. 


Section  1329, — FORM  OF  INDORSED  ASSIGNMENT. — The 
following  is  a  form  of  assignment  to  be  indorsed  on  the 
back  of  a  contract: 

For  Value  Received,  I  do  hereby  transfer  and  assign, 

to ,  his  heirs  and  assigns  forever, 

all  my  right,  title,  and  interest,  in,  to,  and  under  the 
within  instrument. 

Section  1330. — FORM  OF  ASSIGNMENT  OF  DEBT  DUE.— 
The  following  is  a  form  of  assignment  of  debt  due : 

Know  all  Men  by  these  Presents :  That  I, , 

of ,  for  and  in  consideration  of  the  sum 

of dollars,  to  me  paid  by , 

of ,  the  receipt  whereof  is  hereby 

acknowledged,  have  sold,  and  by  these  presents  do  sell, 

assign,  transfer,  and  set  over,  unto  the  said , 

a  certain  debt  due  from ,  amounting 

to  the  sum  of dollars,  for  goods  sold  and 

delivered  (or,  work,  labor,  and  services),  with  full  power 
to  sue  for,  collect,  and  discharge,  or  sell  and  assign  the 
same.  And  I  hereby  covenant,  that  the  said  sum  of 
dollars  is  justly  due  as  aforesaid. 


BUSINESS  CONTEACTS  AND  LEGAL  OBLIGATIONS.          1031 

Section  1331. — FORM  OF  ASSIGNMENT  OF  ACCOUNT.— 
The  following  is  a  form  of  assignment  of  an  account, 
which  may  be  indorsed  on  the  back  of  the  bill : 

For  Value  Received,  I  hereby  sell  and  assign  to 

_ ,  the  within  account,  which  is  justly  due 

from  the  within  named ,  and  I  hereby 

authorize  the  said to  collect  the  same. 

Section  1332. — FORM  OF  ASSIGNMENT  OF  LEASE. — For 
a  form  of  assignment  of  lease,  see  the  subject,  " Leases." 

Section  1333. — FORM  OF  ASSIGNMENT  OF  MORTGAGE.— 
For  a  form  of  assignment  of  mortgage,  see  the  subject 
"Mortgages." 

Section  1334. — FORM  OF  ASSIGNMENT  OF  CONTRACT  FOR 
SALE  OF  REAL  ESTATE. — The  following  is  a  form  of  as- 
signment of  a  contract  for  the  sale  of  real  estate : 

Know  all  Men  by  these  Presents :  That  I, , 

for  and  in  consideration  of  the  sum  of dollars, 

L>;old  coin  of  the  United  States,  to  me  paid  by , 

do,  by  these  presents,  sell,  transfer,  assign  and  set  over 

unto  the  said ,  a  contract  for  the  sale 

of  certain  real  estate,  described  as  follows,  to-wit : 

(Description.) 

which  said  contract  was  made  and  executed  by 

to  the  said ,  and  bears  date  the 

day  of 19 ,  to  have  and  to  hold  the  same 

unto  the  said ,  his  heirs,  executors, 

administrators,  and  assigns ;  subject,  nevertheless,  to  the 
covenants,  conditions,  and  payments  therein  mentioned. 

And  I  hereby  fully  authorize  and  empower  the  said 

,  upon  his  performance  of  the  said  covenants 

and  conditions,  to  demand  and  receive  the  said , 

the  deed  covenanted  to  be  given  in  the  said  contract,  in 
the  same  manner,  to  all  intents  and  purposes,  as  I  my- 
self might  or  could  do,  were  these  presents  not  executed. 


1032  BUSINESS  LAW  FOB  BUSINESS  MEN. 

GUARANTY  OF  ACCOUNTS 

Section  1335. — GUARANTY  DEFINED. — A  guaranty  is  a 
promise  to  answer  for  the  debt,  default,  or  miscarriage 
of  another  person. 

A  person  may  become  guarantor  even  without  the 
knowledge  or  consent  of  the  principal. 
Civil  Code,  Sections  2787,  2788. 

Section  1336. — CONSIDEBATION. — Where  a  guaranty  is 
entered  into  at  the  same  time  with  the  original  obliga- 
tion, or  with  the  acceptance  of  the  latter  by  the  guar- 
antee, and  forms  with  that  obligation  a  part  of  the  con- 
sideration to  him,  no  other  consideration  need  exist.  In 
all  other  cases  there  must  be  a  consideration  distinct 
from  that  of  the  original  obligation. 
Civil  Code,  Section  2792. 

Section  1337. — GUARANTY  MUST  BE  IN  WRITING. — A 
guaranty  must  be  in  writing,  and  signed  by  the  guar- 
antor ;  but  the  writing  need  not  express  a  consideration. 

There  are  some  cases  in  which  a  promise  is  made  to 
answer  for  the  obligation  of  another,  where  the  promise 
is  deemed  an  original  obligation  of  the  person  making  It, 
and  in  such  cases  the  promise  need  not  be  in  writing. 
But  in  ordinary  cases  of  guaranty  of  accounts,  where 
one  person  promises  to  answer  for  the  debt  of  another, 
the  promise  must  be  in  writing. 

Civil  Code,  Section  2793. 

Section  1338. — OFFER  TO  BECOME  GUARANTOR. — A 
mere  offer  to  become  a  guarantor  is  not  binding,  until 
notice  of  its  acceptance  is  communicated  by  the  guar- 
antee to  the  guarantor;  but  an  absolute  guaranty  is  bind- 
ing upon  the  guarantor  without  notice  of  acceptance. 
Civil  Code,  Section  2795. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.         1033 

Section  1339. — GUARANTY  THAT  AN  OBLIGATION  Is 
GOOD  OR  COLLECTIBLE. — A  guaranty  to  the  effect  that  an 
obligation  is  good,  or  is  collectible,  imports  that  the 
debtor  is  solvent,  and  that  the  demand  is  collectible  by 
the  usual  legal  proceedings,  if  taken  with  reasonable 
diligence.  Such  a  guaranty  is  not  discharged  by  an  omis- 
sion to  take  proceedings  upon  the  principal  debt,  or 
upon  any  collateral  security  for  its  payment,  if  no  part 
of  the  debt  could  have  been  collected  thereby.  Where 
there  is  such  a  guaranty,  the  removal  of  the  principal 
from  the  state,  leaving  no  property  therein  from  which 
the  obligation  might  be  satisfied,  is  equivalent  to  the 
insolvency  of  the  principal  in  its  effect  upon  the  rights 
and  obligations  of  the  guarantor. 

Civil  Code,  Sections  2800,  2801,  2802. 

Section  1340. — LIABILITY  OP  GUARANTOR. — A  guaranty 
is  to  be  deemed  unconditional  unless  its  terms  impart 
some  condition  precedent  to  the  liability  of  the  guar- 
antor. 

A  guarantor  of  payment  of  an  account  is  liable  to  the 
guarantee  immediately  upon  the  default  of  the  principal, 
and  without  demand  or  notice.  Therefore,  if  the  debtor 
fails  to  pay  the  account  at  the  time  agreed  upon,  the 
law  does  not  require  the  creditor  to  notify  the  guarantor, 
or  to  make  any  demand  upon  him ;  but  the  creditor  may 
immediately  sue  the  guarantor  for  the  debtor's  account. 
Civil  Code,  Sections  2806,  2807. 

Section  1341. — LIABILITY  UPON  GUARANTY  OF  A  CONDI- 
TIONAL OBLIGATION. — "Where  one  guarantees  a  conditional 
obligation,  his  liability  is  the  same  in  extent  as  that  of 
the  principal;  and  he  is  not  entitled  to  notice  of  the 
default  of  the  principal,  unless  he  is  unable  by  reasonable 
diligence  to  acquire  information  of  such  default,  and  the 
creditor  has  actual  notice  of  his  inability  to  acquire  such 
information. 

Civil  Code,  Section  2808. 


1034  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Section  1342. — CONTINUING  GUARANTY. — A  guaranty 
relating  to  a  future  liability  of  the  principal,  under  suc- 
cessive transactions,  which  either  continue  his  liability  or 
from  time  to  time  renew  it  after  it  has  been  satisfied,  is 
called  a  continuing  guaranty. 

A  continuing  guaranty  may  be  revoked  at  any  time  by 
the  guarantor,  in  respect  to  future  transactions,  unless 
there  is  a  continuing  consideration  as  to  such  transac- 
tion which  he  does  not  renounce. 

Civil  Code,  Sections  2814,  2815. 

Section  1343. — EXONERATION  OF  GUARANTORS. — A 
guarantor  is  exonerated,  except  so  far  as  he  may  be  in- 
demnified by  the  principal,  if  by  any  act  of  the  creditor, 
without  the  consent  of  the  guarantor,  the  original  obliga- 
tion of  the  principal  is  altered  in  any  respect,  or  the 
remedies  or  rights  of  the  creditor  against  the  principal, 
in  respect  thereto,  in  any  way  impaired  or  suspended.  A 
promise  by  a  creditor,  which  for  any  cause  is  void,  or 
voidable  by  him  at  his  option,  does  not  alter  the  obliga- 
tion or  suspend  or  impair  the  remedy. 

The  acceptance,  by  a  creditor,  of  anything  in  partial 
satisfaction  of  an  obligation,  reduces  the  obligation  of  a 
guarantor  thereof,  in  the  same  measure  as  that  of  the 
principal,  but  does  not  otherwise  affect  it. 

Mere  delay  on  the  part  of  a  creditor  to  proceed 
against  the  principal,  or  to  enforce  any  other  remedy, 
does  not  exonerate  a  guarantor. 

A  guarantor,  who  has  been  indemnified  by  the  prin- 
cipal, is  liable  to  the  creditor  to  the  extent  of  the  indem- 
nity, notwithstanding  that  the  creditor,  without  the  as- 
sent of  the  guarantor,  may  have  modified  the  contract 
or  released  the  principal. 

Civil  Code,  Sections  2819,  2820,  2822,  2823,  2824. 

Section  1344. — DEATH  OF  GUARANTOR. — A  guaranty 
for  future  advances  terminates,  when  the  guarantor  dies, 
and  the  guarantee  has  notice  of  his  death.  (Decided  by 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.         1035 

the  Supreme  Court  of  California,  in  the  case  of  Valen- 
tine vs.  Donohoe-Kelly  Banking  Co.,  which  decision  is 
printed  in  Volume  65  of  the  Pacific  Eeporter,  page  381.) 

Section  1345. — JUDGMENT  AGAINST  PRINCIPAL. — Where 
a  creditor  has  recovered  a  judgment  against  the  prin- 
cipal debtor,  which  remains  unsatisfied,  a  guarantor 
against  whom  judgment  is  recovered  on  his  guaranty  is, 
on  payment  thereof,  entitled  to  an  assignment  of  the 
judgment  against  the  principal.  (Decided  by  the  Su- 
preme Court  of  California,  in  the  case  of  Clark  vs.  Chap- 
man, which  decision  is  printed  in  Volume  32  of  the  Pacific 
Eeporter,  page  812.) 

Section  1346. — GUARANTY  MUST  BE  CERTAIN. — The 
writing  creating  a  guaranty  must  be  certain  and  explicit, 
so  that  the  intention  to  guaranty  the  payment  can  be 
plainly  seen.  For  instance,  if  one  person  should  receive 
a  letter  from  another,  making  inquiry  regarding  the 
financial  standing  of  a  third  person,  and  should  answer, 
"You  may  rest  assured  that  you  will  get  your  pay  for 
all  work  done,"  this  would  not  be  a  guaranty,  because 
it  would  not  contain  any  promise  to  stand  good  for  the 
debts  of  that  person.  The  letter  would  be  merely  an 
expression  of  opinion.  To  constitute  a  guaranty,  there 
would  have  to  appear  in  it  some  promise  to  answer  for 
the  debt  or  default  of  another.  (Decided  by  the  Su- 
preme Court  of  California,  in  the  case  of  Switzger  vs. 
Baker,  which  decision  is  printed  in  Volume  30  of  the 
Pacific  Eeporter,  page  761.) 

Section  1347. — FORM  OF  GUARANTY  OF  ACCOUNT. — The 
following  is  a  form  of  guaranty  of  account : 

San  Francisco,  Cal., 

,19 

To  Jones  &  Smith, 

402  Market  Street, 

San  Francisco,  Cal. 

Gentlemen :  I  hereby  guaranty  to  you  the  account  of 
Henry  Green,  for  goods  purchased  by  him,  or  for  work 


3  036  BUSINESS  LAW  FOR  BUSINESS  MEN. 

mid  labor  performed  for  him,  during  the  term  of  six 

months  from  date  hereof  and  up  to  the  amount  of 

dollars.    This  guaranty  is  made  upon  the  consideration 

of dollars  to  me  in  hand  paid  by  the  said 

Henry  Green. 


Section  1348. — POWER  OF  ATTORNEY  MUST  BE  IN  WRIT- 
ING.— A  power  of  attorney  must  be  in  writing,  and  sub- 
scribed by  the  grantor,  or  his  agent.  If  subscribed  by  an 
agent  of  the  grantor,  the  agent's  authority  to  sign  must 
be  in  writing.  If  it  is  intended  to  be  recorded,  it  must 
be  acknowledged. 

Code  of  Civil  Procedure,  Section  1971. 

Section  1349. — MARRIED  WOMAN'S  POWER  OF  ATTOR- 
NEY.— A  married  woman  may  make,  execute,  and  revoke 
powers  of  attorney  for  the  sale,  conveyance,  or  encum- 
brance of  her  real  or  personal  estate,  which  shall  have 
the  same  effect  as  if  she  were  unmarried,  and  may  be 
acknowledged  in  the  same  manner  as  a  grant  of  real 
property. 

Civil  Code,  Section  1094. 

Section  1350. — SIGNATURE  OF  ATTORNEY  IN  FACT. — 
When  an  attorney  in  fact  executes  an  instrument  trans- 
ferring an  estate  in  real  property,  he  must  subscribe 
the  name  of  his  principal  to  it,  and  his  own  name  as 
attorney  in  fact. 

*  Civil  Code,  Section  1095. 

Section  1351. — REVOCATION  OF  POWER  OF  ATTORNEY.— 
No  instrument  containing  a  power  to  convey  or  execute 
instruments  affecting  real  property,  which  has  been 
recorded,  is  revoked  by  any  act  of  the  party  by  whom  it 
was  executed,  unless  the  instrument  containing  such 
revocation  is  also  acknowledged  or  proved,  certified  and 


BUSINESS  CONTEACTS  AND  LEGAL  OBLIGATIONS.          1037 

recorded,  in  the  same  office  in  which  the  instrument  con- 
taining the  power  was  recorded. 
Civil  Code,  Section  1216. 

Section  1352. — REVOCATION  OF  POWER  OF  AN  AGENT.— 
Unless  the  power  of  an  agent  is  coupled  with  an  interest 
in  the  subject  of  the  agency,  it  is  terminated,  as  to  every 
person  having  notice  thereof,  by : 

1.  Its  revocation  by  the  principal; 

2.  His  death;  or, 

3.  His  incapacity  to  contract. 

Civil  Code,  Section  2356. 

Section  1353. — POWER  OF  ATTORNEY  COUPLED  WITH  AN 
INTEREST. — Where  the  power  of  attorney  covers  prop- 
erty in  which  the  grantee  has  an  interest,  the  power  is 
not  revoked  by  the  death  of  the  principal. 

Section  1354. — FORM  OF  GENERAL  POWER  OF  ATTORNEY. 
The  following  is  a  form  of  general  power  of  attorney : 
Know  all  Men  by  these  Presents : 

That  we, and 

of  the  city  and  county  of  San  Francisco,  state  of  Cali- 
fornia, have  made,  constituted  and  appointed,  and  by 

ihese  presents  do  make,  constitute,  and  appoint 

,  of  said  city  and  county,  our  true  and  lawful 

attorney  for  us  and  in  our  names,  place,  and  stead,  and 
for  our  use  and  benefit,  to  ask,  demand,  sue  for,  recover, 
collect  and  receive  all  such  sums  of  money,  debts,  dues,  ac- 
counts, legacies,  bequests,  interests,  dividends,  annuities 
and  demands  whatsoever  as  are  now  or  shall  hereafter 
become  due,  owing,  payable  or  belonging  to  us,  and  have, 
use  and  take  all  lawful  ways  and  means  in  our  names  or 
otherwise  for  the  recovery  thereof,  by  attachments,  ar- 
rests, distress  or  otherwise,  and  to  compromise  and  agree 
for  the  same,  and  acquittances  or  other  sufficient  dis- 
charges for  the  same,  for  us,  and  in  our  names,  to  make, 
seal,  and  deliver;  to  bargain,  contract,  agree  for,  pur- 
chase, receive,  and  take  lands,  tenements,  hereditaments, 


1038  BUSINESS  LAW  FOB  BUSINESS  MEN. 

and  accept  the  seisin  and  possession  of  all  lands,  and  all 
deeds  and  other  assurances,  in  the  law  therefor,  and  to 
lease,  let,  demise,  bargain,  sell,  remise,  release,  convey, 
mortgage  and  hypothecate  lands,  tenements  and  heredita- 
ments, upon  such  terms  and  conditions,  and  under  such 
covenants,  as  he  shall  think  fit.  Also,  to  bargain  and 
agree  for,  buy,  sell,  mortgage,  hypothecate  and  in  any 
and  every  way  and  manner  deal  in  and  with  goods,  wares, 
and  merchandise,  chose  in  action  and  other  property  in 
possession  or  in  action,  and  to  make,  do,  and  transact 
all  and  every  kind  of  business  of  what  nature  or  kind 
soever,  and  also  for  us  and  in  our  names,  and  as  our  act 
and  deed,  to  sign,  seal,  execute,  deliver  and  acknowledge 
such  deeds,  leases  and  assignment  of  leases,  covenants, 
indentures,  agreements,  mortgages,  hypothecations,  bot- 
tomries, charter-parties,  bills  of  lading,  bills,  bonds, 
notes,  receipts,  evidences  of  debts,  releases  and  satisfac- 
tion of  mortgage,  judgments  and  other  debts,  and  such 
other  instruments  in  writing  of  whatever  kind  and  na- 
ture as  may  be  necessary  or  proper  in  the  premises. 

Giving  and  granting  unto  our  said  attorney  full  power 
and  authority  to  do  and  perform  all  and  every  act  and 
thing  whatsoever  requisite  and  necessary  to  be  done  in 
and  about  the  premises,  as  fully  to  all  intents  and  pur- 
poses as  we  might  or  could  do  if  personally  present,  and 
with  full  power  of  substitution  or  revocation,  hereby  rati- 
fying and  confirming  all  that  our  said  attorney,  or  his 
substitute  or  substitutes,  shall  lawfully  do  or  cause  to 
be  done  by  virtue  of  these  presents. 

In  witness  whereof  we  have  hereunto  set  our  hands 

and  seals  the day  of ,  19 

(Seal.) 

(Seal.) 

(Acknowledgment  in  usual  form.) 

Section  1355. — SPECIAL  POWEK  OF  ATTORNEY. — The  fol- 
lowing is  a  form  of  special  power  of  attorney : 
Know  all  Men  by  these  Presents: 

That  I, ,  of  the  county  of  Alarneda, 

state  of  California,  have  made,  constituted,  and  appoint- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.         1039 

ed,  and  by  these  presents  do  make,  constitute,  and  appoint 

,  of , 

my  true  and  lawful  attorney  for  me  and  in  my  name, 
place,  and  stead,  and  for  my  use,  to  ask,  demand,  sue  for, 
collect,  and  receive  all  such  sums  of  money  which  are  or 
which  shall  be  due,  owing,  payable,  and  belonging  to  me, 
or  detained  from  me,  in  any  manner  whatsoever,  by  any 
person  or  persons  whatsoever. 

Giving  and  granting  unto  my  said  attorney  full  power 
and  authority  in  and  about  the  premises ;  and  to  use  all 
due  means,  course  and  process  in  the  law  for  the  full, 
effectual,  and  complete  execution  thereof,  and  in  my 
name  to  make,  execute  and  deliver  all  and  every  instru- 
ment in  writing  under  seal,  or  otherwise,  and  for  the 
premises  to  appear  and  my  person  to  represent  before 
any  governor,  judge,  officer,  and  minister  of  the  law 
whatsoever,  and  in  any  court  or  courts  of  judicature,  and 
on  my  behalf,  to  prosecute  for  debt,  fraud  and  any  man- 
ner of  claims  I  may  have  against  any  person  or  persons, 
and  to  answer,  defend,  and  reply  unto  all  actions,  causes, 
matters,  and  things  whatsoever  relating  to  the  premises. 
Also,  to  submit  any  matter  in  dispute  respecting  the 
premises  to  arbitration  or  reference.  And  generally  to 
say,  do,  act,  transact,  determine,  accomplish  and  finish  all 
matters  and  things  whatsoever  relating  to  the  premises, 
as  fully,  amply,  and  effectually,  to  all  intents  and  pur- 
poses, as  I  might  or  could  do  if  personally  present,  with 
full  power  of  substitution  or  revocation,  hereby  ratify- 
ing, confirming,  and  holding  valid  all  that  my  said  attor- 
ney, or  his  substitute  or  substitutes,  shall  lawfully  do  or 
cause  to  be  done  by  virtue  of  these  presents. 

In  witness  whereof,  I  have  hereunto  set  my  hand  and 
seal  this day  of ,  19 

(Acknowledgment  in  the  usual  form.) 

Section  1356. — COMMERCIAL  POWER  OF  ATTORNEY, 
WITH  AUTHORITY  TO  SELL  EEAL  ESTATE. — Cowdery's  Book 
of  Forms,  which  lawyers  use  in  practice,  contains  a  form 
of  commercial  power  of  attorney,  also  giving  authority 


1040  BUSINESS  LAW  FOE  BUSINESS  MEN. 

to  sell  real  estate.    This  form  is  given  below.    It  appears 
to  have  been  carefully  prepared : 
Know  All  Men  by  these  Presents : 

That  I,  ,  of  the  County 

of  Santa  Clara,  State  of  California,  have  made,  consti- 
tuted, and  appointed,  and  by  these  presents  do  make, 

constitute  and  appoint ,  of  the  County 

of  Alameda,  State  of  California,  my  true  and  lawful 
attorney,  for  me,  and  in  my  name,  and  on  my  behalf,  to 
ask,  demand,  recover  and  receive,  all  and  any  sum  or 
sums  of  money,  debts,  dues,  merchandise,  or  effects,  due, 
payable,  coming,  or  belonging,  or  which  may  at  any  time 
be  due,  payable,  or  belonging  to  me,  from  any  person  or 
persons  whatsoever ;  to  sell  all,  or  any  part,  of  said  goods, 
merchandise  and  effects,  which  may  come  to  his  posses- 
sion or  knowledge,  on  such  credit,  and  for  such  prices  as 
he  may  deem  meet ;  to  purchase  any  goods,  merchandise, 
specie,  currency,  mining  or  other  kinds  of  stock  or  other 
commodities,  on  my  account  for  such  prices  and  to  such 
amount  as  he  may  deem  meet,  and  the  same  to  sell  again 
for  my  benefit  and  on  my  account,  for  any  prices  whatso- 
ever, to  ship  or  transport  the  same,  or  any  part  thereof, 
on  my  behalf  and  account,  to  any  post  or  posts,  place  or 
places,  whatsoever,  in  any  vessel  or  vessels,  and  with  and 
to  any  person  or  persons  whatsoever,  and  there  barter, 
exchange,  and  dispose  of  the  same;  to  insure  and  cause 
insurance  to  be  made,  of  any  such  goods,  merchandise, 
specie  or  other  commodities,  or  of  any  part  thereof,  at 
such  premiums,  and  for  such  risks  as  he  may  deem  meet : 
to  accept  any  bill  or  bills  of  exchange  or  orders,  make 
and  execute  any  note  or  notes  of  hand,  bond  or  bonds, 
or  other  instruments  or  contracts,  in  my  name,  and  on 
my  account,  to  and  for  any  amount  which  he  may  deem 
meet  or  expedient;  to  sell,  barter,  exchange,  or  dispose 
of  any  real  estate  of -which  I  am  now  seized  or  possessed 
in  fee  simple,  or  for  any  less  estate,  to  any  person  or  per- 
sons, for  any  price,  or  in  any  manner  whatsoever,  and 
for  these  purposes  to  execute  and  acknowledge  any  deed 
or  deeds,  lease  or  leases,  or  other  assurance  or  assur- 
ances, with  general  covenants  of  warranty  against  all 
persons,  or  any  other  covenants  whatsoever,  as  he  may 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.          1041 

deem  expedient;  to  purchase  any  real  estate  on  my  ac- 
count, in  fee  simple  or  otherwise,  at  any  price  of  any  ex- 
change whatsoever,  and  for  these  purposes  to  receive, 
confirm,  make,  and  execute,  any  contracts,  deeds,  con- 
veyances, or  other  instruments  whatsoever ;  to  settle  and 
adjust  all  partnership  accounts  and  demands,  and  all 
other  accounts  or  demands  now  subsisting,  or  which  may 
hereafter  subsist  between  me  and  any  person  or  persons 
whatsoever,  and  submit  the  same  to  and  decide  them  by 
arbitration ;  to  compound  for  any  debts,  dues,  or  demands 
owing,  or  which  may  hereafter  be  owing  to  me,  and  to 
take  less  than  the  whole,  or  otherwise  to  agree  for  the 
same,  in  such  manner,  and  on  such  terms  as  he,  in  his  dis- 
cretion, may  deem  proper;  and  for  all  and  any  of  these 
purposes,  to  make  and  execute  any  releases,  compro- 
mises, compositions,  agreements,  or  contracts,  by  deed 
or  otherwise,  in  his  opinion  necessary  and  expedient  in 
the  premises ;  to  pay  and  discharge  all  debts  and  demands 
due  and  payable,  or  which  may  hereafter  become  due 
and  payable  by  me  unto  any  person  or  persons  what- 
soever; to  enter  into  any  lands  or  other  real  estate  to 
which  I  am  or  may  be  entitled,  and  to  recover  the  posses- 
sion thereof,  and  damages  for  any  injury  done  thereto, 
and  to  distrain  for  rent  due  thereon,  and  also  to  com- 
mence and  prosecute  unto  final  judgment  and  execution, 
any  suit  or  suits,  action  or  actions,  real,  personal,  or 
mixed,  which  he  shall  deem  proper  for  the  recovery,  pos- 
session, or  enjoyment  of  any  matter  or  thing  which  is  or 
which  may  hereafter  be  due,  payable,  owing,  belonging, 
accruing,  or  appertaining  to  me,  for  or  by  reason  of  the 
premises,  or  any  part  thereof,  and,  in  any  such  suits  or 
actions,  for  me  in  person,  or  by  such  attorney  or  attor- 
neys, or  counsel,  he  may  deem  necessary  or  proper  to 
retain  or  employ  to  appear  and  plead,  before  any  courts 
or  tribunals  having  jurisdiction  thereof,  and  all  stipula- 
tions, undertakings,  recognizances  and  other  requisites  in 
any  suits  or  actions,  and  any  question  arising  on  the 
same,  by  arbitration  or  other  compromise,  and  of  all  re- 
ceipts and  recoveries  in  the  premises,  due  acquittances 
and  discharges  to  execute  and  deliver,  and  generally  to 


1042  BUSINESS  LAW  FOR  BUSINESS  MEN. 

do  and  perform  all  matters  and  things,  transact  all  busi- 
ness, make,  execute  and  acknowledge  all  contracts, 
orders,  deeds,  mortgages,  satisfaction  of  mortgages, 
leases  and  assignments  of  the  same,  and  all  other  writing, 
assurances,  and  instruments  of  every  kind,  which  may 
be  requisite  or  proper  to  effectuate  all  or  any  of  the 
premises,  or  any  other  matter  or  thing  appertaining  or 
belonging  to  me,  with  the  same  powers,  and  to  all  intents 
and  purposes,  with  the  same  validity  as  I  could,  if  per- 
sonally present  (giving  and  granting  unto  my  said  at- 
torney, full  power  to  substitute  one  or  more  attorneys 
under  him,  my  said  attorney,  in  or  concerning  the  prem- 
ises, or  any  part  thereof,  and  the  same  at  his  pleasure  to 
revoke) ;  and  hereby  ratifying  and  confirming  whatso- 
ever my  said  attorney  (or,  his  substitute  or  substitutes) 
shall  and  may  do,  by  virtue  hereof,  in  the  premises. 

In  witness  whereof,  I  have  hereunto  set  my  hand  and 

seal  this day  of , ,  19 

(Seal.) 

(Acknowledgment  in  usual  form.) 

A.  J.  BLEDSOE,  ATTORNEY-AT-LAW,  Los  Angeles,  Cal.— 
Written  opinions,  at  office,  or  sent  by  mail,  upon  legal 
problems  submitted  by  clients.  See  title  page  of  this 
book  for  office  address  of  A.  J.  Bledsoe. 


PART  XVI. 
WORKMEN'S  COMPENSATION  LAW. 

Section  1356. — The  Workmen's  Compensation  Act, 
passed  in  1917  and  amended  in  1919,  is  intended  to  pro- 
vide a  complete  system  of  workmen's  compensation  for 
the  State  of  California.  It  is  not  printed  here  in  full, 
hut  only  such  sections  of  the  act  as  will  prohahly  he 
required  for  quick  and  ready  reference. 

(a)  Employer's  Liability. — Sec.  6.  Liability  for  the 
compensation  provided  by  this  act,  in  lieu  of  any  other 
liability  whatsoever  to  any  person,  shall,  without  regard 
to  negligence,  exist  against  an  employer  for  any  injury 
sustained  by  his  employees  arising  out  of  and  in  the 
course  of  the  employment  and  for  the  death  of  any  such 
employee  if  the  injury  shall  proximately  cause  death,  in 
those  cases  where  the  following  conditions  of  compen- 
sation concur : 

(1)  Where,  at  the  time  of  the  injury,  both  the  em- 
ployer and  employee  are  subject  to  the  compensation 
provisions  of  this  act. 

(2)  Where,  at  the  time  of  the  injury,  the  employee  is 
performing  service  growing  out  of  and  incidental  to  his 
employment  and  is  acting  within  the  course  of  his  employ- 
ment. 

(3)  Where  the  injury  is  proximately  caused  by  the 
employment,  either  with  or  without  negligence,  and  is  not 
caused  by  the  intoxication  of  the  injured  employee,  or  is 
not  intentionally  self-inflicted. 

(4)  Where  the  injury  is  caused  by  the  serious  and 
\villful  misconduct  of  the  injured  employee,  the  compen- 

1043 


1  044  BUSINESS  LAW  FOE  BUSINESS  MEN. 

sation  otherwise  recoverable  by  him  shall  be  reduced 
one-half;  provided,  hoivever,  that  such  misconduct  of  the 
employee  shall  not  be  a  defense  to  the  claim  of  the  depend- 
ents of  said  employee,  if  the  injury  results  in  death,  or 
to  the  claim  of  the  employee  if  the  injury  results  in  a 
permanent  partial  disability  equaling  or  in  excess  of 
seventy  per  cent  of  total;  and  provided,  further,  that 
such  misconduct  of  said  employee  shall  not  be  a  defense 
where  his  injury  is  caused  by  the  failure  of  the  employer 
to  comply  with  any  provision  of  law,  or  any  safety  order 
of  the  commission,  with  reference  to  the  safety  of  places 
of  employment;  and  provided,  further,  that  in  case  of 
an  injury  suffered  by  an  employee  under  sixteen  years 
of  age,  it  shall  be  conclusively  presumed  that  such  injury 
was  not  caused  by  serious  and  willful  misconduct. 

Act  of  the  Legislature,  approved  May  22,  1919 ; 
in  effect  July  22,  1919. 

Where  such  conditions  of  compensation  exist,  the 
right  to  recover  such  compensation,  pursuant  to  the  pro- 
visions of  this  act,  shall  be  the  exclusive  remedy  against 
the  employer  for  the  injury  or  death;  provided,  that 
where  the  employee  is  injured  by  reason  of  the  serious 
and  willful  misconduct  of  the  employer,  or  his  managing 
representative,  or  if  the  employer  be  a  partnership,  on 
the  part  of  one  of  the  partners,  or  if  a  corporation,  on 
the  part  of  an  executive  or  managing  officer  or  general 
superintendent  thereof,  the  amount  of  compensation  oth- 
erwise recoverable  for  injury  or  death,  as  hereinafter 
provided,  shall  be  increased  one-half,  any  of  the  provi- 
sions of  this  act  as  to  maximum  payments  or  otherwise 
to  the  contrary  notwithstanding ;  provided,  however,  that 
said  increase  of  award  shall  in  no  event  exceed  twenty- 
five  hundred  dollars. 

Act  of  the  Legislature,  approved  May  22,  1919 ; 

In  all  other  cases  where  the  conditions  of  compensa- 
tion do  not  concur,  the  liability  of  the  employer  shall  be 
\}\e  same  as  if  this  act  liarl  not  been  passed. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.          1045 

Workmen  Under  Partnership  Agreements. — Work- 
men associating  themselves  under  a  partnership  agree- 
ment, the  principal  purpose  of  which  is  the  performance 
of  the  labor  on  a  particular  piece  of  work,  shall  be  deemed 
employees  of  the  person  having  such  work  executed,  and, 
in  the  event  the  average  weekly  earnings  are  not  other- 
wise ascertainable,  shall  be  deemed  to  be  employed  at 
an  average  weekly  wage  of  twelve  dollars;  provided, 
hoivever,  that  if  such  workmen  shall  have  taken  out  and 
maintained  in  full  force  and  effect  insurance,  in  an  insur- 
ance carrier  as  defined  in  this  act,  insuring  to  themselves 
and  all  persons  employed  by  them  benefits  identical  with 
those  conferred  by  this  act,  the  person  for  whom  such 
work  is  to  be  done  shall  not  be  liable  as  an  employer 
under  this  act. 

(b)  Payment. — Sec.  9.  Where  liability  for  compen- 
sation under  this  act  exists,  such  compensation  shall  be 
furnished  or  paid  by  the  employer  and  be  as  provided  in 
the  following  schedule : 

(a)  Such  medical,  surgical  and  hospital  treatment, 
including  nursing,  medicines,  medical  and  surgical  sup- 
plies, crutches  and  apparatus,  including  artificial  mem- 
bers, as  may  reasonably  be  required  to  cure  and  relieve 
from  the  effects  of  the  injury,  the  same  to  be  provided 
by  the  employer,  and  in  case  of  his  neglect  or  refusal 
seasonably  to  do  so,  the  employer  to  be  liable  for  the 
reasonable  expense  incurred  by  or  on  behalf  of  the 
employee  in  providing  the  same;  provided,  that  if  the 
employee  so  requests,  the  employer  shall  tender  him  one 
change  of  physicians  and  shall  nominate  at  least  three 
additional  practicing  physicians  competent  to  treat  the 
particular  case,  or  as  many  as  may  be  available  if  three 
cannot  reasonably  be  named,  from  whom  the  employee 
may  choose;  the  employee  shall  also  be  entitled,  in  any 
serious  case,  upon  request,  to  the  services  of  a  consulting 
physician  to  be  provided  bj7  the  employer;  all  of  said 
treatment  to  be  at  the  expense  of  the  employer.  If  the 


1046  BUSINESS  LAW  FOB  BUSINESS  MEN. 

employee  so  requests,  the  employer  must  procure  cer 
tification  by  the  commission  or  a  commissioner  of  the 
competency  for  the  particular  case  of  the  consulting  or 
additional  physicians;  provided,  further,  that  the  fore- 
going provisions  regarding  a  change  of  physicians  shall 
not  apply  to  those  cases  where  the  employer  maintains, 
for  his  own  employees,  a  hospital  and  hospital  staff,  the 
adequacy  and  competency  of  which  have  been  approved 
by  the  commission.  Nothing  contained  in  this  section 
shall  be  construed  to  limit  the  right  of  the  employee  to 
provide,  in  any  case,  at  his  own  expense,  a  consulting 
physician  or  any  attending  physicians  whom  he  may 
desire.  Controversies  between  employer  and  employee, 
arising  under  this  section,  shall  be  determined  by  the 
Industrial  Accident  Commission,  upon  the  request  of 
either  party. 

Time  of  Disability  Payments. — If  the  injury  causes 
temporary  disability,  a  disability  payment  which  shall 
be  payable  for  one  week  in  advance  as  wages  on  the  eighth 
day  after  the  injured  employee  leaves  work  as  a  result 
of  the  injury.  If  the  injury  causes  permanent  disability, 
a  disability  payment  which  shall  be  payable  for  one  week 
in  advance  as  wages  on  the  eighth  day  after  the  injury. 
Such  indemnity  shall  thereafter  be  payable  on  the  em- 
ployer's regular  pay  day,  but  not  less  frequently  than 
twice  in  each  calendar  month,  unless  otherwise  ordered 
by  the  commission,  subject,  however,  to  the  following 
limitations : 

(1)  Disability  Less  Than  Seven  Days. — If  the  period 
of  disability  does  not  'last  longer  than  seven  days  from 
the  day  the  employee  leaves  work  as  the  result  of  the 
injury,  no  disability  payment  whatever  shall  be  recov- 
erable. 

(2)  No  Recovery  for  First  Seven  Days. — If  the  period 
of  disability  lasts  longer  than  seven  days  from  the  day 
the  employee  leaves  work  as  the  result  of  the  injury,  no 
disability  payment  shall  be  recoverable  for  the  first  seven 
davs  of  disability  suffered. 


BUSINESS  CONTEACTS  AND  LEGAL  OBLIGATIONS.          1047 

The  disability  payment  shall  be  as  follows : 

(1)  Amount  of  Disability  Payments. — If  the  injury 
causes  temporary  total  disability,  sixty-five  per  cent  of 
the  average  weekly  earnings  during  the  period  of  such 
disability,  consideration  being  given  to  the  ability  of  the 
injured  employee  to  compete  in  an  open  labor  market ; 

(2)  If  the  injury  causes  temporary  partial  disability, 
sixty-five  per  cent  of  the  weekly  loss  in  wages  during  the 
period  of  such  disability; 

(3)  If  the  temporary  disability  caused  by  the  injury 
is  at  times  total  and  at  times  partial,  the  weekly  disability 
payment  during  the  period  of  each  such  total  or  partial 
disability  shall  be  in  accordance  with  paragraphs  one  and 
two  of  this  subdivision  respectively ; 

(4)  Aggregate    Disability    Payments.  —  Paragraphs 
one,  two,  and  three  of  this  subdivision  shall  be  limited  as 
follows:     Aggregate  disability  payments  for  a  single 
injury  causing  temporary  disability  shall  not  exceed  three 
times  the  average  annual  earnings  of  the  employee,  nor 
shall  the  aggregate  disability  period  for  such  temporary 
disability  in  any  event  extend  beyond  two  hundred  forty 
weeks  from  the  date  of  the  injury. 

(5)  Computation  of  Payments  When  Disability  Per- 
manent.— If  the  injury  causes  permanent  disability,  the 
percentage  of  disability  to  total  disability  shall  be  deter- 
mined and  the  disability  payment  computed  and  allowed 
as  follows :    For  a  one  per  cent  disability,  sixty-five  per 
cent  of  the  average  weekly  earnings  for  a  period  of  four 
weeks;  for  a  ten  per  cent  disability,  sixty-five  per  cent 
of  the  average  weekly  earnings  for  a  period  of  forty 
weeks ;  for  a  twenty  per  cent  disability,  sixty-five  per  cent 
of  the  average  weekly  earnings  for  a  period  of  eighty 
weeks ;  for  a  thirty  per  cent  disability,  sixty-five  per  cent 
of  the  average  weekly  earnings  for  a  period  of  one  hun- 
dred twenty  weeks ;  for  a  forty  per  cent  disability,  sixty- 
five  per  cent  of  the  average  weekly  earnings  for  a  period 
of  one  hundred  sixty  weeks ;  for  a  fifty  per  cent  disability, 


1048  BUSINESS  LAW  FOE  BUSINESS  MEN. 

sixty-five  per  cent  of  the  average  weekly  earnings  for  a 
period  of  two  hundred  weeks ;  for  a  sixty  per  cent  dis- 
ability, sixty-five  per  cent  of  the  average  weekly  earnings 
for  a  period  of  two  hundred  forty  weeks ;  for  a  seventy 
per  cent  disability,  sixty-five  per  cent  of  the  average 
weekly  earnings  for  a  period  of  two  hundred  forty  weeks, 
and  thereafter  ten  per  cent  of  such  weekly  earnings  dur 
ing  the  remainder  of  life ;  for  an  eighty  per  cent  disability, 
sixty-five  per  cent  of  the  average  weekly  earnings  for  a 
period  of  two  hundred  forty  weeks  and  thereafter  twenty 
per  cent  of  such  weekly  earnings  during  the  remainder 
of  life ;  for  a  ninety  per  cent  disability,  sixty-five  per  cent, 
of  the  average  weekly  earnings  for  a  period  of  two  hun- 
dred forty  weeks  and  thereafter  thirty  per  cent  of  such 
weekly  earnings  during  the  remainder  of  life;  for  a 
hundred  per  cent  disability,  sixty-five  per  cent  of  the 
average  weekly  earnings  for  a  period  of  two  hundred 
forty  weeks,  and  thereafter  forty  per  cent  of  such  weekly 
earnings  during  the  remainder  of  life. 

(6)  The  payment  for  permanent  disabilities  interme- 
diate to  those  fixed  by  the  foregoing  schedule  shall  be 
computed  and  allowed  as  follows :    If  under  seventy  per 
cent,  sixty-five  per  cent  of  the  average  weekly  earnings 
for  four  weeks  for  each  one  per  cent  of  disability;  if 
seventy  per  cent  or  over,  sixty-five  per  cent  of  the  average 
weekly  earnings  for  two  hundred  forty  weeks  and  there- 
after one  per  cent  of  such  weekly  earnings  for  each  one 
per  cent  of  disability  in  excess  of  sixty  per  cent  to  be 
paid  during  the  remainder  of  life. 

(7)  In  determining  the  percentages  of  permanent  dis- 
ability, account  shall  be  taken  of  the  nature  of  the  physical 
injury  or  disfigurement,  the  occupation  of  the  injured 
employee,  and  his  age  at  the  time  of  such  injury,  con- 
sideration being  given  to  the  diminished  ability  of  such 
injured  employee  to  compete  in  an  open  labor  market. 

(8)  Where  an  injury  causes  both  temporary  and  per- 
manent disability,  the  injured  employee  shall  not  be 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.          1049 

entitled  to  both  a  temporary  and  permanent  disability 
payment,  but  only  to  the  greater  of  the  two. 

(9)  Permanent  Disabilities  Presumed  to  Be  Total  — 
The  following  permanent  disabilities  shall  be  conclusively 
presumed  to  be  total  in  character :    Loss  of  both  eyes  or 
the  sight  thereof;  loss  of  both  hands  or  the  use  thereof; 
an  injury  resulting  in  a  practically  total  paralysis;  an 
injury  to  the  brain  resulting  in  incurable  imbecility  or 
insanity.    In  all  other  cases,  permanent  total  disability 
shall  be  determined  in  accordance  with  the  fact. 

(10)  The  percentage  of  permanent  disability  caused 
by  any  injury  shall  be  so  computed  as  to  cover  the  per- 
manent disability  caused  by  that  particular  injury  with- 
out reference  to  any  injury  previously  suffered  or  any 
permanent  disability  caused  thereby. 

(11)  Schedule  for  Determination  of  Permanent  Dis- 
abilities.— The  commission  may  prepare,  adopt,  and  from 
time  to  time  amend,  a  schedule  for  the  determination  of 
the  percentages  of  permanent  disabilities,  such  table  to 
be  based  upon  the  proper  combinations  of  the  factors 
indicated  in  subdivision  seven  above.    Such  schedule  shall 
be  available  for  public  inspection  and  without  formal 
introduction  in  evidence  shall  be  prima  facie  evidence  of 
the  percentage  of  permanent  disability  to  be  attributed 
to  each  injury  covered  by  said  schedule. 

3.  The  death  of  an  injured  employee  shall  not  affect 
the  liability  of  the  employer  under  subsections  (a)  and 
(b)  of  this  section,  so  far  as  such  liability  has  accrued 
and  become  payable  at  the  date  of  the  death,  and  any 
accrued  and  unpaid  compensation  shall  be  paid  to  the 
dependents,  if  any,  or,  if  there  are  no  dependents,  to  the 
personal  representative  of  the  deceased  employee  or  heirs 
or  other  persons  entitled  thereto,  without  administration, 
but  such  death  shall  be  deemed  to  be  the  termination  of 
the  disability. 

(c)  Death  Benefits. — If  the  injury  causes  death,  either 
with  or  without  disability,  the  burial  expense  of  the  de- 


1050  BUSINESS  LAW  FOR  BUSINESS  MEN. 

ceased  employee  as  hereinafter  limited  and  a  death  bene- 
fit which  shall  be  payable  in  installments  equal  to  sixty- 
five  per  cent  of  the  average  weekly  earnings  of  the  de- 
ceased employee,  upon  the  employer's  regular  pay  day. 
but  not  less  frequently  than  twice  in  each  calendar  month, 
unless  otherwise  ordered  by  the  commission,  which  death 
benefit  shall  be  as  follows : 

(1)  //  Deceased  Employee  Leaves  Dependents. — In 
case  the  deceased  employee  leaves  a  person  or  persons 
wholly  dependent  upon  him  for  support,  such  dependents 
shall  be  allowed  the  reasonable  expense  of  his  burial,  not 
exceeding  one  hundred  dollars,  and  a  death  benefit,  which 
shall  be  a  sum  sufficient,  when  added  to  the  disability  in- 
demnity which  at  the  time  of  death  has  accrued  and  be- 
come payable,  under  the  provisions  of  subsection  (b)  here- 
of, and  the  said  burial  expense,  to  make  the  total  disabil- 
ity indemnity,  cost  of  burial  and  death  benefit  equal  to 
three  times  his  average  annual  earnings,  such  average  an- 
nual earnings  to  be  taken  at  not  less  than  three  hundred 
thirty-three  dollars  and  thirty-three  cents  nor  more  than 
one  thousand  six  hundred  sixty-six  dollars  and  sixty-six 
cents. 

(2)  //  Deceased  Employee  Leaves  Persons  Partially 
Dependent. — In  case  the  deceased  employee  leaves  no  per- 
son wholly  dependent  upon  him  for  support,  but  one  or 
more  persons  partially  dependent  therefor,  the  said  de- 
pendents shall  be  allowed  the  reasonable  expense  of  his 
burial,  not  to  exceed  one  hundred  dollars,  and,  in  addition 
thereto,  a  death  benefit  which  shall  amount  to  three  times 
the  annual  amount  devoted  by  the  deceased  to  the  support 
of  the  person  or  persons  so  partially  dependent ;  provided, 
that  the  death  benefit  shall  not  be  greater  than  a  sum  suf- 
ficient, when  added  to  the  disability  indemnity  which,  at 
the  time  of  the  death,  has  accrued  and  become  payable 
under  the  provisions  of  subsection  (b)  hereof,  together 
with  the  cost  of  the  burial  of  such  deceased  employee,  to 
make  the  total  disability  indemnity,  cost  of  burial  and 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.         1051 

death  benefit  equal  to  three  times  his  average  annual 
earnings,  such  average  annual  earnings  to  be  taken  at 
not  less  than  three  hundred  thirty-three  dollars  and 
thirty-three  cents  nor  more  than  one  thousand  six  hun- 
,  dred  sixty-six  dollars  and  sixty-six  cents. 

(3)  If  No  Dependants. — If  the  deceased  employee 
leaves  no  person  dependent  upon  him  for  support,  the 
death  benefit  shall  consist  of  the  reasonable  expense  of 
his  burial  not  exceeding  one  hundred  dollars,  and  such 
other  benefit  as  may  be  provided  by  law. 

(d)  Payment  of  compensation  in  accordance  with  the 
order  and  direction  of  the  commission  shall  discharge  the 
employer  from  all  claims  therefor. 

(e)  Average  Annual  Earnings. — Sec.  12.     (a)    The 
average  annual  earnings  referred  to  in  section  nine  hereof 
shall  be  fifty-two  times  the  average  weekly  earnings  re- 
ferred to  in  said  section ;  in  computing  such  earnings  the 
average  weekly  earnings  shall  be  taken  at  not  less  than 
six  dollars  and  forty-one  cents  nor  more  than  thirty-two 
dollars  and  five  cents,  and  three  times  the  average  annual 
earnings  shall  be  taken  at  not  less  than  -one  thousand  dol- 
lars nor  more  than  five  thousand  dollars,  and  between 
said  limits  said  average  weekly  earnings  shall  be  arrived 
at  as  follows: 

(1)  Average  Weekly  Earnings. — If  the  injured  em- 
ployee has  worked  in  the  same  employment,  whether  for 
the  same  employer  or  not,  during  at  least  two  hundred 
sixty  days  of  the  year  preceding  his  injury,  his  average 
weekly  earnings  shall  consist  of  ninety-five  per  cent  of  six 
times  the  daily  earnings  at  the  time  of  such  injury  where 
the  employment  is  for  six  full  working  days  a  week. 
Where  his  employment  is  for  five,  five  and  one-half,  six 
and  one-half  or  seven  working  days  a  week,  the  average 
weekly  earnings  shall  be  ninety-five  per  cent  of  five,  five 
and  one-half,  six  and  one-half  or  seven  times  the  daily 
earnings  at  the  time  of  the  injury,  as  the  case  may  be. 


1052  BUSINESS  LAW  FOR  BUSINESS  MEN. 

(2)  If  the  injured  employee  has  not  so  worked  in  such 
employment  during  at  least  two  hundred  sixty  days  of 
such  preceding  year,  his  average  weekly  earnings  shall  be 
based  upon  the  daily  earnings,  wage  or  salary  of  an  em- 
ployee of  the  same  class  working  at  least  two  hundred 
sixty  days  of  such  preceding  year  in  the  same  or  a  similar 
kind  of  employment  in  the  same  or  a  neighboring  place, 
computed  in  accordance  with  the  provisions  of  the  preced- 
ing subdivision. 

(3)  If  the  earnings  be  irregular  or  specified  to  be  by 
the  week,  month,  or  other  period,  then  the  average  weekly 
earnings  mentioned  in  subdivisions   (1)  and  (2)  above 
shall  be  ninety-five  per  cent  of  the  average  earnings  dur- 
ing such  period  of  time,  not  exceeding  one  year,  as  may 
conveniently  be  taken  to  determine  an  average  weekly 
rate  of  pay. 

(4)  When  Less  Than  5  Days  or  Seasonal. — Where  the 
employment  is  for  less  than  five  days  per  week  or  is  sea- 
sonal or  where  for  any  reason  the  foregoing  methods  of 
arriving  at  the  average  weekly  earnings  of  the  injured 
employee  cannot  reasonably  and  fairly  be  applied,  such 
average  weekly  earnings  shall  be  taken  at  ninety-five  per 
cent  of  such  sum  as  shall  reasonably  represent  the  aver- 
age weekly  earning  capacity  of  the  injured  employee  at 
the  time  of  his  injury,  due  consideration  being  given  to 
his  actual  earnings  from  all  sources  and  employments 
during  the  year  preceding  his  injury;  provided,  that  the 
earnings  from  other  occupations  shall  not  be  allowed  in 
excess  of  the  rate  of  wages  paid  at  the  time  of  the  injury. 

(b)  Overtime,  Board,  Etc. — In  determining  such  aver- 
age weekly  earnings,  there  shall  be  included  overtime  and 
the  market  value  of  board,  lodging,  fuel,  and  other  ad- 
vantages received  by  the  injured  employee,  as  part  of 
his  remuneration,  which  can  be  estimated  in  money,  but 
such  average  weekly  earnings  shall  not  include  any  sum 
which  the  employer  may  pay  to  the  injured  employee  to 
cover  any  special  expenses  entailed  on  him  by  the  nature 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.          105o 

of  his  employment. 

(c)  //  Injured  Employee  Is  Under  21. — If  the  injured 
employee  is  under  twenty-one  years  of  age,  and  his  inca- 
pacity is  permanent,  his  average  weekly  earnings  shall 
be  deemed,  within  the  limits  fixed,  to  be  the  weekly  sum 
that  under  ordinary  circumstances  he  would  probably  be 
able  to  earn  after  attaining  the  age  of  twenty-one  years, 
in  the  occupation  in  which  he  was  employed  at  the  time 
of  the  injury  or  in  any  occupation  to  which  he  would  rea- 
sonably have  been  promoted  if  he  had  not  been  injured; 
and  if  such  probable  earnings  after  attaining  the  age  of 
twenty-one  years  cannot  reasonably  be  determined,  such 
average  weekly  earnings  shall  be  based  upon  three  dollars 
a  day  for  a  six-day  week. 

(d)  Weekly  Loss  in  Wages  in  Case  of  Temporary 
Partial  Disability.— Sec.  13.    The  weekly  loss  in  wages 
in  case  of  temporary  partial  disability  shall  consist  of  the 
difference  between  the  average  weekly  earnings  of  the  in- 
jured employee,  computed  according  to  the  provisions  of 
section  nine,  and  the  weekly  amount  which  the  injured 
employee  will  probably  be  able  to  earn  during  the  dis- 
ability, to  be  determined  in  view  of  the  nature  and  extent 
of  the  injury.    In  computing  such  probable  earnings  due 
regard  shall  be  given  to  the  ability  of  the  injured  em- 
ployee to  compete  in  an  open  labor  market.    If  evidence 
of  exact  loss  of  earnings  be  lacking,  such  weekly  loss  in 
wages  may  be  computed  from  the  proportionate  loss  of 
physical  ability  or  earning  power  caused  by  the  injury. 

(e)  Who  Are  Deemed  Wholly  Dependent. — Sec.  14. 
(a)  The  following  shall  be  conclusively  presumed  to  be 
wholly  dependent  for  support  upon  a  deceased  employee, 
but  these  presumptions  do  not  apply  to  aliens,  non-resi- 
dents of  the  United  States,  at  the  time  of  the  injury: 

(1)  A  wife  upon  a  husband  with  whom  she  was  living 
at  the  time  of  his  death,  or  for  whose  support  such  hus- 
band was  legally  liable  at  the  time  of  his  injury. 


1054  BUSINESS  LAW  FOB  BUSINESS  MEN. 

(2)  A  child  or  children  under  the  age  of  eighteen 
years,  or  over  said  age,  but  physically  or  mentally  inca- 
pacitated from  earning,  upon  the  parent  with  whom  he 
or  they  are  living  at  the  time  of  the  injury  of  such  par- 
ent for  whose  maintenance  such  parent  was  legally  liable 
at  the  time  of  injury,  there  being  no  surviving  dependent 
parent. 

(b)  In  all  other  cases,  questions  of  entire  or  partial 
dependency  and  questions  as  to  who  constitute  dependents 
and  the  extent  of  their  dependency  shall  be  determined  in 
accordance  with  the  fact,  as  the  fact  may  be  at  the  time 
of  the  injury  of  the  employee. 

(c)  No  person  shall  be  considered  a  dependent  of  any 
deceased  employee  unless  in  good  faith  a  member  of  the 
family  or  household  of  such  employee,  or  unless  such  per- 
son bears  to  such  employee  the  relation  of  husband  or 
wife,  child,  posthumous  child,  adopted  child  or  stepchild, 
father  or  mother,  father-in-law  or  mother-in-law,  grand- 
father or  grandmother,  brother  or  sister,  uncle  or  aunt, 
brother-in-law  or  sister-in-law,  nephew  or  niece. 

(d)  1.  If  there  is  one  or  more  persons  wholly  depend- 
ent for  support  upon  a  deceased  employee,  such  person  or 
persons  shall  receive  the  entire  death  benefit,  and  any  per- 
son or  persons  partially  dependent  shall  receive  no  part 
thereof. 

2.  If  there  is  more  than  one  such  person  wholly  de- 
pendent for  support  upon  a  deceased  employee,  the  death 
benefit  shall  be  divided  equally  among  them. 

3.  If  there  is  more  than  one  person  partially  depend- 
ent for  support  upon  a  deceased  employee,  and  no  per- 
son wholly  dependent  for  support,  the  amount  allowed  as 
a  death  benefit  shall  be  divided  among  the  persons  so  par- 
tially dependent  in  proportion  to  the  relative  extent  of 
their  dependency. 

(e)  The  commission  may,  anything  in  this  act  con- 
tained to  the  contrary  notwithstanding,  set  apart  or  reas- 
sign the  death  benefit  to  any  one  or  more  of  the  depend- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.         1055 

ents  in  accordance  with  their  respective  needs  and  as  may 
be  just  and  equitable,  and  may  order  payment  to  a  de- 
pendent subsequent  in  right,  or  not  otherwise  entitled, 
upon  good  cause  being  shown  therefor.  Such  death  bene- 
fit shall  be  paid  to  such  one  or  more  dependents  of  the  de- 
ceased or  to  a  trustee  appointed  by  the  commission  or  a 
commissioner  for  the  benefit  of  the  person  or  persons  en- 
titled, as  may  be  determined  by  the  commission.  The 
person  to  whom  the  death  benefit  is  paid  for  the  use  of 
the  several  beneficiaries  shall  apply  the  same  in  compli- 
ance with  the  findings  and  directions  of  the  commission. 
In  the  event  of  the  death  of  a  dependent  beneficiary  of 
any  deceased  employee,  if  there  be  no  surviving  depend- 
ent, the  death  of  such  dependent  shall  terminate  the 
death  benefit,  which  shall  not  survive  to  the  estate  of  such 
deceased  dependent,  except  that  payments  of  such  deatli 
benefit  accrued  and  payable  at  the  time  of  the  death  of 
such  sole  remaining  dependent  shall  be  paid  upon  the 
order  of  the  commission  to  the  heirs  of  such  dependent  or, 
if  none,  to  the  heirs  of  the  deceased  employee,  without 
administration. 

(f )  Notice  to  Employer. — Sec.  15. — No  claims  to  recover 
compensation  under  this  act  shall  be  maintained  unless 
within  thirty  days  after  the  occurrence  of  the  injury  which 
is  claimed  to  have  caused  the  disability  or  death,  notice 
in  writing,  stating  the  name  and  the  address  of  the  person 
injured,  the  time  and  the  place  where  the  injury  occurred, 
and  the  nature  of  the  injury,  and  signed  by  the  person 
injured  or  some  one  in  his  behalf,  or  in  case  of  his  death, 
by  a  dependent  or  some  one  in  his  behalf,  shall  be  served 
upon  the  employer ;  provided,  however,  that  knowledge  of 
such  injury,  obtained  from  any  source,  on  the  part  of  such 
employer,  his  managing  agent,  superintendent,  foreman, 
or  other  person  in  authority,  or  knowledge  of  the  asser- 
tion of  a  claim  of  injury  sufficient  to  afford  opportunity 
to  the  employer  to  make  an  investigation  into  the  facts, 
shall  be  equivalent  to  such  service ;  and  provided,  further, 


1056  BUSINESS  LAW  FOB  BUSINESS  MEN. 

that  the  failure  to  give  any  such  notice,  or  any  defect  or 
inaccuracy  therein,  shall  not  be  a  bar  to  recovery  under 
this  act  if  it  is  found  as  a  fact  in  the  proceedings  for  the 
collection  of  the  claim  that  there  was  no  intention  to  mis- 
lead or  prejudice  the  employer  in  making  his  defense, 
and  that  he  was  not  in  fact  so  misled  or  prejudiced 
thereby. 

(g)  Medical  Examination  of  Employee. — Sec.  16.  (a) 
Whenever  the  right  to  compensation  under  this  act  would 
exist  in  favor  of  any  employee,  he  shall,  upon  the  written 
request  of  his  employer,  submit  from  time  to  time,  as  may 
be  reasonable,  to  examination  by  a  practicing  physician, 
who  shall  be  provided  and  paid  for  by  the  employer,  and 
shall  likewise  submit  to  examination  from  time  to  time 
by  any  physician  selected  by  the  commission  or  any  mem- 
ber or  referee  thereof. 

(b)  The  request  or  order  for  such  examination  shall 
fix  a  time  and  place  therefor,  due  consideration  being 
given  to  the  convenience  of  the  employee  and  his  physical 
condition  and  ability  to  attend  at  the  time  and  place  fixed. 
The  employee  shall  be  entitled  to  have  a  physician  pro- 
vided and  paid  for  by  himself  present  at  any  examina- 
tion required  by  his  employer.  So  long  as  the  employee, 
after  such  written  request  of  the  employer,  shall  fail  or 
refuse  to  submit  to  such  examination  or  shall  in  any  way 
obstruct  the  same,  his  right  to  begin  or  maintain  any  pro- 
ceeding for  the  collection  of  compensation  shall  be  sus- 
pended ;  and  if  he  shall  fail  or  refuse  to  submit  to  exam- 
ination after  direction  by  the  commission,  or  any  member 
or  referee  thereof,  or  shall  in  any  way  obstruct  the  same, 
his  right  to  the  disability  payments  which  shall  accrue 
during  the  period  of  such  failure,  refusal  or  obstruction, 
shall  be  barred.  Any  physician  who  shall  make  or  be 
present  at  any  such  examination  may  be  required  to  re- 
port or  testify  as  to  the  results  thereof. 

(h)  Hearing  on  Disputes. — Sec.  17.  (a)  Upon  the  fil- 
ing with  the  commission  by  any  party  in  interest  of  an 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.         1057 

application  in  writing  stating  the  general  nature  of  any 
dispute  or  controversy  concerning  compensation,  or  con- 
cerning any  right  or  liability  arising  out  of,  or  incidental 
thereto,  jurisdiction  over  which  is  vested  by  this  act  in 
the  commission,  a  time  and  place  shall  be  fixed  for  the 
hearing  thereof,  which  hearing,  unless  otherwise  agreed 
to  by  all  the  parties  thereto,  must  be  held  not  less  than 
ten  days  nor  more  than  thirty  days  after  the  filing  of  such 
application. 

(i)  Claim  Not  Assignable. — Sec.  24.  (a)  No  claim  for 
compensation  shall  be  assignable  before  payment,  but 
this  provision  shall  not  affect  the  survival  thereof,  nor 
shall  any  claim  for  compensation,  or  compensation  award- 
ed, adjudged  or  paid,  be  subject  to  be  taken  for  the  debts 
of  the  party  entitled  to  such  compensation,  except  as  here- 
inafter provided.  No  compensation,  whether  awarded  or 
voluntarily  paid,  shall  be  paid  to  any  attorney  at  law  or 
in  fact  or  other  agent,  but  shall  be  paid  directly  to  the 
claimant  entitled  to  the  same,  unless  otherwise  ordered  by 
the  commission.  Any  payment  made  to  such  attorney  at 
law  or  in  fact  or  other  agent  in  violation  of  the  provisions 
of  this  section  shall  not  be  credited  to  the  employer. 

(b)  Lien  Against  Amount  Due  as  Compensation.— 
The  commission  may  fix  and  determine  and  allow  as  a 
lien  against  any  amount  to  be  paid  as  compensation : 

(1)  A  reasonable  attorney's  fee  for  legal  services  per- 
taining to  any  claim  for  compensation  or  application  filed 
therefor  and  the  reasonable  disbursements  in  connection 
therewith. 

(2)  The  reasonable  expense  incurred  by  or  on  behalf 
of  the  injured  employee. 

(3)  The  reasonable  value  of  the  living  expenses  of  an 
injured  employee,  or  of  his  dependents,  subsequent  to  the 
injury. 

(4)  The  reasonable  burial  expenses  of  the  deceased 
employee,  not  to  exceed  the  sum  of  one  hundred  dollars. 

(5)  The  reasonable  living  expenses  of  the  wife  or 


105S  BUSINESS  LAW  FOB  BUSINESS  MEN. 

minor  children  of  the  injured  employee,  or  both,  subse- 
quent to  the  date  of  the  injury,  where  such  employee  has 
deserted  or  is  neglecting  his  family,  to  be  allowed  in  such 
proportion  as  the  commission  shall  deem  proper,  upon 
application  of  the  wife  or  guardian  of  the  minor  children. 

(c)  Notice  of  Claim. — If  notice  in  writing  be  given  to 
the  employer  setting  forth  the  nature  and  extent  of  any 
claim  that  may  be  allowed  as  a  lien,  the  said  claim  shall 
be  a  lien  against  any  amount  thereafter  to  be  paid  as  com- 
pensation, subject  to  the  determination  of  the  amount  and 
approval  thereof  by  the  commission. 

(j)  Liability  of  Principal  Employers  and  Contractors. 
Sec.  25.  The  liability  of  principal  employers  and  con- 
tracting employers,  general  or  intermediate,  for  compen- 
sation under  this  act,  when  other  than  the  immediate  em- 
ployer of  the  injured  employee,  shall  be  as  follows : 

(a)  When  any  such  employer  undertakes  to  do,  or 
contracts  with  another  to  do,  or  to  have  done,  any  work, 
either  directly  or  through  contractors  or  subcontractors, 
then  such  principal  employer  or  contracting  employer 
shall  be  liable  to  pay  to  any  employee  injured  while  en- 
gaged in  the  execution  of  such  work,  or  to  his  dependents 
in  the  event  of  his  death,  or  to  any  other  person,  any  com- 
pensation which  the  immediate  employer  is  liable  to  pay, 
and  the  commission  shall  have  jurisdiction  to  determine 
all  controversies  arising  under  this  section. 

(b)  The  person  entitled  to  such  compensation  shaJl 
have  the  right  to  recover  the  same  directly  from  his  im- 
mediate employer,  and  in  addition  thereto  the  right  to 
enforce  in  his  own  name,  in  the  manner  provided  by  this 
act,  the  liability  for  compensation  imposed  upon  other 
persons  by  this  section,  either  by  making  such  other  per- 
sons parties  to  the  original  application  or  by  filing  a  sepa- 
rate application;  provided,  hoivever,  that  payment  in 
whole  or  in  part  of  such  compensation  by  either  the  imme- 
diate employer  or  other  person  shall,  to  the  extent  of  such 
payment,  be  a  bar  to  recovery  against  the  other. 


BUSINESS  CON  TRACTS  AND  LEGAL  OBLIGATIONS.         1059 

(c)  Wlien  any  person,  other  than  the  immediate  em- 
ployer, shall  have  paid  any  compensation  for  which  he 
would  not  have  been  liable  independently  of  this  section, 
he  shall,  unless  he  caused  the  injury,  be  entitled  to  recover 
the  full  amount  so  paid  from  the  person  primarily  liable 
therefor,  and  jurisdiction  to  determine  his  claim  shall  be 
vested  in  the  commission;  provided,  that  such  right  of 
reimbursement  against  the  person  primarily  liable  for 
compensation  shall  not  exist  in  favor  of  any  insurance 
carrier  insuring  such  other  persons  upon  whom  liability 
is  imposed  by  this  section,  in  any  case  where  the  imme- 
diate employer  shall  have  joined  with  any  of  such  other 
persons  in  taking  out  such  policy  of  insurance  or  shall 
have  contributed  to  the  payment  of  the  premium  for  such 
insurance,  with  the  intent  of  securing  joint  protection 
thereby,  anything  in  the  policy  to  the  contrary  notwith- 
standing. 

(d)  The  liability  imposed  by  this  section  shall  be  sub- 
ject to  the  following  limitations : 

(1)  Such  liability  shall  exist  only  in  cases  where  the 
injury  occurred  on  or  in  or  about  the  premises  on  which 
the  principal  employer  or  contracting  employer,  whether 
general  or  intermediate,  has  undertaken  to  execute  or  to 
have  executed  any  work,  or  when  such  premises  or  work 
are  otherwise  under  his  control  or  management. 

(2)  Such  liability  shall  not  exist  in  the  event  that  the 
immediate  employer,  or  other  person  primarily  liable 
for  the  compensation  shall,  previous  to  the  suffering  of 
such  injury,  have  taken  out,  and  maintained  in  full  force 
and  effect,  compensation  insurance  with  any  insurance 
carrier,  covering  his  full  liability  for  compensation. 

(3)  The  commission  may,  in  its  discretion,  order  that 
execution  against  such  principal  employer  or  contracting 
employer  be  stayed  until  execution  against  the  immediate 
employer  shall  be  returned  unsatisfied. 

(k)  When  Person  Other  Than  Employer  Liable  for 
Damages. — Sec.  26.  When  any  injury  for  which  compen- 
sation is  payable  under  the  provisions  of  this  act  shall 


1060  BUSINESS  LAW  FOB  BUSINESS  MEN. 

have  been  sustained  under  circumstances  creating  in  some 
other  person  than  the  employer  a  legal  liability  to  pay 
damages  in  respect  thereto,  the  injured  employee  may 
claim  compensation  under  the  provisions  of  this  act,  but 
the  payment  or  award  of  compensation  shall  not  affect  the 
claim  or  right  of  action  of  such  injured  employee  against 
such  other  person,  but  such  injured  employee  may  proceed 
at  law  against  such  person  to  recover  damages ;  and  any 
employer  having  paid,  or  having  become  obligated  to  pay, 
compensation  may  bring  an  action  against  such  other  per- 
son to  recover  damages,  and  evidence  of  any  amount  he 
has  paid  or  become  obligated  to  pay,  as  compensation, 
shall  not  be  admissible ;  provided,  that  if  either  such  em- 
ployee or  such  employer  shall  bring  such  action  against 
such  third  person,  he  shall  forthwith  notify  the  other  in 
writing,  by  personal  presentation  or  by  registered  mail, 
of  such  fact  and  of  the  name  of  the  court  in  which  suit  is 
brought,  filing  proof  thereof  in  such  action,  and  such 
other  may  join  as  a  party  plaintiff  in  such  action  within 
thirty  days  after  such  notification,  or  must  consolidate  his 
action,  if  brought  independently,  and  if  such  other  party 
fails  to  join  or'  proceed  as  party  plaintiff,  his  right  of 
action  against  such  third  person  shall  be  barred.  In  the 
event  that  such  employer  and  employee  shall  join  as 
parties  plaintiff  in  such  action  and  damages  are  recov- 
ered, such  damages  shall  be  so  apportioned  that  the  claim 
of  the  employer  shall  take  precedence  over  that  of  the 
injured  employee,  and  if  the  damages  shall  not  be  suf- 
ficient or  shall  be  only  sufficient  to  reimburse  the  em- 
ployer for  the  compensation  which  he  has  paid,  or  has  be- 
come obligated  to  pay,  with  a  reasonable  allowance  for 
an  attorney's  fee,  to  be  fixed  by  the  court,  and  his  costs, 
such  damages  shall  be  assessed  in  his  favor;  but  if  the 
damages  shall  be  more  than  sufficient  to  reimburse  him, 
the  damages  shall  be  assessed  in  his  favor  sufficient  to 
so  reimburse  him,  and  the  excess  shall  be  assessed  in 
favor  of  the  injured  employee.  In  case  such  employee 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.         10(51 

shall  prosecute  such  suit  to  judgment  without  the  union 
of  the  employer  by  joinder  or  consolidation,  the  employer 
shall  have  a  first  lien  upon  any  damages  secured  by  the 
employee  by  such  proceeding  for  the  compensation  the 
employer  has  paid,  or  has  become  obligated  to  pay,  and 
may,  by  motion  in  open  court,  secure  the  allowance  of  said 
lien  at  any  time  before  satisfaction  of  the  judgment;  and 
if  such  suit  shall  be  prosecuted  to  judgment  by  the  em- 
ployer alone,  such  employer  shall  hold  the  damages  recov- 
ered by  him,  over  and  above  the  compensation  which  he 
has  paid,  or  has  become  obligated  to  pay,  with  a  reason- 
able allowance  for  an  attorney's  fee,  to  be  fixed  by  the 
court,  and  his  costs,  for  the  benefit  of  the  injured  em- 
ployee or  other  person  entitled,  and  the  injured  em- 
ployee shall,  in  addition  to  other  remedies  provided  by 
law,  be  entitled,  by  motion  in  open  court,  to  have  such 
excess  awarded  to  him  in  the  judgment  entered  by  the 
court,  at  any  time  prior  to  satisfaction  thereof. 

(1)  Contents  of  Release  or  Compromise  Agreement.— 
Sec.  27.  Every  release  or  compromise  agreement  shall 
be  in  writing,  duly  executed  and  attested  by  two  dis- 
interested witnesses,  and  shall  specify  the  date  of  the 
accident,  the  average  weekly  wages  of  the  employee, 
determined  according  to  section  twelve  hereof,  the  nature 
of  the  disability,  whether  total  or  partial,  permanent  or 
temporary,  the  amount  paid  or  due  and  unpaid  to  the 
employee  up  to  the  date  of  the  release  or  agreement  or 
death,  as  the  case  may  be,  and,  if  any,  the  amount  of  the 
payment  or  benefits  then  or  thereafter  to  be  made,  and 
the  length  of  time  that  such  payment  is  to  continue.  In 
case  of  death  there  shall  also  be  stated  in  such  release 
or  compromise  agreement  the  date  of  death,  the  name  of 
the  widow,  if  any,  the  names  and  ages  of  all  children,  if 
any,  and  the  names  of  all  other  dependents,  if  any,  and 
whether  such  dependents  be  total  or  partial,  and  the 
amount  paid  or  to  be  paid  as  a  death  benefit  and  to  whom 
such  payment  is  to  be  made. 


3  062  BUSINESS  LAW  FOB  BUSINESS  MEN. 

(m)  Compensation  Payable  in  Lump  Sum. — Sec.  28. 
(a)  At  the  time  of  making  its  award,  or  at  any  time  there- 
after, the  commission  on  its  own  motion,  either  with  or 
without  notice,  or  upon  application  of  either  party  with 
due  notice  to  the  other,  may,  in  its  discretion,  commute 
the  compensation  payable  under  this  act  to  a  lump  sum. 
if  it  appears  that  such  commutation  is  necessary  for  the 
protection  of  the  person  entitled  thereto,  or  for  the  best 
interest  of  either  party,  or  that  it  will  avoid  undue  ex- 
pense or  hardship  to  either  party,  or  that  the  employer 
has  sold  or  otherwise  disposed  of  the  greater  part  of  his 
assets,  or  is  about  to  do  so,  or  that  the  employer  is  not 
a  resident  of  this  state,  and  the  commission  may  order 
such  compensation  paid  forthwith  or  at  some  future  time. 

(n)  Ways  for  Securing  Payment  of  Compensation.— 
Sec.  29.  (a)  Every  employer  as  defined  in  section  seven 
hereof,  except  the  state  and  all  political  subdivisions  or 
institutions  thereof,  shall  secure  the  payment  of  compen- 
sation in  one  or  more  of  the  following  ways : 

1.  By  insuring  and  keeping  insured  against  liability 
to  pay  compensation  in  one  or  more  insurance  carriers 
duly  authorized  to  write  compensation  insurance  in  this 
state. 

2.  By  securing  from  the  commission  a  certificate  of 
consent  to  self -insure,  which  may  be  given  upon  his  fur- 
nishing proof  satisfactory  to  the  commission  of  ability  to 
carry  his  own  insurance  and  pay  any  compensation  that 
may  become  due  to  his  employees.    The  commission  may, 
in  its  discretion,  require  such  employer  to  deposit  with 
the  state  treasurer  a  bond  or  securities  approved  by  the 
commission,  in  an  amount  to  be  determined  by  the  com- 
sion.     Such  certificate  may  be  revoked  at  any  time  for 
good  cause  shown. 

(o)  Employer  Relieved. From  Liability  ~by  Insurance 
Carrier. — (1)  If  the  employer  shall  be  insured  against 
liability  for  compensation  with  any  insurance  carrier,  and 
if  after  the  suffering  of  any  injury  such  insurance  car- 


BUSINESS  CONTEACTS  AND  LEGAL  OBLIGATIONS.         1063 

rier  shall  serve  or  cause  to  be  served  upon  any  person 
claiming  compensation  against  such  employer  a  notice 
that  it  has  assumed  and  agreed  to  pay  the  compensation, 
if  any,  for  which  the  employer  is  liable,  and  shall  file  a 
copy  of  such  notice  with  the  commission,  such  employer 
shall  thereupon  be  relieved  from  liability  for  compensa- 
tion to  such  claimant  and  the  insurance  carrier  shall, 
without  notice,  be  substituted  in  place  of  the  employer 
in  any  proceeding  theretofore  or  thereafter  instituted  by 
such  person  to  recover  such  compensation,  and  the  em- 
ployer shall  be  dismissed  therefrom.  Such  proceedings 
shall  not  abate  on  account  of  such  substitution  but  shall 
be  continued  against  such  insurance  carrier.  If  at  the. 
time  of  the  suffering  of  an  injury  for  which  compensation 
is  claimed,  or  may  be  claimed,  the  employer  shall  be  in- 
sured against  liability  for  the  full  amount  of  compensa- 
tion payable,  or  that  may  become  payable,  the  employer 
may  serve  or  cause  to  be  served  upon  any  person  claim- 
ing compensation  on  account  of  the  suffering  of  such 
injury  and  upon  the  insurance  carrier  a  notice  that  the 
insurance  carrier  has  in  its  policy  contract  or  otherwise, 
assumed  and  agreed  to  pay  the  compensation,  if  any,  for 
which  the  employer  is  liable,  and  may  file  a  copy  of  such 
notice  with  the  commission.  If  it  shall  thereafter  appear 
to  the  satisfaction  of  the  commission  that  the  insurance 
carrier  has,  through  the  issuance  of  its  contract  of  insur- 
ance or  otherwise,  assumed  such  liability  for  compensa- 
tion, such  employer  shall  thereupon  be  relieved  from 
liability  for  compensation  to  such  claimant  and  the  insur- 
ance carrier  shall,  after  notice,  be  substituted  in  place  of 
the  employer  in  any  proceeding  theretofore  or  thereafter 
instituted  by  such  person  to  recover  such  compensation, 
and  the  employer  shall  be  dismissed  therefrom.  Such 
proceeding  shall  not  abate  on  account  of  such  substitu- 
tion, but  shall  be  continued  against  such  insurance 
carrier. 


1064  BUSINESS  LAW  FOB  BUSINESS  MEN. 

(2)  The  commission  may,  with  or  without  the  filing  of 
the  notice  required  by  the  preceding  paragraph,  enter  its 
order  relieving  the  employer  from  liability  where  it  ap- 
pears from  the  pleadings,  stipulations  or  proof  that  an 
insurance  carrier  joined  as  party  to  the  proceeding  is 
liable  for  the  full  compensation  which  the  employer  in 
such  proceeding  is  liable  to  pay. 

(p)  Jurisdiction  of  Commission  Over  Places  of  Em- 
ployment.— Sec.  38.  The  commission  is  vested  with  full 
power  and  jurisdiction  over,  and  shall  have  such  super- 
vision of.  every  employment  and  place  of  employment  in 
this  state  as  may  be  necessary  adequately  to  enforce  and 
administer  all  laws  and  all  lawful  orders  requiring  such 
employment  and  place  of  employment  to  be  safe,  and  re- 
quiring the  protection  of  the  life  and  safety  of  every 
employee  in  such  employment  or  place  of  employment. 

(q)  Obeying  Order. — Sec.  44.  Every  employer,  em- 
ployee and  other  person  shall  obey  and  comply  with  each 
and  every  requirement  of  every  order,  decision,  direc- 
tion, rule  or  regulation  made  or  prescribed  by  the  com- 
mission in  connection  with  the  matters  herein  specified, 
or  in  any  way  relating  to  or  affecting  safety  of  employ- 
ments or  places  of  employment,  or  to  protect  the  life  and 
safety  of  employees  in  such  employments  or  places  of 
emplovment,  and  shall  do  everything  necessary  or  proper 
in  order  to  secure  compliance  with  and  observance  of 
every  such  order,  decision,  direction,  rule  or  regulation. 

(r)  Report  of  Injuries. — Sec.  53.  Every  employer  of 
labor,  without  any  exceptions,  and  every  insurance  car- 
rier, and  every  physician  or  surgeon  who  attends  any 
injured  employee,  is  hereby  required  to  file  with  the  com- 
mission, under  such  rules  and  regulations  as  the  commis- 
sion may  from  time  to  time  make,  a  full  and  complete 
report  of  every  injury  to  an  employee  arising  out  of  or 
in  the  course  of  his  employment  and  resulting  in  loss  of 
life  or  injury  to  such  person.  Such  reports  shall  be  fur- 
nished to  the  commission  in  such  form  and  such  detail  as 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.         1065 

the  commission  shall  from  time  to  time  prescribe,  and 
shall  make  specific  answers  to  all  questions  required  by 
the  commission  under  its  rules  and  regulations. 

Act  of  the  Legislature,  approved  May  23,  1917; 
in  effect  January  1,  1918. 

A.  J.  BLEDSOE,  ATTORNEY-AT-LAW,  Los  Angeles,  Cal.— 
General  practice  in  all  the  courts ;  contracts  by  the  year 
for  legal  services;  office  advice,  written  opinions,  prose- 
cuting and  defending  suits.  See  title  page  of  this  book 
for  office  address  of  A.  J.  Bledsoe. 


PART  XVII. 
COMMON  LAW  COMPANIES. 

Section  1357. — COMMON  LAW  AND  STATUTE  LAW. — In 
England,  the  common  law,  as  distinguished  from  statute 
law,  is  that  part  of  the  law  of  the  land  which  is 
founded  upon  long  established  customs  of  the  people, 
customs  running  back,  in  many  instances,  to  a  time  be- 
yond the  memory  of  man.  The  constitution  of  England  is 
made  up  of  established  and  recognized  customs — the 
common  law — which  are  seldom  departed  from  or  over- 
turned by  legislative  enactments.  In  California,  we 
have  a  written  constitution,  which  is  the  highest  law  of 
the  commonwealth.  But  the  principles  of  the  common 
law  (whenever  not  prohibited  or  contravened  by  our  con- 
stitution or  statutes)  are  recognized  here,  as  elsewhere; 
and  the  matter  of  trusts  and  trustees,  as  recognized  in  the 
common  law,  is  an  established  fact  in  our  own  affairs. 

Section  1358. — A  COMMON  LAW  COMPANY. — A  corpora- 
tion, or  a  partnership,  organized  under  the  statutes  of 
California,  carries  with  it  the  burden  of  individual  liabil- 
ity for  debts.  It  is  generally  conceded  now,  anywhere  in 
the  United  States,  that  there  can  be  an  organization  under 
the  common  law,  with  no  privilege  or  franchise  from  legis- 
lative authority,  that  can  do  the  .same  acts  as  an  in- 
dividual, with  no  further  restrictions  than  are  placed  upon 
individuals.  Such  an  organization  is  put  into  effect  by 
a  Declaration  of  Trust.  The  Declaration  of  Trust  is  filed 
for  record  in  the  office  of  the  County  Recorder.  The 
property  and  the  business  is  in  the  hands  of  one  or  more 

1066 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.         1067 

trustees,  to  conduct  the  business  for  the  benefit  of  the 
shareholders. 

Section  1359. — TERM  or  EXISTENCE  OF  THE  COMPANY.— 
The  trust  may  continue  for  any  term  which  does  not 
violate  the  law  against  perpetuities.  A  common  law  com- 
pany cannot  be  organized  to  hold  property  in  trust  for- 
ever. A  corporation  organized  under  the  statute  law  may 
fix  its  own  term  of  existence  at  fifty  years  or  less.  In  the 
states  where  common  law  companies  are  generally  found, 
the  trust  is  made  to  extend  for  a  term  of  twenty  years 
after  the  death  of  the  last  surviving  original  subscriber. 
It  is  claimed  that  this  prevents  violation  of  the  rule 
against  perpetuities. 

Section  1360. — SHAREHOLDERS. — The  trustees  hold  the 
legal  title  to  all  the  property  of  the  company,  and  they 
issue  certificates,  similar  to  shares  of  stock,  to  the 
beneficiaries  of  the  trust,  showing  the  interest  owned  by 
each.  The  trust  agreement  provides  that  the  death  of  a 
shareholder  merely  entitles  his  legal  representatives  (the 
executor  or  administrator  of  the  estate)  to  a  new  certifi- 
cate. The  shareholders  have  no  right  to  call  for  partition 
or  division  of  the  property.  Shares  may  be  preferred 
or  common. 

Section  1361. — LIMITED  INDIVIDUAL  LIABILITIES. — The 
trust  agreement  may  provide  for  payment  to  the  trustees 
by  the  shareholders,  and  for  assessments  and  collections. 
The  liability  of  the  shareholders  to  the  organization  for 
assessments  is  limited  by  the  terms  of  the  trust  agree- 
ment. As  to  third  parties,  the  trustees  are  required  to 
provide,  in  the  contracts  they  make,  that  only  property 
in  their  hands  as  trustees  shall  be  answerable.  Parties 
making  contracts  of  any  kind  with  the  trustees,  or  buying 
from  or  selling  to  the  trustees,  are  thus  notified  in  ad- 
vance that  creditors  must  look  only  to  the  property  in  the 
hands  of  the  trustees,  for  the  satisfaction  of  all  claims. 


1 068  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Section  1362. — CERTIFICATES. — The  trustees  issue  cer- 
tificates for  the  number  of  shares  to  which  each  is  entitled 
and  has  subscribed  for.  These  certificates  have  a  par 
value,  entitle  the  holder  to  one  vote  for  each  share,  and 
are  transferable  on  the  books  of  the  trustees. 

Section  1363. — MEETINGS  OF  THE  SHAREHOLDERS. — The 
shareholders  meet  annually,  and  they  have  such  special 
meetings  as  may  be  necessary.  The  agreement  organiz- 
ing the  company  provides  for  the  mode  of  calling  meet- 
ings of  the  shareholders.  The  shareholders,  at  such 
meetings,  fill  vacancies  in  the  number  of  trustees,  and 
may  depose  any  or  all  of  the  trustees  and  elect  others. 

Section  1364. — POWER  OF  THE  TRUSTEES. — The  trustees 
have  the  exclusive  management  of  the  business.  Under 
terms  of  the  trust,  they  may  buy  and  sell,  borrow  money 
and  mortgage  assets,  and  perform  other  acts,  practically 
the  same  as  directors  of  corporations.  The  powers  of 
such  an  organization  may  be  broader  than  most  corpora- 
tions, as  it  may  provide  for  whatever  any  individual  may 
do.  Ownership  of  stocks  in  incorporated  companies  may 
be  provided  for. 

Delcarations  of  Trust  as  Effective  Substitutes 
for  Incorporation,  by  John  H.  Sears,  page  5. 

Section  1365. — ADVANTAGES  OF  TRUST  METHOD. — The 
advantages  of  the  trust  method  over  incorporations  have 
been  summarized  as  follows : 

1.  Taxation  peculiar  to  corporations,  as,  for  example, 
the  Federal  excise  tax,  and  state  organization  and  fran- 
chise taxes,  are  avoided.  The  Supreme  Court  of  the 
United  State  decided  that  a  trust  is  not  liable  for  the  tax 
on  corporations. 

Eliot  vs.  Freeman,  in  31  Supreme  Court  Re- 
porter, page  360. 


BUSINESS  CON TH ACTS  AND  LEGAL  OBLIGATIONS.         1069 

2.  Eeports  required  of  corporations  need  not  be  filed. 

3.  The  trustees  do  not  have  to  comply    with    the 
foreign  corporation  laws  of  various  states. 

4.  There  is  no  legal  obligation  to  maintain  the  capital 
and  refrain  from  paying  dividends  out  of  capital. 

5.  Dissolution  may  be  effected  without  the  formal- 
ities required  of  corporations. 

A.  J.  BLEDSOE,  ATTORNEY-AT-LAW,  Los  Angeles,  Cal.— 
Special  attention  to  organization  of  common  law  com- 
panies in  California.  All  inquiries  by  mail .  promptly 
answered.  See  title  page  of  this  book  for  office  address 
of  A.  J.  Bledsoe. 


PART  XVIII. 
TAXES  AND  TAX  TITLES. 

Section  1366. — TAX  LAWS  STKICTLY  CONSTRUED. — The 
imposition  of  a  tax  on  property  by  the  governing  power 
is  a  thing  which  is  purely  statutory.  The  tax  and  the 
manner  of  imposing  it,  and  the  method  of  collecting  it, 
are  created  and  regulated  solely  by  the  Legislature. 
Therefore,  it  is  said  that  tax  laws  are  to  be  strictly  con- 
strued. In  other  words,  in  order  for  a  tax  or  tax  title  to 
be  valid,  every  step  specified  by  the  statute  to  be  taken 
must  have  been  taken  by  the  proper  authorities.  If  any- 
thing is  lacking,  if  any  required  act  has  been  omitted,  a 
tax  title  under  the  law  of  California  will  not  be  good.  In 
succeeding  Sections  will  be  found  the  law  of  California 
on  the  subject  of  taxes  and  tax  titles. 

Section  1367. — PROPERTY  SUBJECT  TO  TAXATION. — The 
Constitution  of  California,  Article  XIII,  provides  as  fol- 
lows: 

Sec.  1. — All  property  in  the  state  except  as  otherwise 
in  this  Constitution  provided,  not  exempt  under  the  laws 
of  the  United  States,  shall  be  taxed  in  proportion  to  its 
value,  to  be  ascertained  as  provided  by  law,  or  as  herein- 
after provided.  The  word  "property,"  as  used  in  this 
article  and  section,  is  hereby  declared  to  include  moneys, 
credits,  bonds,  stocks,  dues,  franchises,  and  all  other  mat- 
ters and  things,  real,  personal  and  mixed,  capable  of 
private  ownership;  provided,  that  a  mortgage,  deed  of 
trust,  contract,  or  other  obligation  by  which  a  debt  is 
secured  when  land  is  pledged  as  security  for  the  payment 
thereof,  together  with  the  money  represented  by  such 

1070 


TAXES  AND  TAX  TITLES 

Section  1367,  page  1070,  "Business  Law  for  Business  Men" — PROPER- 
TY SUBJECT  TO  TAXATION— Section  3607  of  the  Political  Code  is 
amended  to  read  as  follows:  "All  property  in  this  state,  not  exempt  under 
the  laws  of  the  United  States,  excepting  date  palms  under  the  age  of  eight 
years  old  from  the  time  of  planting  in  orchard  form  and  fruit  and  nut-bearing 
trees  under  the  age  of  four  years  from  the  time  of  planting  in  orchard  form, 
and  grapevines  under  the  age  of  three  years  from  the  time  of  planting  in  vine- 
yard form,  growing  crops,  property  used  exclusively  for  public  schools,  free 
public  libraries,  and  free  museums,  and  such  as  may  belong  to  the  United 
States,  this  state,  or  to  any  county  or  municipal  corporation  within  this  state, 
is  subject  to  taxation,  as  in  this  code  provided;  but  nothing  in  this  code  shall 
be  construed  to  require  or  permit  double  taxation." 

Act  of  the  Legislature  of  California,  approved  May  19,  1921;  in  effect 
July  19,  1921. 

(a)  PERSONAL  PROPERTY  IN  TRANSIT— All  personal  property 
in  the  possession  or  under  the  control  and  management  of  any  person,  cor- 
poration or  company  engaged  in  the  intrastate  transportation  by  water  of 
goods  or  commodities  of  any  sort  or  description  shall  in  the  event  that  said 
personal  property  is  in  transit  have  as  its  situs  for  purposes  of  taxation  the 
residence  of  the  owner  thereof,  and  it  is  hereby  made  the  duty  of  every  such 
individual,  company  or  corporation  to  file  with  the  forwarding  agent  or  ware- 
house proprietor  for  delivery  to  the  assessor  of  his  county,  a  copy  of  the  bill 
of  lading  or  manifest  for  all  goods  in  transit  or  on  board  on  the  first  Monday 
of  March,  showing  description  and  value  of  such  personal  property  together 
with  name  of  consignor  and  consignee  thereof,  or  if  such  personal  property 
be  delivered  for  transportation  by  other  persons  it  shall  then  be  the  duty  of 
said  person,  company  or  corporation  to  report  same  to  the  county  assessor  of 
the  county  from  which  such  property  was  received. 

Act  of  the  Legislature  of  California,  approved  May  23,  1921;  in  effect 
July  23,  1921. 

ALIEN  POLL  TAX — Every  alien  male  inhabitant  of  this  state  over 
twenty-  one  years  of  age  and  under  sixty  years  of  age,  except  paupers,  idiots 
and  insane  persons,  must  annually  pay  a  poll  tax  of  ten  dollars.  In  the  year 
one  thousand  nine  hundred  twenty-one  A.  D.  such  poll  tax  shall  become  due 
and  payable  on  the  first  day  of  August,  and  shall  become  delinquent  if  not 
paid  on  or  prior  to  the  thirty-first  day  of  December  of  said  year,  whereupon 
there  shall  be  added  thereto  a  penalty  of  fifty  per  cent  for  such  delinquency. 
In  all  succeeding  years  such  poll  tax  shall  become  due  and  payable  on  the 
first  Monday  in  March  and  shall  become  delinquent  if  not  paid  on  or  prior  to 
the  thirty-first  day  of  July  next  ensuing,  whereupon  there  shall  be  added 
thereto. a  penalty  of  fifty  per  cent  for  such  delinquency.  In  the  event  such  poll 
tax  and  penalty  be  not  paid  on  or  prior  to  the  thirty-first  day  of  December  of 
the  year  in  which  levied,  the  whole  amount  thereof,  tax  and  penalty,  shall 
thereafter  bear  interest  at  the  rate  of  seven  per  cent  per  annum,  payable  an- 
nually in  advance  on  the  first  day  of  January  for  the  ensuing  year  and  no  re- 
mission thereof  shall  be  made  for  any  part  of  the  year  during  which  such  de- 
linquent tax,  penalty  and  accrued  interest  may  be  collected. 

It  shall  be  the  duty  of  every  person  liable  to  pay  such  poll  tax  to  register, 
annually,  in  the  county,  or  city  and  county,  wherein  he  may  reside;  provided, 
that  if  he  be  employed  and  temporarily  domiciled  in  a  different  county  during 
the  time  prescribed  for  registration  he  may  register  in  the  county  of  his  em- 
ployment. 

Act  of  the  Legislature  of  California,  approved  May  25,  1921;  in  effect 
May  25,  1921. 


BUSINESS  CONTKACTS  AND  LEGAL  OBLIGATIONS.         1071 

lebt,  shall  not  be  considered  property  subject  to  taxation ; 
md  further  provided,  that  property  used  for  free  public 

•  :braries,  and  free  museums,  growing  crops,  property  used 
•xclusively  for  public  schools,  and  such  as  may  belong  to 

Hie  United  States,  this  state,  or  to  any  county,  city  and 

•  ounty,  or  municipal  corporation  within  the  state  shall  be 
xempt  from  taxation,  except  such  lands  and  the  improve- 

.nents  thereon  located  outside  of  the  county,  city  and 

•ounty,  or  municipal  corporation  owning  the  same  as  were 

-ubject  to  taxation  at  the  time  of  the  acquisition  of  the 

--me  by  said  county,  city  and  county,  or  municipal  corpo- 

,tion;  provided,  that  no  improvements  of  any  character 

,\  hatever  constructed  by  any  county,  city  and  county,  or 

aunicipal  corporation  shall  be  subject  to  taxation.    All 

•<tnds  or  improvements  thereon,  belonging  to  any  county, 

fy  and  county,  or  municipal  corporation  not  exempt  from 

nation,  shall  be  assessed  by  the  assessor  of  the  county, 

ty  and  county,  or  municipal  corporation  in  which  said 

nds  or  improvements  are  located,  and  said  assessment 

nail  be  subject  to  review,  equalization  and  adjustment  by 

ne  State  Board  of  Equalization.  The  legislature  may  pro- 

tde,  except  in  the  case  of  credits  secured  by  mortgage  or 

rust  deed,  for  a  deduction  fi  '*n  credits  of  debts  due  to 

ana  fide  residents  of  this  state.     (Amendment  adopted 

November  3,  1914.) 

Sec.  1^4. — The  property  to  the  amount  of  one  thou- 
and  dollars  of  every  resident  in  this  state  who  has  served 
•i  the  army,  navy,  marine  corps,  or  revenue  marine  serv- 
e  of  the  United  States  in  time  of  war,  and  received  an 
>norable  discharge  therefrom;  or  lacking  such  amount 
1  property  in  his  owrn  name,  so  much  of  the  property  of 
iie  wife  of  any  such  person  as  shall  be  necessary  to  equal 
aid  amount ;  and  property  to  the  amount  of  one  thousand 
dollars  of  the  widow  resident  in  this  state,  or  if  there  be 
no  such  widow,  of  the  widowed  mother  resident  in  this 
state,  of  every  person  who  has  so  served  and  has  died 
either  during  his  term  of  service  or  after  receiving  hon- 
orable discharge  from  said  service;  and  the  property  to 


1072  BUSINESS  LAW  FOR  BUSINESS  MEN. 

the  amount  of  one  thousand  dollars  of  pensioned  widows, 
fathers,  and  mothers,  resident  in  this  state,  of  soldiers, 
Bailors,  and  marines  who  served  in  the  army,  navy  or 
marine  corps,  or  revenue  marine  service  of  the  United 
States,  shall  be  exempt  from  taxation ;  provided,  that  this 
exemption  shall  not  apply  to  any  person  named  herein 
owning  property  of  the  value  of  five  thousand  dollars  or 
more,  or  where  the  wife  of  such  soldier  or  sailor  owns 
property  of  the  value  of  five  thousand  dollars  or  more. 
No  exemption  shall  be  made  under  the  provisions  of  this 
act  of  the  property  of  a  person  who  is  not  a  legal  resident 
of  this  state.  [New  section  adopted  October  10, 1911.] 

Sec.  11/2- — All  buildings,  and  so  much  of  the  real  prop- 
erty on  which  they  are  situated  as  may  be  required  for 
the  convenient  use  and  occupation  of  said  buildings,  when 
the  same  are  used  solely  and  exclusively  for  religious 
worship  shall  be  free  from  taxation;  provided,  that  no 
building  so  used  which  may  be  rented  for  religious  pur- 
poses and  rent  received  by  the  owner  therefor,  shall  be 
exempt  from  taxation.  [New  section  adopted  November 
6,  1900.] 

Sec.  !3/4. — All  bonds  hereafter  issued  by  the  State  of 
California,  or  by  any  county,  city  and  county,  municipal 
corporation,  or  district  (including  school,  reclamation, 
and  irrigation  districts)  within  said  state,  shall  be  free 
and  exempt  from  taxation.  [New  section  adopted  Novem- 
ber 4, 1902.] 

Sec.  \a. — Any  educational  institution  of  collegiate 
grade,  within  the  State  of  California,  not  conducted  for 
profit,  shall  hold  exempt  from  taxation  its  buildings  and 
equipment,  its  grounds  within  which  its  buildings  are  lo- 
cated, not  exceeding  one  hundred  acres  in  area,  its  se- 
curities and  income  used  exclusively  for  the  purpose  of 
education.  [New  section  adopted  November  3,  1914.] 

Sec.  4. — All  vessels  of  more  than  fifty  tons  burden  reg: 
istered  at  any  port  in  this  state  and  engaged  in  the  trans- 
portation of  freight  or  passengers  shall  be  exempt  from 
taxation  except  for  state  purposes,  until  and  including 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.         1073 

the  first  day  of  January,  nineteen  hundred  thirty-five. 
[New  section  adopted  November  3,  1914.] 

Sec.  lO1/^. — The  personal  property  of  every  house- 
holder to  the  amount  of  one  hundred  dollars,  the  articles 
to  be  selected  by  each  householder,  shall  be  exempt  from 
taxation.  [New  section  adopted  November  8,  1904.] 

Sec.  11. — Income  taxes  may  be  assessed  to  and  col- 
lected from  persons,  corporations,  joint-stock  associa- 
tions, or  companies  resident  or  doing  business  in  this 
state,  or  any  one  or  more  of  them,  in  such  cases  and 
amounts,  and  in  such  manner,  as  shall  be  prescribed  by 
law. 

Sec.  12. — No  poll  tax  or  head  tax  for  any  purpose 
whatsoever  shall  be  levied  or  collected  in  the  State  of 
California.  [New  section  adopted  November  3, 1914.] 

Sec.  12%. — Fruit  and  nut  bearing  trees  under  the  age 
of  four  years  from  the  time  of  planting  in  orchard  form, 
and  grapevines  under  the  age  of  three  years  from  the 
time  of  planting  in  vineyard  form,  shall  be  exempt  from 
taxation,  and  nothing  in  this  article  shall  be  construed 
as  subjecting  such  trees  and  grapevines  to  taxation.  [New 
section  adopted  November  6,  1894.] 

Section  1368. — SHAKES  OF  STOCK  IN  CORPORATIONS.— 
Shares  of  stock  in  corporations  possess  no  intrinsic  value 
over  and  above  the  actual  value  of  the  property  of  the 
corporation  which  they  stand  for  and  represent.  The 
assessment  and  taxation  of  such  shares,  and  also  of  all 
corporate  property  would  be  double  taxation.  All  prop- 
erty belonging  to  corporations  shall  be  assessed  and 
taxed,  in  the  manner  provided  by  law ;  but  no  assessment 
shall  be  made  of  shares  of  stock  in  any  corporation  ex- 
cept as  prescribed  in  the  constitution  of  this  state  and 
the  laws  enacted  pursuant  to  such  provisions  of  the 
constitution. 

Act  of  the  Legislature,  approved  May  11,  1917; 
in  effect  July  27,  1917. 


1074  BUSINESS  LAW  FOR  BUSINESS  MEN. 

Section  1369. — ASSESSMENT  AT  FULL  CASH  VALUE.— 
All  taxable  property  must  be  assessed  at  its  full  cash 
value.  Land  and  improvements  thereon  shall  be  sep- 
arately assessed.  Cultivated  and  uncultivated  land,  of 
the  same  quality,  and  similarly  situated,  shall  be  assessed 
at  the  same  value. 

Act  of  the  Legislature,  approved  May  11,  1917; 
in  effect  July  27,  1917. 

Section  1370. — ASSESSMENT  OF  TAXABLE  PROPERTY.— 
Except  as  otherwise  provided  in  the  constitution  of  this 
state,  all  taxable  property  shall  be  assessed  in  the  county, 
city,  city  and  county,  town,  township,  or  district  in  which 
it  is  situated.  Land  shall  be  assessed  in  parcels,  or  usbdi- 
visions,  not  exceeding  six  hundred  forty  acres  each ;  and 
tracts  of  land  containing  more  than  six  hundred  forty 
acres,  which  have  been  sectionized  by  the  United  States 
government,  shall  be  assessed  by  sections  or  fractions  of 
sections.  Land  sold  by  the  state  for  which  no  patent  has 
been  issued,  shall  be  assessed  the  same  as  other  land,  but 
the  owner  shall  be  entitled  to  a  deduction  from  such  as- 
sessed valuation  in  the  amount  due  the  state  as  principal 
upon  the  purchase  price.  The  assessor  must,  between  the 
first  Mondays  in  March  and  July  of  each  year,  ascertain 
the  names  of  all  taxable  inhabitants,  and  all  the  property 
in  his  county  subject  to  taxation,  except  such  as  is  re- 
quired to  be  assessed  by  the  state  board  of  equalization^ 
and  must  assess  such  property  to  the  persons  by  whom 
it  was  owned  or  claimed,  or  in  whose  possession  or  con- 
trol it  was,  at  twelve  o'clock  meridian  of  the  first  Mon- 
day in  March  next  preceding ;  but  no  mistake  in  the  name 
of  the  owner  or  supposed  owner  of  real  property  shall 
render  the  assessment  thereof  invalid.  In  assessing  solv- 
ent credits,  not  secured  by  mortgage  or  trust  deed  on  real 
estate,  a  deduction  therefrom  shall  be  made  of  debts  due 
to  bona  fide  residents  of  this  state. 

Act  of  the  Legislature,  approved  May  11,  1917; 
in  effect  July  27,  1917. 


BUSLXES  •>  CONTRACTS  AND  LEGAL  OBLIGATIONS.          1075 

Section  1371. — STATEMENT  OF  PROPERTY  OWNED. — The 
assessor  must  exact  from  each  person  a  statement,  under 
oath,  setting  forth  specifically  all  the  real  and  personal 
property  owned  by  such  person,  or  in  his  possession,  or 
under  his  control,  at  twelve  o'clock  m.  on  the  first  Mon- 
day in  March.  Such  statement  shall  be  in  writing,  show- 
ing separately: 

1.  All  property  belonging  to,  claimed  by,  or  in  the  pos- 
session or  under  the    control    or   management    of  such 
person. 

2.  All  property  belonging  to,  claimed  by,  or  in  the 
possession  or  under  the  control  or  management  of  any 
firm  of  which  such  person  is  a  member. 

3.  All  property  belonging  to,  claimed  by,  or  in  the 
possession  or  under  the  control  or  management  of  any 
corporation  of  which  such  person  is  president,  secretary, 
rashier,  or  managing  agent. 

4.  The  county  in  which  such  property  is  situated,  or 
in  which  it  is  liable  to  taxation,  and,  if  liable,  to  taxation 
in  the  county  in  which  the  statement  is  made,  also  the 
city,  town,  township,  school  district,  road  district,  or  other 
revenue  districts  in  which  it  is  situated. 

5.  An  exact  description  of  all  lands,  in  parcels  or  sub- 
divisions, not  exceeding  six  hundred  forty  acres  each, 
and  the  sections  and  fractional  sections  of  all  tracts  of 
laud  containing  more  than  six  hundred  forty  acres,  which, 
have  been  sectionized  by  the  United  States  government, 
improvements  and  personal  property,  including  all  ves- 
sels, steamers,  and  other  watercraft ;  and  all  taxable  state, 
county,  city,  or  other  municipal  or  public  bonds,  and  the 
taxable  bonds  of  any  person,  firm,  or  corporation,  and 
deposits  of  money,  gold  dust,  or  other  valuables,  and  the 
names  of  the  persons  with  whom  such  deposits  are  made, 
and  the  places  in  which  they  may  be  found. 

6.  All  solvent  credits,  unsecured   by   deed    of  trust, 
mortgage,  or  other  lien  on  real  or  personal  property,  due 
or  owing  to  such  person,  or  any  firm  of  which  he  is  a 
member,  or  due  or  owing  to  any  corporation  of  which  he 


1076  BUSINESS  LAW  FOB  BUSINESS  MEN. 

is  president,  secretary,  cashier,  or  managing  agent,  de- 
ducting from  the  sum  total  of  such  credits  such  debts  only, 
unsecured  by  trust  deed,  mortgage,  or  other  lien  on  real 
or  personal  property,  as  may  be  owing  by  such  person, 
firm,  or  corporation  to  bona  fide  residents  of  this  state. 
No  debts  shall  be  so  deducted  unless  the  statement  shows 
the  amount  of  such  debt  as  stated  under  oath  in  aggre- 
gate. Whenever  one  member  of  a  firm,  or  one  of  the 
proper  officers  of  a  corporation,  has  made  a  statement 
showing  the  property  of  the  firm  or  corporation,  another 
member  of  the  firm,  or  another  officer,  need  not  include 
such  property  in  the  statement  made  by  him;  but  his 
statement  must  show  the  name  of  the  person  or  officer 
who  made  the  statement  in  which  such  property  is  in- 
cluded. 

Act  of  the  Legislature,  approved  May  11,  1917; 
in  effect  July  27,  1917. 

Section  1372. — FERRIES. — A  ferry  boat  is  a  vessel  tra- 
versing across  any  of  the  waters  of  the  state,  between 
two  constant  points,  regularly  employed  for  the  transfer 
of  passengers  and  freight,  authorized  by  law  so  to  do. 
Where  ferries  connect  more  than  one  county,  the  wharves, 
storehouses,  and  all  stationary  property  belonging  to  or 
connected  with  such  ferries,  must  be  assessed,  and  the 
taxes  paid,  in  the  county  where  located.  The  value  of 
&11  watercraft,  and  of  all  toll  bridges  connecting  more 
than  one  county,  must  be  assessed  in  equal  proportions 
in  the  counties  connected  by  such  ferries  or  toll  bridges. 
Act  of  the  Legislature,  approved  May  11,  1917 ; 
in  effect  July  27,  1917. 

Section  1373. — WATER  DITCHES. — Water  ditches  con- 
structed for  mining,  manufacturing,  or  irrigation  pur- 
poses, and  wagon  and  turnpike  toll  roads,  must  be  as- 
sessed the  same  as  real  estate  by  the  assessor  of-  the 
county,  at  a  rate  per  mile  for  that  portion  of  such  prop- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.          1.077 

crty  as  lies  within  his  county. 

Act  of  the  Legislature,  approved  May  11,  1917 ; 
in  effect  July  27,  1917. 

Section  1374. — STATEMENT  OF  TAX  BATE  SENT  TO  CON- 
TROLLER.— When  the  board  of  supervisors  of  each  county, 
and  city  and  county  shall  have  fixed  the  rate  of  county, 
or  city  and  county  taxation,  the  clerk  of  the  board  of 
supervisors  must,  within  three  days  after  such  rate  has 
been  fixed,  transmit  by  mail,  postage  paid,  to  the  con- 
troller, in  such  form  as  the  controller  shall  direct,  a  state- 
ment of  the  rate  of  taxation  levied  by  the  board  of  super- 
visors for  county,  or  city  and  county  taxation.  If  the 
clerk  fails  to  transmit  such  statement  in  the  time  herein 
provided  for,  he  shall  forfeit  to  the  state  one  thousand 
dollars,  to  be  recovered  in  an  action  brought  by  the  at- 
torney general,  in  the  name  of  the  controller. 

Act  of  the  Legislature,  approved  May  11,  1917 ; 
in  effect  July  27,  1917. 

Section  1375.  —  STATEMENTS  FROM  "ASSESSMENT 
BOOK."  -The  auditor  must,  on  or  before  the  second 
Monday  in  August  in  each  year,  prepare  from  the 
"assessment  book"  of  such  year,  as  corrected  by  the 
board  of  supervisors,  duplicate  statements,  showing  in 
separate  columns— 

1.  The  number  of  acres  of  land. 

2.  The  total  value  of  all  property. 

3.  The  value  of  real  estate. 

4.  The  value  of  improvements  thereon. 

5.  The  value  of  personal  property,  exclusive  of  money. 

6.  The  amount  of  money. 

7.  Such  other  information  as  the  state  board  of  equal- 
ization may  require. 

Act  of  the  Legislature,  approved  May  11,  1917 ; 
in  effect  July  27,  1917. 

Section  1376. — STATEMENT  OF  AMOUNT  CHARGED  SENT 
TO  CONTROLLER. — On  delivering  the  assessment-book  to 


1078  BUSINESS  LAW  FOR  BUSINESS  MEN. 

fiW 

the  tax  collector,  the  auditor  must  charge  the  tax  collector 
with  the  full  amount  of  the  taxes  levied,  and  forthwith 
transmit  by  mail  to  the  controller  of  state,  in  such  form 
as  the  controller  may  prescribe,  a  statement  of  the 
amount  so  charged.  Any  auditor  failing  to  forward  such 
statement  to  the  controller  within  ten  days  after  the  roll 
has  been  delivered  to  the  tax  collector,  forfeits  to  the 
state  one  thousand  dollars,  to  be  recovered  in  an  action 
brought  by  the  attorney  general,  in  the  name  of  the  con- 
troller. 

Section  1377. — STATEMENT  BY  TAX  COLLECTOR. — On 
the  first  Monday  in  each  month  the  tax  collector  must 
settle  with  the  auditor  for  all  moneys  collected  for  the 
state  or  county,  and  pay  the  same  to  the  county  treas- 
urer, and  on  the  same  day  must  deliver  to  and  file  in 
the  office  of  the  auditor  a  statement  under  oath,  showing : 

1.  An  itemized  account  of  all  of  his  transactions  and 
receipts  since  his  last  settlement,  which  account  must 
show  the  amount  collected  for  each  fund  or  district  ex- 
tended on  the  assessment  book. 

2.  That  all  money  collected  by  him  as  tax  collector  has 
been  so  paid  to  the  county  treasurer. 

Act  of  the  Legislature,  approved  May  11,  1917 ; 
in  effect  July  27,  1917. 

Section  1378. — EXEMPTION  OF  CHURCH  PROPERTY. — All 
buildings,  and  so  much  of  the  real  property  on  which 
they  are  situated  as  may  be  required  for  the  convenient 
use  and  occupation  of  said  buildings,  when  the  same  are 
used  solely  and  exclusively  for  religious  worship,  shall 
be  free  from  taxation ;  provided,  that  no  building  so  used 
which  may  be  rented  for  religious  purposes  and  rent  re- 
ceived by  the  owner  therefor  shall  be  exempt  from  taxa- 
tion. That  any  person  claiming  property  to  be  exempt 
from  taxation  under  this  section  shall  make  a  return 
thereof  to  the  assessor  annually,  the  same  as  property 
listed  for  taxation,  and  shall  accompany  the  same  by  an 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.         1079 

affidavit  showing  that  the  building  is  used  solely  and 
exclusively  for  religious  worship,  and  that  the  described 
portion  of  the  real  property  claimed  as  exempt  is  re- 
quired for  the  convenient  use  and  occupation  of  such 
building,  and  that  the  same  is  not  rented  for  religious 
purposes  and  rent  received  by  the  owner  therefor. 
Political  Code,  Section  3611. 

Section  1379. — CEMETERY  LANDS  EXEMPT  FROM  TAXA- 
ATION. — The  cemetery  lands  and  property  of  any  associa- 
tion, formed  pursuant  to  law,  are  exempt  from  all  pub- 
lic taxes,  rates,  and  assessments,  and  are  not  liable  to  be 
sold  on  execution,  or  be  applied  in  payment  of  debts  due 
from  any  individual  proprietors.  But  the  proprietors  of 
lots,  or  plots,  in  such  cemeteries,  their  heirs,  or  devisees, 
may  hold  the  same  exempt  therefrom,  so  long  as  the 
same  shall  remain  dedicated  to  the  purposes  of  a  ceme- 
tery. 

Act  of  the  Legislature,  approved  April  24,  1911. 

Section  1380. — FUNDS  OF  FRATERNAL  BENEFIT  SOCIETY 
EXEMPT. — All  the  funds  of  a  fraternal  benefit  society,  or- 
ganized and  licensed  under  the  law  of  this  state  as  a 
charitable  and  benevolent  institution,  are  exempt  from 
all  state,  county,  district,  municipal  and  school  taxes.  But 
the  real  estate  and  office  equipment  of  such  societies  may 
be  taxed. 

Act  of  the  Legislature,  approved  May  1,  1911. 

Section  1381. — FEDERAL  SECURITIES  NOT  TAXABLE  BY 
THE  STATE. — Bonds  or  other  obligations  of  the  United 
States,  issued  under  its  constitutional  power  to  borrow 
money  for  its  own  purposes,  are  not  subject  to  taxation 
by  the  state  or  municipal  governments. 

Section  1382. — PUBLIC  PROPERTY  NOT  SUBJECT  TO  TAX- 
ATION.— Public  property  is  not  subject  to  taxation.  If  it 
is  the  property  of  the  state,  it  is  not  taxed  by  the  state 


1080  BUSINESS  LAW  FOB  BUSINESS  MEN. 

itself,  because  it  would  be  unreasonable  to  impose  a  tax, 
the  payment  of  which  would  have  to  be  met  by  the  levy 
of  another  tax.  For  a  similar  reason,  the  property  of  a 
city,  town  or  county,  belonging  to  a  municipal  corpora- 
tion, when  used  for  public  purposes,  is  not  a  proper  sub- 
ject of  taxation.  Considerations  of  public  policy  are 
deemed  sufficient  to  exempt  all  such  property  from  tax- 
ation. 

Section  1383. — CONDITIONS  OF  ASSESSMENT  OF  PROP- 
ERTY.— All  taxable  property  must  be  assessed  at  its  full 
cash  value.  Land  and  improvements  thereon  shall  be  sep- 
arately assessed.  Cultivated  and  uncultivated  land,  of 
the  same  quality,  and  similarly  situated,  shall  be  as- 
sessed at  the  same  value.  A  mortgage,  deed  of  trust,  con- 
tract, or  other  obligation  by  which  a  debt  is  secured,  shall 
for  the  purposes  of  assessment  and  taxation,  be  deemed 
and  treated  as  an  interest  in  the  property  affected  there- 
by, except  as  to  railroad  and  other  quasi-public  cor- 
porations. In  case  of  debt  so  secured,  the  value  of  the 
property  affected  by  such  mortgage,  deed  of  trust,  con- 
tract, or  obligation,  less  the  value  of  such  security,  shall 
be  assessed  and  taxed  to  the  owner  of  the  property,  and 
the  value  of  such  security  shall  be  assessed  and  taxed  to 
the  owner  thereof,  in  the  county,  city,  or  district  in  which 
the  property  affected  thereby  is  situated.  The  taxes  so 
levied  shall  be  a  lien  upon  the  property  and  security,  and 
may  be  paid  by  either  party  to  such  security;  if  paid  by 
the  owner  of  the  security,  the  tax  so  levied  upon  the 
property  affected  thereby  shall  become  a  part  of  the  debt 
so  secured.  If  the  owner  of  the  property  shall  pay  the 
tax  so  levied  on  such  security,  it  shall  constitute  a  pay- 
ment thereon,  and,  to  the  extent  of  such  payment,  a  full 
discharge  thereof.  If  any  such  security  or  indebtedness 
shall  be  paid  by  any  such  debtor  or  debtors  after  assess- 
ment, and  before  the  tax  levy,  the  amount  of  such  levy 
may  likewise  be  retained  by  such  debtor  or  debtors,  and 
shall  be  computed  according  to  the  tax  levy  for  the  pre- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.          1081 

ceding  year.  The  parties  to  any  contract  of  loan  or  to 
any  mortgage,  deed  of  trust  or  other  lien  securing  any 
obligation,  shall  nevertheless  have  the  right  to  provide 
by  contract  that  the  debtor  shall  pay  all  or  any  taxes  or 
assessments  on  the  money  loaned  or  on  the  mortgage, 
deed  of  trust,  or  other  lien,  or  on  the  property  thereby 
covered  or  the  obligation  thereby  secured,  and  such  con- 
tract shall  be  valid  and  constitute  a  waiver  by  the  debtor 
of  all  right  to  treat  the  payment  of  such  tax  or  assess- 
ment as  a  payment  on  the  amount  loaned  or  secured  or 
as  being  to  any  extent  a  discharge  thereof. 
Political  Code,  Section  3627. 

Section  1384. — RAILROADS  AND  FRANCHISES. — Railroads 
operated  in  more  than  one  county  in  this  state  shall  be 
assessed  by  the  state  board  of  equalization.  Other  fran- 
chises, if  granted  by  the  authorities  of  a  county,  city,  or 
city  and  county,  must  be  assessed  in  the  county,  city,  or 
city  and  county  within  which  they  were  granted;  if 
granted  by  any  other  authority,  they  must  be  assessed  in 
the  county  in  which  the  corporations,  firms,  or  persons 
owning  or  holding  them  have  their  principal  place  of 
business.  All  other  taxable  property  shall  be  assessed  in 
the  county,  city,  or  city  and  county,  town,  township,  or" 
district  in  which  it  is  situated. 

Political  Code,  Section  3638. 

Section  1385. — ARBITRARY  ASSESSMENTS. — If  any  per- 
son, after  demand  made  by  the  assessor,  neglects  or  re- 
fuses to  give,  under  oath,  the  statement  herein  provided 
.for,  or  to  comply  with  the  other  requirements  of  this 
title,  the  assessor  must  note  the  refusal  on  the  assess- 
ment book,  opposite  the  name  of  such  person,  and  must 
make  an  estimate  of  the  value  of  such  property  of  such 
person,  and  the  assessor  must  transmit  on  or  before  the 
first  day  of  July  of  each  year  to  the  board  of  supervisors 
a  verified  report  in  writing,  separate  from  the  assess- 
ment roll,  containing  a  complete  list  of  all  persons  who 


1082  BUSINESS  LAW  FOR  BUSINESS  MEN. 

refuse  or  neglect  to  furnish  a  statement  of  their  prop- 
erty as  herein  provided  for,  or  to  comply  with  the  re- 
quirements of  this  title,  the  amount  of  the  assessment 
upon  the  property  of  such  persons,  with  a  statement  of 
the  particular  facts,  if  any,  upon  which  the  assessment 
has  been  made,  and  the  valuation  of  the  property  so 
assessed  ascertained.  The  board  of  supervisors  must  in- 
vestigate and  inquire  into  all  assessments  and  values  so 
fixed  by  the  assessor,  as  prescribed  by  this  section,  and 
for  that  purpose  must  require  each  taxpayer  affected  by 
such  assessment  and  valuation  to  make  a  statement 
under  oath,  within  ten  days  from  making  an  order  requir- 
ing such  statement,  setting  forth  specifically,  all  the 
property  owned  or  controlled,  or  in  the  possession  of 
such  taxpayer  on  the  first  Monday  of  March.  If  any 
taxpayer,  after  demand  made  by  the  board  of  super- 
visors, shall  neglect  or  refuse  to  make  and  deliver  to  the 
said  board  of  supervisors  the  statement,  duly  verified, 
herein  provided  for,  or  to  comply  with  the  other  require- 
ments of  this  title,  the  said  board  of  supervisors,  sitting 
as  a  county  board  of  equalization,  must  increase  such 
assessment  and  valuation  to  such  an  amount  as  the  said 
board  shall  deem  just ;  but  the  value  fixed  by  the  assessor 
must  not,  in  any  case,  be  reduced  by  the  board  of  super- 
visors. 

Political  Code,  Section  3633. 

Section  1386. — ASSESSMENT  OF  UNKNOWN  OR  ABSENT 
OWNERS. — If  the  owner  or  claimant  of  any  property,  not 
listed  by  another  person,  is  absent  or  unknown,  the  as- 
sessor must  make  an  estimate  of  the  value  of  such  prop- 
erty. If  the  name  of  the  absent  owner  is  known  to  the 
assessor,  or  if  it  appears  of  record  in  the  office  of  the 
county  recorder  where  the  property  is  situated,  the  prop- 
erty must  be  assessed  to  such  name;  if  unknown  to  the 
assessor,  and  if  it  does  not  so  appear  of  record,  the  prop- 
erty must  be  assessed  to  unknown  owners. 
Political  Code,  Sections  3635,  3636. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.         1083 

Section  1387.  —  CONSIGNED  PROPERTY. — All  personal 
property  consigned  for  sale  to  any  person  within  this 
state,  from  any  place  out  of  this  state,  or  from  other 
county  or  counties  in  this  state,  must  be  assessed  in  the 
county  where  the  property  is  situated. 
Political  Code,  Section  3638. 

Section  1388. — UNDISTRIBUTED  PROPERTY  OF  DECEASED 
PERSON. — The  undistributed  or  unpartitioned  property  of 
deceased  persons  may  be  assessed  to  the  heirs,  guardians, 
executors,  or  administrators ;  and  a  payment  of  taxes 
made  by  either  binds  all  the  parties  in  interest  for  their 
equal  proportions. 

Political  Code,  Section  3642. 

Section  1389. — VESSELS  AND  BOATS. — Vessels  regis- 
tered, licensed,  or  enrolled  out  of  and  plying  in  whole  or 
in  part  in  the  waters  of  this  state,  the  owners  of  which 
reside  in  this  state,  must  be  assessed  in  this  state. 

All  vessels,  except  ferry-boats,  which  may  be  regis- 
tered, of  every  class  which  are  by  law  required  to  be  reg- 
istered, must  be  assessed  and  the  taxes  thereon  paid,  only 
in  the  county,  or  city  and  county,  where  the  same  are  reg- 
istered, enrolled,  or  licensed. 

All  boats  and  small  craft  not  required  to  be  registered, 
must  be  assessed  in  the  county  where  their  owner  resides. 
Political  Code,  Sections  3644,  3645,  3646. 

Section  1390. — PROPERTY  AND  MONEY  IN  LITIGATION.— 
Money  and  property  in  litigation  in  possession  of  a  county 
treasurer,  of  a  court,  county  clerk,  or  receiver,  must  be 
assessed  to  such  treasurer,  clerk,  or  receiver,  and  the 
taxes  be  paid  thereon  under  the  direction  of  the  court. 
Political  Code,  Section  3647. 

Section  1391. — PROPERTY  CONCEALED,  MISREPRESENTED, 
ETC. — Any  property  wilfully  concealed,  removed,  trans- 
ferred, or  misrepresented  by  the  owner  or  agent  thereof, 
to  evade  taxation,  upon  discovery  must  be  assessed  at  not 


1084  BUSINESS  LAW  TOR  BUSINESS  MEN. 

exceeding  ten  times  its  value,  and  the  assessment  so  made 
must  not  be  reduced  by  the  board  of  supervisors. 
Political  Code,  Section  3648. 

Section  1392. — PROPERTY  NOT  TAXED  IN  PREVIOUS  YEAR. 
Any  property  discovered  by  the  assessor  to  have  escaped 
assessment  for  the  last  preceding  year,  if  such  property 
is  in  the  ownership  or  under  the  control  of  the  same  per- 
son who  owned  or  controlled  it  for  such  preceding  year, 
may  be  assessed  at  double  its  value. 
Political  Code,  Section  3649. 

Section  1393. — NOTICE  OF  MEETING  TO  EQUALIZE  ASSESS- 
MENTS.— As  soon  as  completed,  the  assessment  book, 
together  with  the  map  books,  statements,  and  military  roll, 
must  be  delivered  to  the  clerk  of  the  board  of  supervisors, 
who  must  immediately  give  notice  thereof,  and  of  the  time 
the  board  will  meet  to  equalize  assessments,  by  publica- 
tion in  a  newspaper,  if  any  is  printed  in  the  county;  if 
none,  then  in  such  manner  as  the  board  may  direct.  In 
the  meantime,  the  assessment-book,  map-books,  and  state- 
ments must  remain  in  his  office  for  the  inspection  of  all 
persons  interested.  After  the  board  of  equalization  has 
completed  its  labors,  the  map-books  and  statements  shall 
be  returned  to  the  county  assessor's  office,  and  shall  be 
kept  in  said  office  for  future  reference. 
Political  Code,  Section  3651. 

Section  1394. — PERSONS  CLAIMING  OWNERSHIP. — Lands 
once  described  on  the  assessment-book  need  not  be  de- 
scribed a  second  time,  but  any  person  claiming  the  same, 
and  desiring  to  be  assessed  therefor,  may  have  his  name 
inserted  with  that  of  the  person  to  whom  such  land  has 
been  assessed. 

Political  Code,  Section  3657. 

Section  1395. — OFFICIAL  MAPS  OF  CITY  LOTS  OR  BLOCKS. 
—Whenever  any  city,  town,  or  subdivision  of  land  is  plat- 
ted or  divided  into  lots  or  blocks,  and  whenever  any  addi- 
tion to  any  city,  town,  or  such  subdivision  shall  be  or  has 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.         1085 

been  laid  out  into  lots  or  blocks  for  the  purpose  of  sale 
or  transfer,  it  shall  be  lawful  for  the  city  engineer,  or 
the  county  or  city  and  county  surveyor,  under  the  direc- 
tion and  with  the  approval  of  the  city  council  or  board  of 
supervisors  of  said  city,  county,  or  city  and  county,  to 
make  an  official  map  of  such  city,  town,  or  subdivision, 
giving  to  each  block  on  such  map  a  number,  and  to  each 
lot  or  subdivision  in  such  block  a  separate  number  or  let- 
ter, and  giving  names  to  such  streets,  avenues,  lanes, 
courts,  commons,  or  parks,  as  may  be  delineated  on  such 
official  map. 

Whenever  the  city  council  or  board  of  supervisors  of 
such  city,  county,  or  city  and  county,  shall  adopt  such 
map  as  the  official  map  of  the  subdivision,  town,  city, 
county,  or  city  and  county,  it  shall  be  lawful  to,  and  the 
assessor  shall,  describe  such  lots,  blocks,  or  parcels  of 
land  by  numbers  or  letters  as  delineated  on  such  map  in 
assessing  such  property,  and  it  shall  be  lawful  and  suffi- 
cient to  describe  such  lots  or  blocks  in  any  deeds,  convey- 
ances, contracts,  or  obligations  affecting  any  such  lots  or 
blocks  as  designated  on  such  official  map,  a  reference  to 
such  map  sufficient  for  the  identification  thereof  being 
coupled  with  such  description. 

Such  engineer  or  surveyor,  under  the  direction  and 
with  the  approval  of  the  city  council  or  board  of  super- 
visors of  such  city,  county,  or  city  and  county,  may  coin- 
pile  such  map  from  maps  on  file,  or  may  resurvey  or  re- 
number the  blocks,  or  renumber  or  reletter  the  lots  in  such 
blocks,  or  change  the  names  of  streets.  All  surveys  and 
the  field-notes  thereof  made  by  any  such  engineer  or  sur- 
veyor, under  the  provisions  of  this  section,  or  in  survey- 
ing officially  any  lots  or  parcels  of  land  in  any  city,  town, 
county,  or  city  and  county,  for  the  purposes  of  any  such 
map,  shall  be  filed  in  the  office  of  the  surveyor  or  engineer, 
as  the  case  may  be,  and  shall  become  a  part  of  the  public 
rcords  of  such  city,  town,  county,  or  city  and  county. 

Each  and  every  map,  made  and  adopted  as  herein  - 
above  provided,  shall  be  certified  under  the  hands  of  a 


1086  BUSINESS  LAW  FOR  BUSINESS  MEN. 

majority  of  the  members  and  the  presiding  officer  and  sec- 
retary and  official  seal,  if  any,  of  the  authority  adopting 
the  same.  Such  certificate  shall  set  forth  in  full  the  reso- 
lution adopting  such  map,  with  the  date  of  adoption ;  and 
such  map,  so  certified,  shall  be  forthwith  filed  in  the  office 
of  the  county  recorder  of  the  county,  or  city  and  county, 
wherein  the  platted  lands  are  situate,  and  the  said  re- 
corder shall  immediately  securely  fasten  and  bind,  in  one 
of  a  series  of  firmly  bound  books  to  be  provided,  together 
with  the  proper  indexes  thereof  and  appropriately  marked 
for  the  reception  of  the  maps  herein  provided  for,  each 
such  map  so  filed  with  him;  and  the  same  shall  become 
an  official  map  for  all  the  purposes  of  this  section  when 
so  certified,  filed  and  bound,  but  not  before.  This  section 
is  hereby  made  applicable  to  all  cities,  towns,  and  villages 
in  this  state,  as  well  as  to  the  counties,  and  cities  and 
counties  thereof,  whether  the  same  be  incorporated  or  not ; 
and  the  words  "city  council  or  board  of  supervisors" 
wherever  used  herein  shall  be  deemed  to  include  the 
proper  corresponding  governing  board  and  authority  in 
each  such  place;  and  the  words  "city  engineer"  and 
"county  or  city  and  county  surveyor"  shall  be  deemed 
to  include  the  like  or  corresponding  officer,  subject  to  the 
direction  of  such  "corresponding  governing  board  and 
authority"  in  each  such  place;  or,  if  there  be  no  such  offi- 
cer subject  to  such  direction,  such  "corresponding  board 
and  authority"  may  employ  competent  engineers  and  sur- 
veyors to  the  extent  necessary  for  the  carrying  out  of  the 
purposes  of  this  act  in  the  places  subject  to  its  jurisdic- 
tion, and  the  persons  so  appointed  shall  have  the  same 
authority  and  shall  perform  the  same  duties  as  are  given 
to  and  enjoined  upon  "city  engineers"  and  "county  or 
city  and  county  surveyors,"  respectively,  in  like  cases. 
The  services  of  such  engineers  and  surveyors  so  employed 
shall  be  contracted  for,  examined,  passed  upon,  audited, 
and  paid  as  are  other  debts  contracted  by  such  governing 
boards  and  authorities. 

Political  Code,  Section  3658-A. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.         1087 

Section  1396. — COUNTY  BOARD  OF  EQUALIZATION. — The 
board  of  supervisors  of  each  county  must  meet  on  the 
first  Monday  of  July  in  each  year,  to  examine  the  assess- 
ment-book and  equalize  the  assessment  of  property  in  the 
county.  It  must  continue  in  session  for  that  purpose, 
from  time  to  time,  until  the  business  of  equalization  is 
disposed  of,  but  not  later  than  the  third  Monday  in  July. 

The  board  has  power,  after  giving  notice  in  such  man- 
ner as  it  may,  by  rule,  prescribe,  to  increase  or  lower  the 
entire  assessment-roll,  or  any  assessment  contained  there- 
in, so  as  to  equalize  the  assessment  of  the  property  con- 
tained in  said  roll,  and  make  the  assessment  conform  to 
the  true  value  of  such  property  in  money. 

No  reduction  must  be  made  in  the  valuation  of  prop- 
erty, unless  the  party  affected  thereby  or  his  agent  makes 
and  files  with  the  board  a  written  application  therefor, 
verified  by  his  oath  showing  the  facts  upon  which  it  is 
claimed  such  reduction  should  be  made. 

Before  the  board  grants  the  application  or  makes  any 
reduction  applied  for,  it  must  first  examine,  on  oath,  the 
person  or  the  agent  making  the  application  touching  the 
value  of  the  property  of  such  person.  No  reduction  must 
be  made  unless  such  person  or  the  agent  making  the  ap- 
plication attends  and  answers  all  questions  pertinent  to 
the  inquiry. 

Upon  the  hearing  of  the  application  the  board  may 
subpoena  such  witnesses,  hear  and  take  such  evidence  in 
relation  to  the  subject  pending,  as  in  its  discretion  it  may 
deem  proper. 

During  the  session  of  the  board  the  assessor  and  any 
deputy  whose  testimony  is  needed  must  be  present,  and 
may  make  any  statement,  or  introduce  and  examine  wit- 
nesses on  questions  before  the  board. 

Any  assessment  on  a  mortgage,  or  deed  of  trust,  which 
has  been  erroneously  taxed  to  the  mortgagee,  or  party 
loaning  the  money,  when  the  same  has  been  paid  or  sat- 
isfied prior  to  the  first  Monday  in  March,  shall  be  valid 


1088  BUSINESS  LAW  FOR  BUSINESS  MEN. 

only  as  against  the  real  estate  from  the  assessment  on 
which  a  reduction  has  been  previously  made.  When  par- 
tial payments  have  been  made  on  a  debt  secured  by  mort- 
gage, or  deed  of  trust,  the  owner  is  authorized  to  mako 
the  proper  deduction,  listing  only  the  balance  due  on  the 
first  Monday  in  March. 

Political  Code,  Sections  3674,  3675,  3676,  3677, 
3678. 

Section  1397. — TAX  LEVY. — The  board  of  supervisors 
of  each  county  must  on  the  first  Tuesday  after  the  first 
Monday  of  September  of  each  year,  fix  the  rate  of  county 
taxes,  designating  the  number  of  cents  levied  for  each 
fund  on  each  one  hundred  dollars  of  property,  and  must 
levy  the  state  and  county  taxes  upon  the  taxable  property 
in  the  county;  provided,  that  it  shall  not  be  lawful  for 
any  board  of  supervisors  of  any  county  in  the  state  to 
levy,  nor  shall  any  tax  greater  than  fifty  cents  on  each  one 
hundred  dollars  of  property  be  levied  and  collected  in  any 
one  year,  to  pay  the  bonded  indebtedness,  or  judgment 
arising  therefrom,  of  this  state,  or  of  any  county  or  mu- 
nicipality in  this  state. 

Act  of  the  Legislature,  in  effect  July  27,  1917. 

Section  1398. — LIEN  OF  TAXES. — Every  tax  has  the 
effect  of  a  judgment  against  the  person,  and  every  such 
lien  has  the  force  and  effect  of  an  execution  duly  levied 
against  all  property  of  the  delinquent.  The  judgment  is 
not  satisfied  nor  the  lien  removed  until  the  taxes  are  paid 
or  the  property  sold  for  the  payment  thereof. 

Every  tax  due  upon  personal  property  is  a  lien  upon 
the  real  property  of  the  owner  thereof,  from  and  after 
twelve  o'clock  m.  of  the  first  Monday  in  March  in  each 
year. 

Every  tax  due  upon  real  property  is  a  lien  against  the 
property  assessed;  and  every  tax  due  upon  improvements 
upon  real  estate  assessed  to  others  than  the  owner  of  the 
real  estate,  is  a  lien  upon  the  land  and  improvements; 


BUSINESS  CONTRACTS  AND  LEGAL,  OBLIGATIONS.         1089 

which  several  liens  attach  as  of  the  first  Monday  of  March 
in  each  year. 

Political  Code,  Sections  3716,  3717,  3718. 

Section  1399. — COLLECTOR'S  NOTICE  THAT  TAXES  ARE 
DUE. — On  or  before  the  third  Monday  in  October,  the  tax 
collector  must  publish  a  notice  specifying: 

1.  That  the  taxes  on  all  personal  property  secured  by 
real  property,  and  one-half  of  the  taxes  on  all  real  prop- 
erty, will  be  due  and  payable  on  the  third  Monday  in  Octo- 
ber, and  will  be  delinquent  on  the  first  Monday  in  Decem- 
ber next  thereafter,  at  five  o'clock  p.  m.,  and  that  unless 
paid  prior  thereto  fifteen  per  cent  will  be  added  to  the 
amount  thereof,  and  that  if  said  one-half  be  not  paid  be- 
fore the  last  Monday  in  April  next,  at  five  o'clock  p.  m., 
an  additional  five  per  cent  will  be  added  thereto.    That 
the  remaining  one-half  of  the  taxes  on  all  real  property 
will  be  payable  on  and  after  the  second  Monday  in  Janu- 
ary next,  and  will  be  delinquent  on  the  last  Monday  in 
April,  next  thereafter,  at  five  o'clock  p.  m.,  and  that  un- 
less paid  prior  thereto,  five  per  cent  will  be  added  to  the 
amount  thereof. 

2.  That  all  taxes  may  be  paid  at  the  time  the  first  in- 
stallment, as  herein  provided,  is  due  and  payable. 

3.  The  times  and  places  at  which  payment  of  taxes 
may  be  made. 

Act  of  the  Legislature,  approved  April  4,  1919 ; 
in  effect  July  22,  1919. 

Section  1400. — TAXES  ON  ANY  PARTICULAR  PARCEL  OF 
LAND  MAY  BE  PAID  SEPARATELY. — The  taxes  on  any  par- 
ticular lot,  piece,  or  parcel  of  land  contained  in  any 
assessment  may  be  paid  separately  from  the  whole  assess- 
ment, if  such  lot,  piece,  or  parcel  has  a  separate  valuation 
on  the  assessment-roll,  by  paying  the  amount  of  state  and 
county  taxes  due  on  such  lot,  piece,  or  parcel  of  land,  with 
a  proper  proportion  of  the  amounts  due  as  tax  on  per- 
sonal property,  penalties,  if  any,  and  a  proper  propor- 


1090  BUSINESS  LAW  FOR  BUSINESS  MEN. 

lion  of  the  tax  due  to  any  school,  road,  or  other  lesser 
taxation  district.  The  tax  collector  shall  make  an  entry  on 
the  margin  of  the  assessment-book,  showing  what  prop- 
erty has  been  released  by  the  payment  of  the  taxes,  to- 
gether with  the  amounts  of  such  taxes  separately  and  spe- 
cifically set  forth. 

Political  Code,  Section  3747. 

Section  1401. — PLACE  OF  PAYMENT. — All  taxes  must  be 
paid  at  the  office  of  the  tax-collector,  unless  the  board  of 
supervisors  by  order,  made  on  or  before  the  first  Monday 
in  October,  direct  that  the  taxes  must  be  collected  in  the 
several  townships  of  the  county,  or  in  either  thereof,  or 
in  any  municipal  corporation  in  said  county;  in  which 
case,  the  notice  by  the  tax-collector  must  specify  a  time 
and  place  within  any  township  or  municipal  corporation 
named  in  such  order,  when  and  where  the  tax-collector 
will  attend  to  receive  the  payment  of  taxes. 

The  notice  in  every  case  must  be  published  for  two 
weeks  in  some  weekly  or  daily  newspaper  published  in 
the  county,  if  there  is  one;  or  if  there  is  not,  then  by 
posting  it  in  three  public  places  in  each  township. 
Political  Code,  Sections  3748,  3749. 

Section  1402. — PAYMENT  OF  TAXES  OF  DECEDENTS  AND 
INSOLVENTS. — The  superior  court  must  require  every  ad- 
ministrator or  executor  to  pay  out  of  the  funds  of  the 
estate  all  taxes  due  from  such  estate;  and  no  order  or 
decree  for  the  distribution  of  any  property  of  any  de- 
cedent among  the  heirs  or  devisees,  must  be  made  until 
all  taxes  against  the  estate  are  paid.  In  the  same  man- 
ner, the  court  must  require  the  assignee  to  pay  out  of  the 
funds  of  an  insolvent's  estate  all  taxes  due  from  such  es- 
tate; and  no  final  discharge  to  such  assignee  shall  be 
granted  until  all  taxes  against  the  insolvent's  estate  are 
paid. 

Political  Code,  Section  3752. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.         1091 

Section  1403. — WHEN  TAXES  ABE  DELINQUENT. — On 
the  first  Monday  of  December  of  each  year,  at  six  o'clock 
P.  M.,  all  taxes  then  unpaid,  except  the  last  installment 
of  the  real  property  taxes,  are  delinquent,  and  thereafter 
the  tax  collector  must  collect,  for  the  use  of  the  county,  or 
city  and  county,  an  additional  fifteen  per  cent  thereon; 
provided,  that  if  they  be  not  paid  before  the  last  Monday 
in  April  next  succeeding,  at  six  o'clock  P.  M.,  he  shall  col- 
lect an  additional  five  per  cent  thereon.  On  the  last  Mon- 
day in  April  of  each  year,  at  six  o'clock  P.  M.,  all  the  un- 
paid portion  of  the  remaining  one-half  of  the  taxes  on  all 
real  property  is  delinquent,  and  thereafter  the  tax  col- 
lector must  collect,  for  the  use  of  the  county,  or  city  and 
county,  an  additional  five  per  cent  thereon;  provided, 
that  the  entire  tax  on  any  real  property  may  be  paid  at 
the  time  the  first  installment,  as  above  provided,  is  due 
and  payable ;  and  provided,  further,  that  the  taxes  on  all 
personal  property  unsecured  by  real  property  shall  be 
due  and  payable  immediately  after  the  assssment  of  said 
personal  property  is  made. 

Act  of  the  Legislature,  approved  June  4,  1915, 
in  effect  August  8, 1915. 

Section  1404. — ANNUAL  PUBLICATION  OF  DELINQUENT 
TAX  LISTS. — On  or  before  the  eighth  day  of  June  of  each 
year,  the  tax  collector  must  publish  the  delinquent  list, 
which  must  contain  the  names  of  the  persons  and  a 
description  of  the  property  delinquent,  and  the  amount  of 
taxes,  penalties,  and  costs  due,  opposite  each  name  and 
description,  with  the  taxes  due  on  personal  property,  the 
delinquent  state  poll,  road  and  hospital  tax,  the  taxes  due 
each  school,  road,  or  other  lesser  taxation 'district,  added 
to  the  taxes  on  real  estate,  where  the  real  estate  is  liable 
therefor,  or  the  several  taxes  are  due  from  the  same  per- 
son; provided,  however,  that  before  publication  of  said 
list  the  tax  collector  and  auditor  shall  jointly  arrange 
said  list  in  such  manner  that  said  publication  shall  desig- 
nate in  some  particular  manner  the  property  contained 


1092  BUSINESS  LAW  FOB  BUSINESS  MEN. 

in  said  list  which  was  sold  to  the  state  five  years  previous, 
on  which  the  taxes  remain  unpaid,  or  which  property  has 
not  been  redeemed  or  the  sale  thereof  canceled,  and  which 
property  the  state  would  otherwise  be  entitled  to  a  deed 
thereof  after  the  lapse  of  five  years  from  said  previous 
sale. 

Act  of  the  Legislature,  approved  April  4,  1919 ; 
in  effect  July  22,  1919. 

Section  1405. — NOTICE  OF  SALE. — The  Tax  Collector 
must  append  and  publish  with  the  delinquent  list  a  notice, 
that  unless  the  taxes  delinquent,  together  with  the  costs 
and  penalties,  are  paid,  the  real  property  upon  which 
such  taxes  are  a  lien,  will  be  sold.  The  publication  must 
be  made  once  a  week  for  three  successive  weeks  in  some 
newspaper,  or  supplement  thereto,  published  in  the  county 
newspaper,  or  supplement  thereto,  published  in  the 
county. 

The  publication  must  designate  the  day  and  hour  when 
the  property  will,  by  operation  of  law,  be  sold  to  the  state, 
which  sale  must  not  be  less  than  twenty-one  nor  more  than 
twenty-eight  days  from  the  time  of  the  first  publication, 
and  the  place  shall  be  in  the  tax  collector 's  office. 
Political  Code,  Sections  3765,  3766,  3767. 

Section  1406. — LAND  SOLD  FOR  TAXES  ENCUMBERED  BY 
TRUST  DEED  OR  MORTGAGE. — Whenever  land  to  be  sold  for 
taxes  is  encumbered  by  trust  deed  or  mortgage,  and  the 
taxes  for  which  the  land  is  to  be  sold  is  for  the  value  over 
and  above  the  encumbrance,  as  the  said  encumbrance  is 
shown  by  and  upon  the  assessment-roll  in  the  tax  col- 
lector's office,  the  tax  collector  shall  at  least  ten  days 
before  the  date  of  sale  mail  a  copy  of  the  notice  of  sale  to 
the  mortgagee  named  in  any  such  mortgage  and  the 
trustees  named  in  any  such  trust  deed.  When  the  ad- 
dresses of  the  mortgagee  named  in  any  mortgage  and  the 
trustees  named  in  any  trust  deed  are  unknown  to  the  tax 
collector,  he  shall  mail  said  notice  in  said  names  to  the 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.          1 093 

county  seat  of  the  said  county.  The  tax  collector  shall 
iile  a  copy  of  said  notice  with  an  affidavit  of  time  and  place 
of  mailing  same  with  the  county  recorder  and  county  clerk, 
respectively. 

Political  Code,  Section  3760-A. 

Section  1407. — ADDITIONAL  SUM  COLLECTED  TO  DEFRAY 
COSTS. — The  tax  collector  must  collect,  in  addition  to  thq 
taxes  due  on  the  delinquent  list,  together  with  the  penal- 
ties for  delinquency,  fifty  cents  on  each  lot,  piece,  or  tract 
of  land  separately  assessed,  and  on  each  assessment  of 
personal  property,  which  shall  be  paid  to  the  county  and 
be  placed  to  the  credit  of  the  salary  fund. 
Political  Code,  Section  3770. 

Section  1408. — TAX  SALES. — On  the  day  and  hour  fixed 
for  the  sale,  all  the  property  delinquent,  upon  which  the 
taxes  of  all  kinds,  penalties  and  costs  have  not  been  paid, 
shall,  by  operation  of  law  and  the  declaration  of  the  tax 
collector,  be  sold  to  the  state,  and  said  tax  collector  shall 
make  an  entry,  "Sold  to  the  state,"  on  the  delinquent 
assessment  list,  opposite  the  tax,  and  he  shall  be  credited 
with  the  amount  thereof  in  his  settlement ;  provided,  that 
on  the  day  of  sale  the  owner  or  person  in  possession  of 
any  property  offered  for  sale  for  taxes  due  thereon,  may 
pay  the  taxes,  penalties,  and  costs  due;  and  provided, 
further,  that  when  the  original  tax  amounts  to  the  sum 
of  three  hundred  dollars  or  more  upon  any  piece  of  prop- 
erty or  assessment  delinquent,  the  state  may  bring  suit 
against  the  owner  of  said  property  for  the  collection  of 
said  taxes,  penalties,  and  costs ;  and  provided,  further, 
that  any  property  contained  in  the  advertised  list,  which 
lias  not  been  redeemed  from  the  sale  made  to  the  state  five 
years  previously,  shall  be  sold  by  the  tax  collctor  at  public 
auction  to  the  highest  bidder  for  cash  in  lawful  money  of 
the  United  States;  but  no  bid  shall  be  accepted  at  such 
sale  for  less  than  the  amount  of  all  taxes,  penalties  and 
costs  due  as  shown  in  said  advertised  list.  After  such  bid 


1 094  BUSINESS  LAW  FOB  BUSINESS  MEN. 

has  been  made  and  accepted  the  right  of  redemption  shall 
cease,  except  as  to  the  purchaser,  who  shall  have  thirty 
days  within  which  to  make  redemption,  and  if 
not  so  redeemed  or  if  no  sale  is  had  under 
the  provisions  of  this  paragraph  then  said  prop- 
erty shall  be  deeded  to  the  state;  and  pro- 
vided, further,  when  any  property  is  to  be  sold  at  public 
auction  as  provided  in  this  section,  within  five  days  after 
the  first  publication  of  said  delinquent  list,  the  tax  col- 
lector shall  mail  a  copy  of  said  list  or  publication,  postage 
thereon  prepaid  and  registered,  to  the  party  to  whom  the 
land  was  last  assessed  next  before  such  sale,  at  his  last 
known  post-office  address ;  or  in  lieu  of  mailing  the  entire 
printed  list  said  tax  collector  may  mail  to  the  party  to 
whom  the  land  was  last  assessed  next  before  the  sale  at 
his  last  known  post-office  address,  postage  thereon  pre- 
paid and  registered,  a  printed  notice  of  such  sale. 

Act  of  the  Legislature,  approved  May  3,  1919; 
in  effect  July  22,  1919. 

Section  1409. — TIME  FOB  REDEMPTION  OF  PBOPEBTY.— 
The  redemption  of  the  property  sold  may  be  made  by  the 
owner,  or  any  party  in  interest,  within  five  years  from  the 
date  of  the  sale  to  the  state,  or  at  any  time  prior  to  the 
entry  of  said  land  by  the  state. 

Political  Code,  Section  3780. 

Section  1410. — How  REDEMPTION  Is  MADE. — Redemp- 
tion must  be  made  to  the  county  treasurer  on  an  estimate 
furnished  by  the  auditor,  in  lawful  money  of  the  Untied 
States. 

Political  Code,  Section  3781. 

Section  1411. — TAX  DEEDS  MADE  AFTEB  FIVE  YEAES.— 
If  the  property  is  not  redeemed  within  five  years  from  the 
date  of  the  sale  to  the  state,  the  tax  collector,  or  his  suc- 
cessor in  office,  must  make  the  state  a  deed  of  the  prop- 
erty. All  such  deeds  shall  be  recorded  in  the  office  of  the 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.         1095 

county  recorded  of  the  county  wherein  the  property  sold 
is  situated. 

Act  of  the  Legislature,  approved  April  28,  1911. 

Section  1412. — EVIDENCE  OF  TAX  DEEDS. — The  tax  deed, 
duly  acknowledged  or  approved,  is  primary  evidence  that 
the  property  was  assessed  as  required  by  law;  that  the 
property  was  equalized  as  required  by  law;  that  the  taxes 
were  levied  in  accordance  with  the  law;  that  the  taxes 
were  not  paid ;  that  at  a  proper  time  and  place  the  prop- 
erty was  sold  as  prescribed  by  law,  and  by  the  proper 
officer;  that  the  property  was  not  redeemed;  that  the 
person  who  executed  the  deed  was  the  proper  officer,  and 
the  tax  deed  is  conclusive  evidence  of  the  regularity  of  all 
other  proceedings,  from  the  assessment  by  the  assessor, 
inclusive,  to  the  execution  of  the  deed.  There  is  an  excep- 
tion to  this  rule  in  the  case  of  actual  fraud,  and  if  a  levy 
of  an  assessment,  or  the  assessment  itself,  or  any  other 
requisite  proceeding  leading  up  to  the  execution  of  the 
deed,  was  procured  or  done  by  fraudulent  acts,  then  the 
deed  would  not  be  protected  by  the  law,  and  would  not  be 
conclusive  of  the  facts  recited  in  it. 

Political  Code,  Section  3787. 

Act  of  the  Legislature,  approved  May  5, 1917 ;  in 
effect  July  27,  1917. 

Section  1413. — STATE  LANDS  SOLD  FOB  DELINQUENT 
TAXES. — When  state  lands,  upon  which  the  full  purchase 
price  has  not  been  paid,  have  been  sold  to  the  state  for 
delinquent  taxes,  and  the  deed  therefor  to  the  state  has 
been  forwarded  to  and  filed  with  the  surveyor  general,  the 
said  lands  shall  again  become  subject  to  entry  and  sale,  in 
the  same  manner,  and  subject  to  the  same  conditions,  as 
apply  to  other  state  lands  of  like  character;  except  that 
the  former  possessors  or  owners  of  the  land  thus  deeded 
to  the  state,  their  heirs  or  assigns,  shall  be  preferred  pur- 
chasers thereof  for  the  period  of  six  months  after  the 
deeds  are  filed  with  the  surveyor  general;  during  which 


BUSINESS  LAW  FOB  BUSINESS  MEN. 

said  period  of  six  months  no  application  by  any  person 
other  than  said  former  possessors,  or  owners,  their  heirs 
or  assigns,  shall  be  filed;  and  provided  further,  that  the 
former  possessors  or  owners  of  said  land  thus  deeded  to 
the  state,  their  heirs  or  assigns,  shall  have  the  right  to  be 
restored  to  their  former  estate  and  title  (at  any  time 
either  during  the  said  period  of  six  months  above  referred 
to,  or  afterwards,  and  before  application  for  said  land  is 
made  and  filed  with  the  surveyor  general  by  any  other  per- 
son)  upon  paying  to  the  county  treasurer  of  the  county 
wherein  the  said  land  is  situated  a  sum  equivalent  to  the 
taxes,  penalties,  costs  and  accruing  costs  by  virtue  whereof 
the  state  became  a  purchaser  of  the  said  lands,  and  also, 
all  delinquent  taxes,  penalties,  and  costs  which  may  have 
accrued  upon  such  lands  subsequent  to  the  date  of  the 
certificate  of  purchase  under  which  the  former  possessors 
or  owners,  or  their  heirs  and  assigns,  claim  title  to  said 
lands,  and  also  all  unpaid  interest  up  to  the  first  day  of 
January.  If  such  former  owner  or  possessor,  his  heirs 
or  assigns  desires  to  avail  himself  of  the  privileges  hereof, 
he  shall  file  with  the  surveyor  general  the  receipt  of  the 
county  treasurer,  showing  the  payment  of  all  such  taxes, 
together  with  all  unpaid  interest  up  to  the  first  day  of 
January  following  the  date  when  he  shall  make  the  said 
payment  to  the  said  county  treasurer,  and  thereupon  the 
surveyor  general  shall  give  to  such  person  a  certificate 
signed  and  sealed  by  him,  but  which  need  not  be  acknowl- 
edged, showing  full  payment  of  all  such  sums,  which  said 
receipt  of  the  surveyor  general  shall  be  recorded  by  said 
persons  in  the  county  recorder's  office  of  the  county 
wherein  the  said  lands  are  situated ;  and  the  said  receipt, 
when  so  recorded,  shall  have  the  same  effect  as  a  deed  of 
reconveyance  of  the  interest  conveyed  by  such  deed,  and 
the  said  former  owner  or  possessor,  his  heirs  or  assigns, 
shall  thereby  be  restored  to  all  his  rights  in  the  said  lands, 
and  his  certificate  of  purchase  shall  be  in  full  force  and 
effect  as  effectually  as  though  no  sale  had  been  made ;  but 
the  surveyor  general  shall  not  receive  or  file  any  applica- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.         1097 

tion  or  make  a  sale  of  any  lands  thus  deeded  to  the  state, 
except  upon  the  previous  payment  into  the  state  treasury, 
as  other  moneys  are  required  to  be  paid  therein,  in  addi-- 
tion  to  the  price  of  said  lands  as  compared  with  the  price 
fixed  for  other  state  lands  of  like  character,  by  the  person 
or  persons  proposing  to  file  the  application  and  make 
the  purchase,  of  a  sum  equal  to  the  delinquent  taxes,  pen- 
alties, costs  and  accruing  costs,  by  virtue  whereof  the 
state  became  a  purchaser  of  the  lands  thus  sought  to  be 
entered  or  purchased,  and  also  all  delinquent  taxes,  pen- 
alties and  costs  which  may  have  accrued  upon  such  lands 
prior  to  and  subsequent  to  the  date  of  the  sale  to  the  state 
in  pursuance  of  which  the  state  received  a  deed  therefor ; 
and  the  surveyor  general's  authority  for  filing  said  appli- 
cation, if  said  lands  are  otherwise  subject  to  sale,  shall 
be  the  production  by  said  applicant  of  the  county  treas- 
urer's receipts  showing  full  payment  of  the  delinquent 
taxes,  penalties  and  costs  as  herein  specified. 

If  an  application  for  the  land  is  not  presented  to  the 
surveyor  general's  office  by  the  party,  or  his  agent,  who 
paid  the  delinquent  taxes,  penalties  and  costs,  by  virtue 
whereof  the  state  became  a  purchaser  of  said  land,  within 
a  period  of  fifteen  days  after  the  payment  thereof,  the 
land  shall  be  subject  to  sale  to  the  first  person  presenting 
his  application  for  said  land  to  the  surveyor  general's 
office,  accompanied  by  a  certified  copy  of  the  auditor's 
estimate  and  treasurer's  receipt,  showing  full  payment  of 
all  delinquent  taxes,  penalties  and  costs,  as  herein  speci- 
fied. An  estimate  of  the  amount  of  delinquent  taxes,  pen- 
alties and  costs,  as  herein  specified,  must  be  made  by  the 
county  auditor  of  the  county  wherein  the  land  is  situated, 
upon  the  written  request  of  the  surveyor  general,  and 
without  cost  to  the  state.  Said  county  auditor's  estimate 
shall  include  all  delinquent  taxes,  penalties  and  costs,  as 
shown  by  the  records  in  the  state  land  office,  by  virtue 
whereof  the  state  became  a  purchaser  of  the  land  thus 
sought  to  be  entered  or  purchased,  and  also  all  delinquent 
taxes,  penalties  and  costs  which  may  have  accrued  upon 


1098  BUSINESS  LAW  FOE  BUSINESS  MEN. 

such  lands  prior  to  and  subsequent  to  the  date  of  the  sale 
to  the  state  in  pursuance  of  which  the  state  received  a 
deed  therefor. 

Nothing  in  this  act  contained  shall  apply  to  land  situ- 
ated within  the  exterior  boundaries  of  an  Indian  or  Forest 
reservation  created  by  authority  of  the  United  States,  or 
of  a  National  Monument,  or  within  the  exterior  boundaries 
of  lands  withdrawn  from  public  entry  for  forest  purposes. 
Act  of  Legislature,  approved  May  1, 1911. 

Section  1414.  —  SEIZUEE  AND  SALE  OF  PERSONAL 
PROPERTY  FOR  TAXES. — The  tax  collector  of  each  county, 
and  city  and  county,  has  the  power,  and  it  is  made  by  law 
his  duty,  to  collect  the  taxes  due  on  personal  property, 
except  when  real  estate  is  liable  therefor,  by  seizure  and 
sale  of  any  personal  property  owned  by  the  delinqunt. 
The  sale  must  be  at  public  auction,  and  of  a  sufficient 
amount  of  the  property  to  pay  taxes,  percentage  and  cost. 
The  sale  must  be  made  after  one  week's  notice  of  the 
time  and  place  thereof,  given  by  publication  in  a  news- 
paper in  the  county,  or  by  posting  in  three  public  places. 
Political  Code,  Sections  3790,  3791,  3792. 

Section  1415. — TITLE  OF  PERSONAL  PROPERTY  SOLD  FOR 
TAXES. — On  payment  of  the  price  bid  for  any  property 
sold,  the  delivery  of  the  property  with  a  bill  of  sale  vests 
the  title  in  the  purchaser.  There  is  no  redemption  from  a 
sale  of  personal  property. 

Political  Code,  Section  3794. 

Section  1416. — PERSONAL  PROPERTY  AT  EISK  OF  OWNER. 
-The  unsold  portion  of  any  personal  property  sold  for 
taxes  may  be  left  at  the  place  of  sale,  at  the  risk  of  the 
owner. 

Political  Code,  Section  3796. 

Section  1417. — EEFUND  OF  ERRONEOUSLY  COLLECTED 
TAXES. — Any  taxes,  penalties  or  costs  thereon  heretofore 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.         1099 

or  hereafter  paid  more  than  once,  or  heretofore  or  here- 
after erroneously  or  illegally  collected,  or  any  taxes  here- 
tofore or  hereafter  paid  upon  an  assessment  in  excess 
of  the  actual  cash  value  of  the  property  so  assessed  by 
reason  of  a  clerical  error  of  the  assessor  as  to  the  excess 
in  such  cases,  or  any  taxes  heretofore  or  hereafter  paid 
upon  an  erroneous  assessment  of  improvements  on  real 
estate  not  in  fact  in  existence,  when  said  taxes  became  a 
lien,  may,  by  order  of  the  board  of  .supervisors,  be  re- 
funded by  the  county  treasurer.  Whenever  any  payment 
shall  have  been  made  to  the  state  treasurer  by  the  county 
trasurer,  and  it  shall  afterward  appear  to  the  satisfaction 
of  the  board  of  supervisors  that  a  portion  of  the  money 
so  paid  should  be  refunded  as  herein  provided,  said  board 
of  supervisors  may  refund  such  portion  of  the  said  taxes, 
penalties  and  costs  so  paid  to  the  state  treasurer,  to  the 
person  paying  the  same  or  to  his  guardian,  or  in  case  of 
his  death,  to  his  executor  or  administrator,  out  of  the 
general  fund,  and  upon  the  rendering  of  the  report  re- 
quired the  auditor  shall  certify  to  the  controller,  in  such 
form  as  the  controller  may  prescribe,  all  amounts  so 
refunded,  and  in  the  next  settlement  of  the  county  treas- 
urer with  the  state,  the  controller,  if  satisfied  of  the 
legality  of  such  refunding  by  the  said  board,  shall  give 
such  treasurer  credit  for  the  state's  portion  of  the 
amounts  so  refunded.  When  the  taxes,  penalties  and 
costs  hereinbefore  referred  to  are  levied  in  behalf  of  any 
school  district  or  any  municipal  or  other  public  corpora- 
tion, and  collected  by  the  officers  of  the  county,  the  same 
may  be  refunded  upon  order  of  the  board  of  supervisors, 
and  the  county  treasurer  shall  pay  the  amount  to  be 
refunded  out  of  any  money  in  his  possession  belonging 
to  the  appropriate  fund  of  such  school  district  or  munici- 
pal or  other  public  corporation.  No  order  for  the  refund 
of  taxes,  penalties  or  costs  under  this  section  shall  be 
made  except  upon  a  verified  claim  therefor  verified  by 
the  person  who  has  paid  said  tax,  or  by  his  guardian,  or 
in  case  of  his  death,  by  his  executor  or  administrator, 


1 100  BUSINESS  LAW  FOB  BUSINESS  MEN. 

which  said  claim  must  be  filed  within  three  years  after  the 
making  of  the  payment  sought  to  be  refunded. 

All  such  payments  not  refunded  under  the  provisions 
of  this  section  within  the  time  allowed  therefor  may  be 
transferred  to  the  general  fund  of  the  county  upon  an 
order  to  that  effect  by  the  board  of  supervisors. 

In  no  case  shall  any  judgment  be  rendered  in  favor 
of  plaintiff  in  any  action  brought  for  the  enforcement  or 
allowance  of  any  rights  or  claims  under  this  section 
(except  in  actions  brought  by  the  county  treasurer  to 
enforce  any  credits  hereinabove  provided  for)  if  the  said 
action  be  brought  by  an  assignee  of  the  person  paying 
said  tax,  or  by  any  person  other  than  the  person  who  has 
paid  said  tax,  or  by  his  guardian,  or  in  case  of  his  death, 
by  his  executor  or  administrator. 

Act  of  the  Legislature,  approved  May  10,  1919 ; 
in  effect  July  22,  1919. 

Section  1418.  —  PUBLIC  LANDS  UPON  WHICH  FINAL 
PAYMENT  HAS  NOT  BEEN  MADE. — Whenever  the  possess- 
ory interest  in  land  belonging  to  the  United  States,  or 
land  upon  which  final  payment  had  not,  at  the  time  of 
assessment,  been  made  to  the  United  States,  or  land  of 
this  state  upon  which  the  full  purchase  price  has  not 
or  had  not  been  made  to  the  state,  has  been,  or  may  here- 
after be,  assessed  and  sold  to  the  state  for  delinquent 
state,  county  or  local  district  taxes,  or  whenever  the  taxes 
levied  against  any  such  possessory  interest  in  lands,  or 
against  any  such  state  lands,  have  not  been  paid,  the 
board  of  supervisors  shall,  upon  verified  application  of 
the  owner  of  the  land,  by  an  order  entered  upon  its  min- 
utes, direct  the  auditor  to  cancel  such  assessment;  and 
if  the  property  under  such  assessment  has  been  sold  to 
the  state,  and  a  certificate  of  sale  or  deed  thereon  issued 
to  the  state,  such  order  of  the  board  shall  further  direct 
the  recorder  to  cancel  such  certificate  of  sale  and  deed; 
privided,  that  no  order  to  cancel  any  such  assessments, 
certificates  of  sale  or  deeds  shall  be  made  where  the 
person  or  persons  to  whom  such  land  or  possessory  in- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.         1 101 

terests,  or  state  lands,  his  or  their  successors  or  assigns, 
have,  after  such  assessment,  obtained  from  the  United 
States  or  this  state  a  patent  or  the  absolute  title  to  said 
lands,  or  retain  any  interest  therein,  or  been  in  possession 
of  the  premises;  and  provided  that  no  order  to  cancel 
any  assessment  shall  be  made  whereby  the  person  or 
persons,  his  or  their  successors  or  assigns  shall  be  re- 
lieved from  paying  the  taxes  upon  said  property  for  the 
full  time  he  or  they  have  had  the  possession  of  said 
property,  no  matter  in  whose  name  said  property  was  or 
had  been  assessed.  Before  an  order  to  cancel  such  assess- 
ment, certificate  of  sale  or  deed  shall  be  granted,  the 
applicant  shall  file  with  the  board  a  certificate  of  the  Reg- 
ister of  the  United  States  Land  Office,  or  of  the  state  land 
office,  showing  that  the  person  or  persons  to  whom  such 
assessment  was  made,  his  or  their  successors  and  assigns, 
never  received  a  patent  or  otherwise  acquired  title  to 
said  lands.  Upon  affecting  the  cancellations,  all  assess- 
ments, certificates  of  sale  and  deeds  the  subject  of  such 
cancellation  shall  be  null  and  void. 

Political  Code,  Section  3805a. 

Section  1419. — CLERICAL  ERRORS  IN  CERTIFICATE  OF 
SALE. — When  real  property  has  been  correctly  assessed 
and  sold  to  the  state  for  delinquent  state  and  county  taxes, 
any  misstatement  of  facts  or  clerical  errors  occurring 
or  appearing  in  the  certificate  of  sale,  or  in  the  deed 
issued  thereon,  may  be  corrected  by  the  tax  collector, 
or  his  successor  in  office,  upon  an  order  of  the  board  of 
supervisors,  entered  upon  its  minutes  directing  correc- 
tion, by  the  issuance  of  a  new  or  amended  certificate  of 
sale,  or  tax  deed,  when  it  can  be  determined  by  the  assess- 
ment and  subsequent  proceedings  what  was  originally 
intended. 

Political  Code,  Section  38051). 

Section  1420. — MISTAKES  WHICH  Do  NOT  AFFECT  SALE 
OF  PROPERTY  FOR  TAXES. — When  land  is  sold  for  taxes 
correctly  imposed  as  the  property  of  a  particular  person, 
no  misnomer  of  the  owner,  or  supposed  owner,  or  other 


1102  BUSINESS  LAW  FOR  BUSINESS  MEN. 

mistake  relating  to  the  ownership  thereof,  affects  the 
sale,  or  renders  it  void  or  voidable. 

Political  Code,  Section  3807. 

Section  1421. — PEOPEETY  SOLD  TO  STATE  ASSESSED 
SUBSEQUENTLY. — In  case  property  assessed  for  taxes  is 
purchased  by  the  state,  it  shall  be  assessed  each  subse- 
quent year  for  taxes  until  a  deed  is  made  to  the  state 
therefor,,  in  the  same  manner  as  if  it  had  not  been  so 
purchased. 

Political  Code,  Section  3813. 

Section  1422. — ALL  COSTS  MUST  BE  PAID  BEFORE  EE- 
DEMPTION. — In  case  property  is  sold  to  the  state,  and  is 
subsequently  assessed,  no  person  shall  be  permitted  to 
redeem  such  sale,  except  upon  payment  of  the  amount 
of  such  subsequent  assessments,  costs,  fees,  penalties, 
and  interest. 

Political  Code,  Section  3815. 

Section  1423. — WHEN  FORMER  OWNERS  MAY  REDEEM 
LANDS  SOLD  FOR  DELINQUENT  TAXES. — In  all  cases  where 
real  estate  has  been  sold,  or  may  hereafter  be  sold  for 
delinquent  taxes  to  the  state,  and  the  state  has  not  dis- 
posd  of  the  same,  the  person  whose  estate  has  been,  or 
may  hereafter  be  sold,  his  heirs,  executors,  adminis- 
trators, or  other  successors  in  interest,  shall,  at  any  time 
after  the  same  has  been  sold  to  the  state,  and  before  the 
state  shall  have  disposed  of  the  same,  have  the  right  to 
redeem  such  real  estate  by  paying  to  the  county  treas- 
urer of  the  county  wherein  the  real  estate  may  be  situ- 
ated, the  amount  of  taxes,  penalties  and  costs  due  thereon 
at  the  time  of  said  sale,  with  interest  on  the  aggregate 
amount  of  said  taxes,  at  the  rate  of  seven  per  cent  per 
annum ;  and  also  all  taxes  that  were  a  lien  upon  said  real 
estate  at  the  time  said  taxes  became  delinquent;  and 
also  all  unpaid  taxes  of  every  description  assessed 
against  the  property  for  each  year  since  the  sale;  or,  if 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.          1103 

not  so  assessed,  then  upon  the  value  of  the  property  as 
assessed  in  the  year  nearest  the  time  of  such  redemption, 
with  interest  from  the  first  day  of  July  following  each  of 
said  years,  respectively,  at  the  same  rate,  to  the  time  of 
redemption;  and  also  all  costs  and  expenses  of  such  re- 
demption, and  penalties  as  follows,  to  wit :  ten  per  cent 
if  redeemed  within  six  months  from  July  first  following 
the  date  of  sale ;  twenty  per  cent  if  redeemed  within  one 
year  therefrom;  thirty  per  cent  if  redeemed  within  two 
years  therefrom ;  forty  per  cent  if  redeemed  within  three 
years  therefrom;  forty-five  per  cent  if  redeemed  within 
four  years  therefrom;  and  fifty  per  cent  if  redeemed 
within  five  or  any  greater  number  of  years  therefrom. 
The  penalty  shall  be  computed  upon  the  amount  of  each 
year's  taxes  in  like  manner,  reckoning  from  July  first 
following  the  date  when  the  lands  would  have  been  sold 
for  the  taxes  of  that  year,  if  there  had  been  no  previous 
sales  thereof. 

The  county  auditor  shall,  on  the  application  of  the 
person  desiring  to  redeem,  make  an  estimate  of  the 
amount  to  be  paid,  and  shall  give  him  triplicate  certifi- 
cates of  the  -amount,  specifying  the  several  amounts 
thereof,  which  certificates  shall  be  delivered  to  the  county 
treasurer,  together  with  the  money,  and  the  county  treas- 
urer shall  give  triplicate  receipts,  written  or  indorsed 
upon  said  certificates,  to  the  redemptioner,  who  shall 
deliver  one  of  said  receipts  to  the  state  controller,  and 
on  to  the  county  auditor,  taking  their  receipts  therefor. 

The  county  treasurer  shall  settle  for  the  moneys  re- 
ceived as  for  other  state  and  county  moneys.  Upon  the 
payment  of  the  money  specified  in  said  certificate,  and 
the  giving  of  the  receipts  aforesaid  by  the  treasurer,  con- 
troller, and  auditor,  any  deed  or  certificate  of  sale  that 
may  have  been  made  to  the  state  shall  become  null  and 
void,  and  all  right,  title  and  interest  acquired  by  the  state, 
under  and  by  virtue  of  the  tax  sale,  shall  cease  and  deter- 
mine. Upon  consummation  of  the  redemption,  the  audi- 
tor shall  report  the  same  to  the  tax  collector  and  re- 


1104  BUSINESS  LAW  FOE  BUSINESS  MEN. 

corder;  the  recorder  shall,  without  payment  of  fee,  note 
on  the  margin  of  the  certificate  of  sale,  or  deed,  if  issued, 
the  fact  of  such  redemption,  date  thereof,  and  by  whom 
redeemed. 

The  receipt  of  the  controller  may  be  recorded  in  the 
recorder's  office  of  the  county  in  which  said  real  estate 
is  situated  in  the  book  of  deeds,  and  the  record  thereof 
shall  have  the  same  effect  as  that  of  a  deed  of  reconvey- 
ance of  the  interest  conveyed  by  such  deed  or  certificate 
of  sale. 

This  act  shall  not  apply  to  state  lands  sold  by  the 
state  when  the  full  amount  of  the  purchase  price  has 
not  been  paid  to  the  state  therefor,  after  the  deed  to  the 
state  has  been  filed  with  the  surveyor  general. 

Act  of  the  Legislature,  approved  May  18,  1919 ; 
in  effect  July  22,  1919. 

Section  1424. — PARTIAL  REDEMPTION. — A  partial  re- 
demption may  be  made,  separately  from  the  whole  assess- 
ment, of  any  lot,  piece,  or  parcel  of  land  contained  in  any 
assessment,  if  such  lot,  piece,  or  parcel  has  a  separate 
valuation  on  the  assessment  roll,  in  the  manner  follow- 
ing :  In  the  estimate  provided  for,  the  auditor  shall  esti- 
mate the  amount  of  state  and  county  taxes  due  on  such 
lot,  piece,  or  parcel  of  land,  together  with  a  proper  pro- 
portion of  the  taxes  due  on  personal  property  under  such 
assessment,  and  of  the  taxes  due  each  school,  road,  or 
lesser  taxation  district;  and  such  redemption  shall  be 
made  in  the  manner  provided  in  this  act.  The  recorder 
shall  note,  on  the  margin  of  the  record  of  the  certificate 
of  sale,  a  description  of  the  property  thus  redeemed,  and 
shall  specifically  set  forth  the  several  amounts  of  taxes 
paid  upon  such  redemption. 

Political  Code,  Section  3818. 

Section  1425. — PAYMENT  UNDER  PROTEST. — At  any 
time  after  the  assessment  book  has  been  received  by 
the  tax  collector,  and  the  taxes  have  become  payable,  the 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.         1105 

owner  of  any  property  assessed  therein,  who  may  claim 
that  the  assessment  is  void  in  whole  or  in  part,  may  pay 
the  same  to  the  tax  collector  under  protest,  which  protest 
shall  be  in  writing,  and  shall  specify  whether  the  whole 
assessment  is  claimed  to  be  void,  or  if  a  part  only,  what 
portion,  and  in  either  case  the  grounds  upon  which  such 
claim  is  founded;  and  when  so  paid  under  protest,  the 
payment  shall  in  no  case  be  regarded  as  voluntary  pay- 
ment, and  such  owner  may  at  any  time  within  six  months 
after  such  payment  bring  an  action  against  the  county, 
in  the  superior  court,  to  recover  back  the  tax  so  paid 
under  protest.  And  if  it  shall  be  adjudged  that  the 
assessment,  or  the  part  thereof  referred  to  in  the  protest, 
was  void  on  the  ground  specified  in  the  protest,  judg- 
ment shall  be  entered  against  such  county  therefor;  pro- 
vided, that  no  assessment  shall  be  declared  void  on  ac- 
count of  deductions  being  made  for  mortgages  where  part 
payments  have  been  made  and  not  released  upon  the 
record. 

Political  Code,  Section  3819. 

/'.''/'• 

Section  1426.  —  SALE  OF  PROPERTY  PURCHASED  BY 
STATE. — Whenever  the  state  shall  become  the  owner  of 
any  property  sold  for  taxes  and  the  deed  to  the  state  has 
been  filed  with  the  controller  as  provided  herein,  the  con- 
troller may  thereupon  by  a  written  authorization  direct 
the  tax  collector  of  the  county,  or  city  and  county,  to  sell 
the  property  or  any  part  thereof  as  in  his  judgment  he 
shall  deem  advisable  in  the  manner  following :  He  must 
give  notice  of  such  sale  by  first  publishing  a  notice  for 
at  least  three  successive  weeks  in  some  newspaper  pub- 
lished in  the  county  or  city  and  county,  or  if  there  be  no 
newspaper  published  therein,  then  by  posting  a  notice 
in  three  conspicuous  places  in  the  county  or  city  and 
county,  one  of  which  shall  be  at  the  United  States  post- 
office  nearest  the  land,  in  addition  to  a  notice  conspicu- 
ously posted  on  the  land  itself  for  the  same  period.  Such 
notices  must  state  specifically  the  place  of  and  the  day 


1 10(5  BUSINESS  LAW  FOR  BUSINESS  MEN. 

and  hour  of  sale,  and  shall  contain  a  description  of  the 
property  to  be  sold  and  shall  also  contain  a  detailed  state- 
ment of  all  the  delinquent  taxes,  penalties,  costs,  interest, 
and  expenses  up  to  the  date  of  such  sale,  and  shall  give 
the  name  of  the  person  to  whom  the  property  was 
assessed  for  each  year  on  which  there  may  be  delinquent 
taxes  against  said  property  or  any  part  thereof ;  and  said 
notice  shall  also  embody  a  copy  of  the  authorization 
received  from  the  controller.  It  shall  be  the  duty  of  the 
tax  collector  to  mail  a  copy  of  said  notice  within  five  days 
after  its  publication,  postage  thereon  prepaid  and  regis- 
tered, to  the  party  to  whom  the  land  was  last  assessed 
next  before  the  sale,  at  his  last  known  postoffice  address. 
At  the  time  set  for  such  sale,  the  tax  collector  must  sell 
the  property  described  in  the  controller's  authorization 
and  said  notices,  at  public  auction  to  the  highest  bidder 
for  cash  in  lawful  money  of  the  United  States ;  but  no  bid 
shall  be  received  or  accepted  at  such  sale  for  less  than  the 
amount  of  all  the  taxes  levied  upon  such  property  and 
all  costs  and  penalties  for  every  year  delinquent,  as 
shown  by  the  delinquent  rolls  for  said  years  to  the  date 
of  the  execution  of  the  deed  to  the  state,  and  all  expenses 
accrued  to  the  date  of  the  sale  under  this  section,  to- 
gether with  interest  at  seven  per  cent  per  annum  from 
the  first  day  of  July  following  delinquency  in  each  of 
said  years  to  the  date  of  the  sale  hereunder,  computed 
upon  the  aggregate  amount  of  such  delinquent  taxes, 
penalties  and  costs ;  provided,  however,  that  if  the  board 
of  supervisors  of  the  county,  or  city  and  county,  in  which 
any  such  property  is  situate,  shall,  by  resolution  entered 
upon  their  minutes,  declare  that,  in  their  judgment,  the 
property  so  owned  by  the  state,  and  particularly  des- 
cribed in  said  resolution,  is  not  at  that  time  of  value  great 
enough  that  it  can  be  sold  by  the  state  for  a  sum  equal 
to  the  amount  of  all  taxes  levied  upon  said  property, 
and  all  interests,  costs  and  penalties  and  expenses  up 
to  the  date  of  such  sale,  and  that  it  would  be  to  the  best 
interest  of  the  state  to  sell  the  said  property  for  a  sum 


T,  rSTNESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.          1107 

to  be  stated  in  said  resolution  less  than  the  sum  above 
named,  upon  receipt  of  a  copy  of  said  resolution,  cer- 
tified by  the  clerk  of  said  board  of  supervisors,  the  state 
controller  may  thereupon,  by  written  authorization,  direct 
the  tax  collector  of  the  county,  or  city  and  county,  to  sell 
the  said  property  so  described  in  said  resolution  for  a 
sum  not  less  than  the  sum  stated  in  said  resolution,  to- 
gether with  the  expenses  of  sale.  The  expense  of  giving 
the  notice  herein  required  shall  be  a  charge  against  the 
property  so  advertised,  and  shall  be  collected  by  the 
collector,  and  no  redemption  of  such  property  before  said 
sale  may  be  had  without  payment  of  such  cost  of  adver- 
tising; and  to  secure  the  payment  of  such  advertising 
cost  the  collector  shall  demand  in  advance,  from  the  party 
or  parties  seeking  to  purchase,  a  deposit  with  said  officer 
of  a  sum  sufficient  to  defray  such  cost  of  advertising, 
which  deposit  shall  be  forfeited  in  the  event  said  party 
or  parties  fail  or  refuse  to  purchase  at  such  sale;  pro- 
vided, that  if  the  party  or  parties  so  depositing  fail  to 
secure  such  property  on  their  bid,  such  deposit  shall 
be  returned,  and  such  advertising  cost  shall  be  collected 
from  the  successful  purchaser. 

Political  Code,  Section  3897. 

Section  1427. — VOID  SALE — FAILUEE  TO  MAIL  NOTICE 
TO  PARTY  LAST  ASSESSED. — It  has  already  been  stated  that 
tax  laws  .are  strictly  construed,  and  that  in  order  to  make 
a  valid  tax  title  it  must  appear  that  everything  was  done 
from  the  beginning  to  the  end  of  the  tax  proceedings 
which  the  law  requires  to  be  done.  An  illustration  of  this 
statement  is  found  in  a  case  appealed  to  the  Supreme 
Court  of  California  from  Mendocino  County.  It  ap- 
peared on  the  trial  of  this  case  that  the  address  of  the 
person  to  whom  the  land  in  controversy  was  last  assessed 
was  well  known  to  the  tax  collector,  and  that  no  copy 
of  the  notice  of  the  proposed  sale  of  the  land  by  the  state 
was  mailed  to  the  owner  prior  to  the  sale,  as  required 
by  Section  3897  of  the  Political  Code.  It  was  held  by 


1108  BUSINESS  LAW  FOR  BUSINESS  MEN. 

the  Supreme  Court  in  this  case  that  a  sale  by  the  state 
of  land  sold  to  it  for  non-payment  of  taxes  is  void,  where 
the  tax  collector  through  whom  such  sale  is  made  fails 
to  mail  a  copy  of  the  notice  of  sale  to  the  person  to  whom 
the  land  was  last  assessed  next  before  the  sale,  at  the 
address  shown  on  the  assessment  roll.  The  mailing  of 
such  notice,  where  the  address  of  the  party  is  known,  or 
shown  on  the  assessment  roll  so  that  it  can  be  ascer- 
tained, is  essential  to  the  validity  of  a  sale  by  the  state 
of  land  purchased  by  it  for  delinquent  taxes.  (Decided 
by  the  Supreme  Court  of  California,  in  the  case  of 
Wright  vs.  Anglo- Calif ornian  Bank,  which  decision  is 
printed  in  Volume  42,  California  decisions,  page  760.) 

Section  1428.  —  FRAUDULENT  ASSESSMENT.  —  A  tax- 
payer may  go  into  the  Superior  Court  of  the  county 
where  he  is  assessed  and  obtain  an  injunction  prohibiting 
the  collection  of  a  tax  founded  upon  an  assessment  fraud- 
ulently and  corruptly  made,  with  the  intention  of  dis- 
criminating against  him,  and  for  the  purpose  of  causing 
him  to  pay  more  than  his  share  of  the  public  taxes.  This 
was  determined  by  the  Supreme  Court  of  California  in 
a  case  in  Alameda  County,  where  the  property  owner 
alleged  that  the  assessment  was  fraudulently  made,  at 
excessive  values,  in  fixing  which  he  was  discriminated 
against.  In  this  case  the  property  owner  tendered  the 
legal  tax,  or  an  amount  founded  on  the  real  value  of  the 
property,  which  was  not  accepted,  and  the  suit  followed. 
(Decided  by  the  Supreme  Court  of  California,  in  the  case 
of  Pacific  Postal  Telegraph  Co.  vs.  Dalton,  which  decision 
is  printed  in  Volume  51  of  the  Pacific  Eeporter,  page 
1072.) 

Section  1429. — SEAT  IN  STOCK  EXCHANGE. — In  a  case 
in  San  Francisco,  the  question  was  whether  or  not  a 
seat  in  the  San  Francisco  Stock  and  Exchange  Board 
is  taxable  property,  and  the  Supreme  Court  decided  that 
it  is  not.  The  Court  said  that  a  seat  in  the  Stock  Ex- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.         1109 

change  is  merely  a  personal  privilege  of  being  and  re- 
maining a  member  of  a  voluntary  association,  with  the 
consent  of  the  associates,  and  is  not  property  that  will 
pass  by  a  sale  under  the  common  writ  of  execution;  and 
it  has  no  such  qualities  as  make  it  assessable  and  taxable 
as  property.  It  is  a  mere  right  to  belong  to  an  associa- 
tion, with  the  latter 's  consent,  and  to  enjoy  certain  per- 
sonal privileges  and  advantages  which  flow  from  mem- 
bership in  the  association.  Those  privileges  and  advan- 
tages cannot  be  conveyed  without  the  consent  of  the  asso- 
ciation, and  a  forced  sale  of  them  would  not  give  the 
purchaser  the  right  to  occupy  the  seat.  It  is  too  impal- 
pable to  go  into  any  category  of  taxable  property.  (De- 
cided by  the  Supreme  Court  of  California,  in  the  case 
of  City  and  County  of  San  Francisco  vs.  Anderson,  which 
decision  is  printed  in  Volume  36  of  the  Pacific  Reporter, 
page  1034.) 

Section  1430.  —  RAILROAD  BONDS. — Bonds  held  by  a 
permanent  resident  within  the  state,  though  issued  by  a 
non-resident  corporation,  and  secured  by  mortgage  on 
property  outside  the  state,  may  be  taxed  in  this  state  as 
property  belonging  to  the  resident.  Bonds  of  a  railroad 
corporation  organized  in  Arizona,  payable  in  New  York, 
and  secured  by  a  mortgage  in  Arizona,  were  taxed  in  Cal- 
ifornia, as  the  property  of  a  permanent  resident  of  the 
state,  and  the  Supreme  Court  decided  that  the  tax  was 
valid  under  the  provision  of  the  Constitution  which  de- 
fines property  for  the  purpose  of  taxation,  and  expressly 
declares  it  to  include,  among  other  things,  moneys, 
credits  and  bonds.  (Decided  by  the  Supreme  Court  of 
California,  in  the  case  of  Mackay  vs.  City  and  County 
of  San  Francisco,  which  decision  is  printed  in  Volume  45 
of  the  Pacific  Reporter,  page  696.) 

Section  1431. — TAXATION  OF  SHIP  ON  THE  HIGH  SEAS.— 
It  has  been  held  that  a  ship  engaged  in  commerce  on  the 
high  seas  was  taxable  in  the  City  and  County  of  San 


1 110  BUSINESS  LAW  FOE  BUSINESS  MEN. 

Francisco,  where  the  managing  owner  of  the  vessel  re- 
sided there,  although  she  had  been  temporarily  regis- 
tered in  Washington,  had  received  permanent  registra- 
tion at  San  Francisco,  and  had  never  been  in  the  waters 
of  California,  and  though  some  of  her  owners  resided 
without  the  state.  A  vessel  must  be  taxed  at  the  place  of 
her  home  port,  although  in  fact  she  may  be  thousands  of 
miles  away  on  the  high  seas;  and  she  is  taxable  only 
within  the  state  in  which  her  home  port  is  situated.  The 
taxation  must  be  in  the  state  of  her  home  port,  at  which 
alone  the  vessel  may  be  registered.  And  where  the  vessel 
has  several  owners,  it  is  only  the  residence  of  the  manag- 
ing owner  that  is  material.  Tangible  personal  property 
is  ordinarily  taxable  only  in  the  state  where  it  is  physi- 
cally situated.  When,  however,  we  come  to  sea-going 
vessels,  engaged  in  foreign  or  interstate  commerce,  and 
not  employed  in  such  commerce  wholly  within  the  waters 
of  any  one  state,  we  find  that  from  the  nature  of  the 
property  a  different  rule  is  necessarily  adopted.  Such  a 
vessel  goes  where  she  may  be  called  in  the  business  in 
which  she  is  engaged,  and  is  in  port  in  any  jurisdiction 
only  as  an  incident  to  that  business,  and  therefore  can- 
not properly  be  held  to  have  an  actual  physical  presence 
within  any  particular  state.  Under  our  shipping  laws, 
however,  every  such  vessel  has  what  is  called  her  "Home 
Port,"  the  port  to  which  she  belongs,  and  which  consti- 
tutes her  local  abiding  place  or  residence,  regardless  of 
her  actual  location.  It  is  only  in  the  collection  district 
comprising  her  home  port  that  she  may  be  permanently 
registered.  (Decided  by  the  Supreme  Court  of  Cali- 
fornia, in  the  case  of  Olson  vs.  City  and  County  of  San 
Francisco,  which  decision  is  printed  in  Volume  82  of  the 
Pacific  Eeporter,  page  850.) 

Section  1432. — TAXATION  OF  OIL  LEASES. — Where  a 
land  owner  grants  to  a  lessee  the  exclusive  right  to  enter 
on  the  premises,  and  bore  wells,  and  extract  oil  from 
them,  this  constitutes  on  the  part  of  the  oil  company  a 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.         1111 

claim  to  the  possession  of  land,  and  can  be  assessed  sep- 
arately from  the  ownership  in  fee.  The  oil  stratum  also 
constitutes  "minerals  in  and  under  the  land,"  and  the 
rights  of  the  lessee  are  rights  and  privileges  appertaining 
to  such  minerals,  and  hence  are  "real  estate"  within  the 
meaning  of  Section  3617  of  the  Political  Code.  The 
rights  of  an  oil  lessee  to  extract  oil  from  land  constitute 
a  claim  to  the  possession  of  land,  which  may  be  assessed 
and  taxed ;  and  if  the  taxes  thereon  are  not  paid  and  no 
personal  property  of  the  owner  can  be  found,  the  assessor 
can  forthwith  proceed  to  sell  the  rights  under  the  lease, 
and  give  immediate  possession  to  the  purchaser.  (De- 
cided by  the  Supreme  Court  of  California,  in  the  case 
of  Graciosa  Oil  Co.  vs.  Santa  Barbara  County,  which 
decision  is  printed  in  Volume  99  of  the  Pacific  Reporter.) 

Section  1433. — INHERITANCE  TAXES. — For  the  Inheri- 
tance Tax  Law,  see  under  the  subject  about  settlement 
of  estates. 

Section  1434.  —  COEPOEATION  TAXES.  —  The  law  pro- 
vides for  the  taxation  of  public  service  and  other  cor- 
porations, banks,  and  insurance  companies,  for  the  ben- 
efit of  the  state.  This  law  provides  that  taxes  levied, 
assessed  and  collected  upon  railroads,  including  street 
railways,  whether  operated  in  one  or  more  counties; 
sleeping  car,  dining  car,  drawing  room  car  and  palace 
car  companies,  refrigerator,  oil,  stock,  fruit,  and  other 
car  loaning  and  other  car  companies,  operated  upon  rail- 
roads in  this  state ;  companies  doing  express  business  on 
any  railroad,  steamboat,  vessel  or  stage  line  in  this  state ; 
telegraph  companies;  telephone  companies;  companies 
engaged  in  the  transmission  or  sale  of  gas  or  electricity ; 
insurance  companies;  banks,  banking  associations,  sav- 
ings and  loan  societies,  and  trust  companies,  shall  be 
assessed  and  levied  by  the  state  board  of  equalization. 
(For  the  Federal  income  tax  see  the  subject  "Corpora- 
tions in  California.") 


1112  BUSINESS  LAW  FOR  BUSINESS  MEN. 

1.  Public  Service  Corporations. — All  railroad  com- 
panies, including  street  railways,  whether  operated  in 
one  or  more  counties ;  all  sleeping  car,  dining  car,  draw- 
ing-room car  and  palace  car  companies ;  all  refrigerator, 
oil,  stock,  fruit  and  other  car-loaning  and  other  car  com- 
panies operating  upon  the  railroads  in  this  state;  all 
companies  doing  express  business  on  any  railroad,  steam- 
boat, vessel,  or  stage  line  in  this  state ;  all  telegraph  and 
telephone  companies;  and  all  companies  engaged  in  the 
transmission  or  sale  of  gas  or  electricity;  shall  annually 
pay  to  the  state  a  tax  upon  their  franchise,  roadways, 
rails,  rolling  stock,  pipes,  rights  of  way,  and  other  prop- 
erty, or  any  part  thereof  used  exclusively  in  the  opera- 
tion of  their  business  in  this  state,  computed  as  follows : 
Said  tax  shall  be  equal  to  the  percentages  hereinafter 
fixed  upon  the  gross  receipts  from  operation  of  such 
companies  within  this  state.  When  such  companies  are 
operating  partly  within  and  partly  without  this  state, 
the  gross  receipts  on  business  beginning  and  ending 
within  this  state,  and  a  proportion,  based  upon  a  propor- 
tion of  the  mileage  within  this  state  to  the  entire  mileage 
with  which  this  business  is  done,  passing  through,  into,  or 
out  of  this  state.  The  percentages  above  mentioned  shall 
be  as  follows :  On  all  railroad  companies,  five  and  one- 
fourth  per  cent ;  on  all  sleeping  car,  dining  car,  drawing- 
room  car,  palace  car  companies,  refrigerator,  oil,  stock, 
fruit,  and  other  car-loaning,  and  other  car  companies, 
three  and  ninety-five  hundredths  per  cent;  on  all  com- 
panies doing  express  business  on  any  railroad,  steam- 
boat, vessel  or  stage  line,  nine-tenths  of  one  per  cent ;  on 
all  telegraph  and  telephone  companies,  four  and  two- 
tenths  per  cent;  on  all  companies  engaged  in  the  trans- 
mission or  sale  of  gas  and  electricity,  five  and  six-tenths 
per  cent.  Such  taxes  shall  be  in  lieu  of  all  other  taxes 
and  licenses,  state,  county,  and  municipal,  upon  the  prop- 
erty above  enumerated  of  such  companies,  except  as 
otherwise  provided  in  the  Constitution  of  this  state. 


Section  1434,  page  1112,  "Business  Law  for  Business  Men" — CORPORA- 
TION TAX — Under  Public  Service  Corporations,  on  page  1112,  the  law 
about  percentages  to  be  paid  by  companies  is  changed  to  read  as  follows: 
"On  all  railroad  companies,  seven  per  cent;  on  all  street  railways,  herein  de- 
fined to  include  interurban  electric  railways  and  gasoline  propelled  railways, 
five  and  a  quarter  per  cent;  on  all  sleeping  car,  dining  car,  drawingroom  car, 
palace  car  companies,  refrigerator,  oil,  stock,  fruit,  and  other  car-loaning,  and 
other  car  companies,  five  and  one-quarter  per  cent;  on  all  companies  doing 
express  business  on  any  railroad,  steamboat,  vessel  or  stage  line,  one  per  cent; 
on  all  telegraph  and  telephone  companies,  five  and  one-half  per  cent;  on  all 
companies  engaged  in  the  transmission  or  sale  of  gas  or  electricity  seven  and 
one-half  per  cent. 

(a)  INSURANCE    COMPANIES— The   rate    to   be    paid   by    insurance 
companies  has  been  increased  to  two  and  sixty  hundredths  per  centum. 

(b)  STATE  AND   NATIONAL  BANKS— The   rate  on   state  and   na- 
tional banks  has  been  increased  to  one  and  forty-five  hundredths  per  centum. 

(c)  FRANCHISE  TAX — The   rate  of  tax  on   franchises   has   been    in- 
creased to  one  and  six-tenths  per  centum. 

Act  of  the  Legislature  of  California,  1921;  in  effect  immediately. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.         1113 

Act  of  the  Legislature,  in  effect  May  11,  1917. 

2.  Insurance  Companies. — Every  insurance  company 
or  association  doing  business  in  this  state  shall  annually 
pay  to  the  state  a  tax  of  two  per  cent  upon  the  amount 
of  the  gross  premiums  received  upon  its  business  done  in 
this  state,  less  return  premiums  and  reinsurance  by  com- 

nies ;  provided,  that  there  shall  be  deducted  from  said 
i  per  cent  upon  the  gross  premiums  the  amount  of  any 
.nty  and  municipal  taxes  paid  by  such  companies  on 
estate  owned  by  them  in  this  state.    This  tax  shall 
i  lieu  of  all  other  taxes  and  licenses,  state,  county,  and 
.nicipal,  upon  the  property  of  such  companies,  except 
unty  and  municipal  taxes  on  real  estate  and  except 
•>  otherwise  provided  in  the  Constitution  of  this  state; 
u-ovided,  that  when  by  the  laws  of  any  other  state  or 
.untry,  any  tax,  fines,  penalties,  licenses,  fees,  deposits 
f  money  or  of  securities,  are  imposed  on  insurance  com- 
panies of  this  state  doing  business  in  such  other  state  or 
country,  or  their  agents  therein,  in  excess  of  such  taxes, 
the  same  impositions  and  prohibitions  of  whatever  kind 
must  be  imposed  by  the  insurance  commissioner  upon  in- 
surance companies  of  such  other  state  or  country  doing 
business  in  this  state.' 

3.  State  and  National  Banks. — The  shares  of  capital 
stock  of  all  banks,  organized  under  the  laws  of  this  state, 
or  of  the  United  States,  or  of  any  other  state,  and  located 
in  this  state,  shall  be  assessed  and  taxed  to  the  owners  or 
holders  thereof  by  the  state  board  of  equalization,  in  the 
city  or  town  where  the  bank  is  located,  and  not  otherwise. 
There  shall  be  levied  and  assessed  upon  such  shares  of 
capital  stock  an  annual  tax,  payable  to  the  state,  of  one 
and    sixteen-hundredths    per    centum    upon    the    value 
thereof.    The  value  of  each  share  of  stock  in  each  bank, 
except  such  as  are  in  liquidation,  shall  be  taken  to  be 
the  amount  paid  in  thereon,  together  with  its  pro  rata 
of  the  accumulated  surplus  and  undivided  profits.     The 
value  of  each  share  of  stock  in  each  bank  which  is  in 
liquidation  shall  be  taken  to  be  its  pro  rata  of  the  actual 


1114  BUSINESS  LAW  FOR  BUSINESS  MEN. 

assets  of  such  bank.  This  tax  shall  be  in  lieu  of  all  other 
taxes  and  licenses,  state,  county,  and  municipal,  upon 
such  shares  of  stock  and  upon  the  property  of  such  bank, 
except  county  and  municipal  taxes  on  real  estate,  and 
except  as  otherwise  provided  in  the  constitution  of  this 
state.  In  determining  the  value  of  the  capital  stock  of 
any  bank  there  shall  be  deducted  from  the  value,  as  de- 
fined above,  the  value,  as  assessed  for  county  taxes,  of 
any  real  estate,  other  than  mortgage  interests  therein, 
owned  by  such  bank  and  taxed  for  county  purposes.  The 
banks  shall  be  liable  to  the  state  for  this  tax,  and  the 
same  shall  be  paid  to  the  state  by  them  on  behalf  of  the 
stockholders,  and  they  shall  have  a  lien  upon  the  shares 
of  stock  and  upon  any  dividends  declared  thereon  to 
secure  the  amount  so  paid. 

Act  of  the  Legislature,  in  effect  May  11, 1917. 

4.  Tax  on  Unincorporated  Banks,  and  on  Branches 
and  Agencies  of  Foreign  Banks.  The  moneyed  capital, 
reserve,  surplus,  undivided  profits,  and  all  other  prop- 
erty belonging  to  unincorporated  banks  or  bankers  of  this 
state,  or  held  by  any  bank  located  in  this  state  which  has 
no  shares  of  capital  stock,  or  employed  in  this  state  by 
any  branches,  agencies,  or  other  representatives  of  any 
banks  doing  business  outside  of  the  State  of  California, 
shall  be  likewise  assessed  and  taxed  to  such  banks  or 
bankers  by  the  said  board  of  equalization,  in  the  same 
manner  as  above  provided  for  incorporated  banks,  and 
taxed  at  the  same  rate  that  is  levied  upon  the  shares  of 
capital  stock  of  incorporated  banks.  In  the  case  of  a 
branch,  an  agency,  or  other  representative  of  any  bank 
doing  business  outside  of  this  state,  the  capital  of  said 
branch,  agency,  or  representative  used  in  this  state  shall 
be  taken  to  be  the  average  amount  owed  by  the  said 
branch,  agency,  or  representative  to  the  bank  of  which 
it  is  a  branch,  agency,  or  representative  during  the  year 
ending  the  first  Monday  in  March.  The  value  of  said 
property  shall  be  determined  by  taking  the  entire  prop- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.          1115 

erty  invested  in  such  business,  together  with  all  reserve, 
surplus,  and  undivided  profits,  at  their  full  cash  value, 
and  deducting  therefrom  the  value  as  assessed  for  county 
taxes  of  any  real  estate,  other  than  mortgage  interests 
therein,  owned  by  such  bank  or  banker  and  taxed  for 
county  purposes.  Such  taxes  shall  be  in  lieu  of  all  other 
taxes  and  licenses,  state,  county,  and  municipal,  upon 
the  property  of  the  banks  and  bankers  mentioned  herein, 
except  county  and  municipal  taxes  on  real- estate,  and 
except  as  otherwise  provided  in  the  Constitution  of  this 
state.  All  moneyed  capital  and  property  of  the  banks 
and  bankers  mentioned  in  this  paragraph  shall  be 
assessed  and  taxed  at  the  same  rate  as  an  incorporated 
bank.  In  determining  the  value  of  the  moneyed  capital 
and  property  of  the  banks  and  bankers  mentioned  herein, 
the  state  board  of  equalization  shall  include  and  assess 
to  such  banks  property  and  everything  of  value  owned 
or  held  by  them  which  would  go  to  make  up  the  value  of 
the  capital  stock  of  such  banks  and  bankers,  if  the  same 
were  incorporated  and  had  shares  of  capital  stock. 

The  word  "banks"  as  used  in  this  act  shall  include 
banking  associations,  incorporated  banks  and  bankers, 
branches,  or  other  representatives  of  other  banks  doing 
business  outside  of  the  State  of  California,  Savings  and 
Loan  Societies,  and  such  Trust  Companies  as  conduct 
the  business  of  receiving  money  on  deposit,  but  shall  not 
include  building  and  loan  associations. 

5.  Tax  on  Franchise. — All  franchises  other  than  those 
of  public  service  corporations,  insurance  companies,  and 
state  or  national  banks,  shall  be  assessed  at  their  actual 
cash  value,  after  making  the  due  deductions  for  good  will, 
and  shall  be  taxed  at  the  rate  of  one  and  two-tenths  per 
centum  each  year,  and  the  tax  collected  thereon  shall  be 
exclusively  for  the  benefit  of  the  state.  This  franchise 
shall  include  the  actual  exercise  of  the  right  to  be  a  cor- 
poration and  to  do  business  as  a  corporation  under  the 
laws  of  this  state,  and  the  actual  exercise  of  the  right  to 
do  business  ns  a  corporation  in  this  state,  when  such 


1116  BUSINESS  LAW  FOB  BUSINESS  MEN. 

right  is  exercised  by  a  corporation  incorporated  under 
the  laws  of  any  other  state  or  country;  also  the  right, 
authority,  privilege,  or  permission  to  maintain  wharves, 
ferries,  toll  roads  and  toll  bridges,  and  to  construct, 
maintain  or  operate,  in,  under,  above,  upon,  through  or 
along  any  streets,  highways,  public  places  or  waters,  any 
pipes,  canals,  ditches,  tanks,  conduits  or  other  means  for 
conducting  water,  oil,  or  other  substances. 

Act  of  the  Legislature,  in  effect  May  11,  1917. 

6.  Gross  Receipts  From  Operation  Defined. — The 
term  ''gross  receipts  from  operation"  as  used  in  this  act 
is  defined  to  include  all  sums  received  from  business  done 
within  this  state  during  the  year  ending  the  31st  day  of 
December  last  preceding,  including  the  company's  pro- 
portion of  gross  receipts  from  any  and  all  sources  on 
account  of  business  done  by  it  within  this  state  in  con- 
nection with  other  companies. 

In  case  of  companies  operating  partly  within  and 
partly  without  this  state,  the  gross  receipts  within  this 
state  shall  be  deemed  to  be  all  receipts  on  business  begin- 
ning and  ending  within  this  state,  and  the  proportion 
based  upon  the  proportion  of  the  mileage  within  this  state 
to  the  entire  mileage  over  which  such  business  is  done,  of 
receipts  on  all  business  passing  through,  into  or  out  of 
this  state. 

No  deduction  shall  be  allowed  from  the  gross  receipts 
from  operation  for  commissions,  rebates,  or  other  repay- 
ments, except  only  such  refunds  as  arise  from  errors  or 
overcharges  nor  shall  any  deduction  be  allowed  for  pay- 
ments from  gross  receipts  to  other  companies  for  any 
purpose  whatsoever,  except  such  refunds  as  arise  from 
errors  or  overcharges. 

Income  derived  from  property  not  defined  in  this  act 
as  operative  property  shall  not  be  included  in  the  gross 
receipts  for  the  purpose  of  determining  the  tax  on  the 
property  and  franchises. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.          1117 

7.     "Operative  Property"  Defined. — The  term  "oper- 
ative property"  as  used  in  this  act  shall  include: 

(a)  In  the  case  of  railroad  companies,  including  street 
railways :    The  franchises,  roadway,  roadbed,  rails,  roll- 
ing stock,  rights  of  way,  sidings,  spur  tracks,  switches, 
signal  systems,  cranes  and  structures  used  in  loading  and 
unloading  cars,  fences  along  the  right  of  way,  poles,  wires, 
conduits,  power  lines,  piers,  used  exclusively  in  the  opera- 
tion of  the  railroad  business,  depot  grounds  and  buildings, 
ferry  boats,  tugs  and  car-floats  used  exclusively  in  the 
operation  of  the  railroad  business ;  machine  shops,  repair 
shops,  round  houses,  car  barns,  power  houses,  substations 
and  other  buildings,  used  in  the  operation  of  the  railroad 
business  and  so  much  of  the  land  on  which  said  shops, 
houses,  barns,  and  other  buildings  are  situate  as  may  be 
required  for  the  convenient  use  and  occupation  of  said 
buildings. 

(b)  In  the  case  of  sleeping  car,  dining  car,  drawing- 
room  car  and  palace  car  companies,  refrigerator,  oil, 
stock,  fruit,  and  other  car-loaning,  and  other  car  compa- 
nies operating  upon  railroads  in  this  state :    The  fran- 
chises, cars  and  other  rolling  stock. 

(c)  In  the  case  of  companies  doing  express  business 
on  any  railroad,  steamboat,  vessel,  or  stage  line  in  this 
state :   The  franchises,  cars,  trucks,  wagons,  horses,  har- 
ness, and  safes. 

(d)  In  the  case  of  telegraph  and  telephone  companies 
doing  business  in  this  state :    The  franchises,  rights  of 
way,  poles,  wires,  pipes,  conduits,  cables,  switchboards, 
telegraph  and  telephone  instruments,  batteries,   gener- 
ators, and  other  electrical  appliances,  and  exchange  and 
other  buildings  used  in  the  telegraph  and  telephone  busi- 
ness and  so  much  of  the  land  on  which  said  buildings  are 
situate  as  may  be  required  for  the  convenient  use  and 
occupation  of  said  buildings. 

(e)  In  the  case  of  companies  engaged  in  the  transmis- 
sion or  sale  of  gas  or  electricity :  The  franchises,  towers, 
poles,  wires,  pipes,  canals,  tunnels,  ditches,  flumes,  aque- 


1118  BUSINESS  LAW  FOR  BUSINESS  MEN. 

ducts,  conduits,  rights  of  way,  dams,  reservoirs,  water 
and  water  rights  used  exclusively  in  the  business  of  the 
transmission  or  sale  of  gas  or  electricity ;  transformers, 
substations,  gas-holders,  gas  and  electric  generators, 
switches,  switchboards,  meters,  electrical  and  gas  appli- 
ances, oil  tanks,  power  plants,  power  houses,  and  other 
buildings  and  structures  used  in  the  operation  of  the 
business  of  the  transmission  or  sale  of  gas  or  electricity, 
and  so  much  of  the  land  on  which  said  buildings  and 
structures  are  situate  as  may  be  required  for  the  con- 
venient use  and  operation  of  said  buildings. 

Provided,  that  the  operative  property  of  the  compa- 
nies enumerated  shall  also  include  any  other  property  not 
above  enumerated  that  may  be  reasonably  necessary  for 
use  by  said  companies  exclusively  in  the  operation  and 
conduct  of  the  particular  kinds  of  business  enumerated 
in  this  act. 

8.  Operative  Property  Exempt  from  Local  Taxation. 
The  operative  property  mentioned  above  in  subdivisions 
(a),  (b),  (c),  (d),  and  (e),  shall  not  be  subject  to  taxation 
for  county,  municipal,  or  district  purposes,  except  as 
otherwise  provided  for  in  the  constitution  and  laws  of 
this  state. 

Provided,  however,  that  when  any  piece  or  parcel  of 
property  in  this  state  owned  by  any  of  the  companies 
mentioned  is  used  partially  by  such  company  for  any  use 
reasonably  necessary  to  the  operation  of  any  of  the  lines 
of  business  enumerated,  and  such  property  is  also  par- 
tially rented  to  or  used  by  others  or  is  partially  used  by 
the  company  for  some  other  lines  of  business  not  among 
those  so  enumerated,  or  for  purposes  not  reasonably  nec- 
essary to  the  operation  of  any  of  said  enumerated  lines 
of  business,  it  shall  be  considered  operative  property,  in 
that  proportion  only  which  that  part  of  the  property 
mentioned  in  this  proviso  used  by  the  company  in  the 
operation  of  any  of  said  enumerated  lines  of  business, 
bears  to  the  whole  of  the  property  mentioned  in  this 
proviso. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.          1119 

9.  Plants  Under  Construction.-^-Any  property  of  the 
classes  mentioned,  owned  by  a  company  constructing  a 
new  railroad,  street  railway,  telegraph  or  telephone  sys- 
tem, or  plant  or  system  for  the  transmission  or  sale  of 
gas  or  electricity,  no  part  of  which  new  road,  line,  plant, 
or  system  is  in  operation,  and  the  same  classes  of  prop- 
erty when  held  by  an  operating  company  solely  for  the 
construction  of  a  new  railroad  or  railway  line,  a  new 
telegraph  or  telephone  system,  or  a  new  plant  or  system 
for  the  transmission  or  sale  of  gas  or  electricity,  and  not 
to  be  used  for  betterments  or  additions  to  roads,  lines, 
plants,  or  systems  already  under  operation,  shall  not  be 
considered  operative  property,  and  shall  be  subject  to 
assessment  and  taxation  for  county,  municipal  and  dis- 
trict purposes.    The  property  of  any  company  shall  be 
deemed  to  be  in  operation  as  to  such  part  of  the  new 
road,  line,  plant,  or  system  as  may  be  in  use  as  soon  as  it 
offers  and  renders  service  to  the  public  for  compensation ; 
provided,  however,  that  the  state  board  of  equalization 
shall  finally  determine  the  fact  of  such  operation  and  the 
liability  of  any  such  company  to  be  taxed  upon  its  gross 
receipts. 

10.  When  No  Service  Is  Rendered  to  Public. — When 
any  property  in  this  state  belonging  to  a  company  of  the 
classes  named  is  rendering  no  service  to  the  public  in  this 
state,  even  though  it  may  be  rendering  service  to  the  pub- 
lic in  some  other  state  or  states,  such  property  shall  not 
be  considered  as  operative  property,  and  shall  be  subject 
to  assessment  and  taxation  for  county,  municipal,  and 
district  purposes. 

11.  Report  of  Public  Service  Companies. — Such  per- 
son or  officer,  as  the  state  board  of  epualization  may  des- 
ignate, of  each  company,  shall,  on  or  before  the  first  Mon- 
day in  March  of  each  year,  file  with  the  said  board  a 
report  signed  and  sworn  to  by  one  or  more  of  said  persons 
or  officers,  showing  in  detail  for  the  year  ending  the 
thirty-first  day  of  December  last  preceding,  the  various 
items  as  follows : 


1120  BUSINESS  LAW  FOR  BUSINESS  MEN. 

(1)  The  name  of  the  company,  its  nature,  whether  a 
person  or  persons,  a  partnership  (with  names  of  part- 
ners), an  association,  or  corporation,  and  under  the  laws 
of  what  state,  territory  or  country  organized,  the  nature 
of  its  business,  the  location  of  its  principal  place  of  busi- 
ness, the  names  and  postoffice  addresses  of  its  president, 
secretary,  auditor,  treasurer,  superintendent,  and  general 
manager,  the  location  of  its  principal  place  of  business  in 
this  state,  the  name  and  postoffice  address  of  its  chief 
officer  or  managing  agent  in  this  state,  and  the  names  and 
addresses  of  all  subsidiary  companies  whose  property 
arid  business  are  operated  by  it,  and  the  names  and 
addresses  of  any  company  of  which  it  may  be  subsidiary. 

(2)  Each  of  the  companies  shall  report,  in  such  detail 
as  the  state  board  of  equalization  shall  prescribe,  all  of 
its  property  in  this  state  which  comes  under  the  definition 
of  operative  property.    When  any  such  company  operates 
both  within  and  without  this  state  it  shall  report  the  mile- 
age over  which  it  operates,  both  within  and  without  this 
state.    It  shall  also  report  the  location  of  said  property 
within  this  state  by  counties,  cities  and  counties,  munici- 
palities, and  districts,  in  such  manner  and  in  such  detail 
as  sad  board  of  equalization  shall  prescribe.    It  shall  also, 
at  the  same  time,  furnish  a  duplicate  of  the  report  cover- 
ing so  much  of  said  property  as  is  located  in  any  county, 
city  and  county,  municipality,  or  district,  to  the  assessor 
of  the  county,  city  and  county,  city,  or  district  in  which 
such  property  is  located. 

The  state  board  of  equalization  may  require  the  filing 
in  its  office  of  maps  descriptive  of  all  the  operative  prop- 
erty of  any  such  companies,  and  may  prescribe  the  form 
and  size  of  such  maps  and  the  details  to  be  shown  therein, 
and  may  require  that  similar  maps  descriptive  of  the 
operative  property  within  each  county,  city  and  county, 
municipality,  or  district,  shall  be  filed  in  the  assessor's 
office  in  each  county,  city  and  county,  city,  or  district  in 
which  any  of  said  property  is  located. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.         1121 

(3)  The    amount   of   capital   stock   issued,    and   the 
amount  of  money  received  therefor,  showing  separately 
the  capital  stock  issued  and  the  money  received  therefor 
of  the  operating  company  and  of  each  subsidiary  com- 
pany in  this  state. 

(4)  The  dividends  paid  during  the  year  ending  the 
thirty-first  day  of  December  last  preceding,  the  surplus 
fund,  if  any,  on  said  thirty-first  day  of  December,  or  be- 
tween-such  periods  as  the  state  board  of  equalization  may 
determine,  those  of  the  operating  company  and  of  each 
subsidiary  company  in  this  state  to  be  shown  separately. 

(5)  The  funded  and  floating  debts  and  the  rate  of 
interest   thereon,   showing  separately  the  debts   of  the 
operating  company  and  of  each  subsidiary  company  in 
this  state,  on  the  thirty-first  day  of  December  last  pre- 
ceding. 

(6)  The  market  value  of  the  stock  and  of  the  out- 
standing bonds,  or,  when  said  stock  or  bonds  have  no 
market  value,  the  actual  value  thereof,  for  such  periods 
and  for  such  dates  as  the  state  board  of  equalization  shall 
prescribe. 

(7)  The  amounts  expended  for  improvements  during 
the  year  ending  the  thirty-first  day  of  December  last  pre- 
ceding, how  expended  and  the  character  of  the  improve- 
ments. 

(8)  The  gross  receipts   from  operation  within  this 
state  for  the  year  ending  the  thirty-first  day  of  December 
last  preceding,  the  gross  receipts  from  such  classes  of 
business  as  the  state  board  of  equalization  may  designate, 
to  be  reported  separately;  also,  where  the  property  and 
business  are  partly  within  and  partly  without  this  state, 
the  gross  receipts  for  said  period  on  all  business  begin- 
ning and  ending  entirely  within  this  state,  and  that  pro- 
portion of  the  gross  receipts  from  all  business  passing 
through,  into,  or  out  of  this  state,  which  the  mileage 
within  this  state  bears  to  the  total  mileage  over  which 
such  interstate  business  is  done  as  further  defined  in  sec- 
tion seven  of  this  act. 


1122  BUSINESS  LAW  FOE  BUSINESS  MEN. 

(9)  The  operating  and  other  expenses. 

(10)  The  balances  of  profit  and  loss,  between  such 
periods  as  the  state  board  of  equalization  may  determine. 

(11)  Such  other  matters  as  the  state  board  of  equal- 
ization may  deem  necessary. 

Each  such  company  shall  include  in  its  report  the 
property  and  business  of  all  subsidiary  companies  whose 
property  and  business  are  operated  by  it,  whether  by  vir- 
tue of  a  lease,  an  operating  contract  or  agreement,  or  by 
virtue  of  control  through  the  ownership  of  stock  or  other- 
wise, even  though  such  subsidiary  companies  maintain  an 
independent  legal  existence  and  separate  accounts. 

The  term  "subsidiary  company"  is  hereby  defined  as 
applying  to  a  company  which  is  merged  in  the  operating 
system  of  an  operating  company  in  any  of  the  ways  above 
stated,  whose  property  and  franchises  would  be  taxable 
by  this  act  if  the  same  were  operated  independently.  No 
separate  report  need  be  rendered  by  a  subsidiary  com- 
pany whose  property,  franchises,  and  operations  arc 
fully  and  completely  covered  by  the  report  of  an  operat- 
ing company,  unless  the  state  board  of  equalization  shall 
deem  such  a  separate  report  necessary. 

12.  Separate  Reports  of  Certain  Subsidiary  Com- 
panies.— Each  such  company  operating  the  property  and 
business  of  a  subsidiary  company  in  some  line  of  business 
to  which  a  different  percentage  of  the  gross  receipts  is 
applied  by  this  act  from  that  applied  to  the  gross  receipts 
of  the  operating  company,  shall  report  such  receipts  of 
the  subsidiary  company  separately. 

13.  Hearings  and  Decisions  ~by  State  Board. — If  any 
assessor  finds  in  the  report  of  the  operative  property  in 
liis  county,  city  and  county,  municipality,  or  district,  fur- 
nished to  him  by  any  of  the  companies  as  required  in  this 
act,  any  piece  or  parcel  of  property  which  he  regards  as 
non-operative  property,  or  partially  operative  and  par- 
tially non-operative,  he  shall,  within  thirty  days  after 
receiving  such  report,  notify  the  state  board  of  equaliza- 
tion thereof  by  mail,  which  notice  shall  contain  a  general 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.         1123 

description  of  the  property  and  the  assessor's  reasons 
for  regarding  the  same  as  non-operative  property.  He 
shall  also  mail  a  copy  of  the  notice  to  the  company  whose 
property  is  involved.  The  said  board  shall  investigate 
the  nature  of  the  property  and  its  use,  and,  if  an  agree- 
ment between  the  said  board,  the  assessor  and  the  com- 
pany as  to  the  proper  classification  of  such  property  can- 
not be  reached,  then  the  said  board  shall,  under  such  rules 
of  notice  as  it  may  deem  reasonable,  set  a  date  for  a  hear- 
ing, at  which  the  assessor  and  the  company  may  be  pres- 
ent or  represented.  At  such  hearing  the  board  shall,  from 
the  evidence  presented  and  from  the  best  information  it 
can  obtain,  decide  the  matter  in  dispute,  and  determine 
whether  such  property  is  operative  or  non-operative,  or 
in  what  proportion  operative  and  in  what  proportion 
non-operative. 

If  the  state  board  of  equalization  shall  find  in  the 
report  of  operative  property  furnished  to  said  board  by 
any  company  under  the  provisions  of  this  act,  any  piece 
or  parcel  of  property  which  said  board  regards  as  non- 
operative  property,  or  partially  operative  and  partially 
non-operative,  the  board  shall,  within  thirty  days  after 
receiving  such  report,  notify  said  company  thereof  in 
writing,  which  notice  shall  contain  a  general  description 
of  the  property  and  the  reasons  for  regarding  the  same 
as  non-operative.  It  shall  also  mail  a  copy  of  the  notice 
to  any  assessor  in  whose  county,  city  and  county,  munici- 
pality, or  district  the  property  is  located.  If  an  agree- 
ment between  the  said  board,  the  assessor,  and  the  com- 
pany as  to  the  proper  classification  of  such  property  can- 
not be  reached,  then  the  said  board  shall,  under  such  rules 
of  notice  as  it  may  deem  reasonable,  set  a  date  for  a  hear- 
ing, at  which  the  assessor  and  the  company  may  be  pres- 
ent or  represented.  At  such  hearing  the  board  shall, 
from  the  evidence  presented  and  from  the  best  informa- 
tion it  can  obtain,  decide  the  matter  in  dispute,  and  deter- 
mine whether  such  property  is  operative  or  non-operative- 

14.     Insurance  Commissioner  to  Report. — The  insur- 


1124  BUSINESS  LAW  FOE  BUSINESS  MEN. 

ance  commissioner  of  this  state  must,  on  or  before  the 
last  day  of  March  in  each  year,  make  and  file  with  the 
state  board  of  equalization  a  report  showing: 

(1)  All    companies,   domestic   and   foreign,   and   all 
firms,  associations,  or  persons,  engaged  in  the  business 
of  insurance  in  this  state. 

(2)  The  total  amount  of  the  gross  premiums  received 
from  its  business  in  this  state  by  each  of  said  companies, 
firms,  associations,  and  persons  during  the  year  ending 
the  thirty-first  day  of  December  last  preceding. 

(3)  The  amount  of  return  premiums  paid  on  business 
done  in  this  state  and  the  amount  of  reinsurance  on  busi- 
ness done  in  this  state  paid  to  other  insurance  companies 
or  associations  authorized  to  do  business  in  this  state,  by 
said  companies,  firms,  associations,  and  persons,  during 
said  year. 

(4)  The  amount  of  any  county  and  municipal  taxes 
paid  during  said  year  by  such  companies  on  real  estate 
owned  by  them  in  this  state,  and  where  said  real  estate  is 
located. 

In  making  this  report  he  shall  list  separately  all  those 
companies,  firms,  associations,  or  persons,  which  are  sub- 
ject to  a  tax  at  a  rate  higher  than  one  and  one-half  per 
cent  on  their  gross  premiums,  or  to  any  additional  tax 
or  burden,  and  shall  indicate  in  each  case  the  amount  and 
character  of  said  tax  or  burden. 

15.  Additional  Statements  by  Insurance  Companies. 
Every  company,  firm,  association,  or  person  engaged  in 
the  business  of  insurance  in  this  state  shall  file  with  the 
insurance  commissioner  on  or  before  the  first  Monday  in 
March  in  each  year  such  statements  in  addition  to,  or  in 
modification  of,  the  statements  required  to  be  rendered 
under  the  provisions  of  the  Political  Code  as  said  insur- 
ance commissioner  shall  deem  necessary  to  enable  him  to 
prepare  the  report  required  of  him  in  this  act,  and  said 
statements  shall  be  verified  in  the  same  manner  as  is  pro- 
vided for  the  verification  of  other  statements  by  insur- 
ance companies,  except  that  those  filed  by  foreign  compa- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.         1125 

nies  shall  be  verified  by  the  oath  of  the  manager  thereof 
residing  within  this  state. 

16.  Bank  Reports. — The  president,  secretary,  treas- 
urer, cashier,  or  such  other  officer  as  the  state  board  of 
equalization  may  determine,  of  every  bank  shall  on  the 
first  Monday  in  March,  or"  within  ten  days  thereafter, 
make  and  file  with  the  state  board  of  equalization  a  sworn 
statement  showing  the  condition  of  said  bank  at  the  close 
of  business  on  the  first  Monday  in  March,  and  showing 
the  amount  of  its  authorized  capital  stock,  the  number  of 
shares  issued  and  the  par  value  thereof,  the  amount 
received  for  stock  issued,  the  amount  of  its  surplus  and 
undivided  profits,  if  any,  a  complete  list  of  the  names  and 
residences  of  its  stockholders,  and  the  number  of  shares 
held  by  each  as  of  record  on  the  books  of  the  bank  at  the 
close  of  business  on  the  first  Monday  in  March;  or,  in 
the  case  of  unincorporated  banks  and  bankers,  of  banks 
having  no  capital  stock  and  of  branches,  agencies,  or  other 
representatives  of  banks  doing  business  outside  of  this 
state,  the  moneyed  capital,  reserve,  surplus,  undivided 
profits,  and  other  taxable  property  used  by  them  in  the 
banking  business  in  this  state;  also  a  description  of  the 
real  estate,  other  than  mortgage  interests  therein,  and  the 
value  of  each  piece  thereof  as  assessed  for  the  purpose  of 
county  taxation  for  the  then  current  fiscal  year.  Branches, 
agencies,  or  other  representatives  of  banks  doing  busi- 
ness outside  of  this  state,  shall  report  the  average  amount 
owed  by  said  branches,  agencies,  or  other  representa- 
tives, to  the  banks  of  which  they  are  branches,  agencies, 
or  representatives,  during  the  year  ending  the  first  Mon- 
day in  March ;  also  a  description  of  the  real  estate  other 
than  mortgage  interests  therein,  and  the  value  of  each 
piece  thereof  as  assessed  for  the  purpose  of  county  tax- 
ation for  the  then  current  fiscal  year.  The  state  board  of 
equalization  shall  prescribe  the  form  of  reports,  the 
manner  of  their  verification,  and  may  require  the  sub- 
mission of  tax  receipts,  or  copies  thereof  certified  to  be 
correct  by  any  notary  public,  in  order  to  verify  the 


1126  BUSINESS  LAW  FOE  BUSINESS  MEN. 

statements  as  to  the  assessed  value  of  the  real  estate, 
and  may  require  such  further  information  or  statements 
as  said  board  may  deem  necessary. 

17.  Owners  of  Franchise  Report. — The  owner  or 
holder  of  every  franchise  subject  to  taxation  shall  within 
ten  days  after  ,the  first  Monday  in  March  in  each  year, 
make  a  written  report  to  the  state  board  of  equalization, 
signed  and  sworn  to  by  the  holder  or  owner  himself,  if 
an  individual,  or  by  one  of  the  copartners  if  such  owner 
or  holder  is  a  copartnership,  or  by  the  president  or  vice- 
president  and  the  treasurer  and  secretary,  if  the  owner 
is  a  corporation,  containing  such  a  concise  statement  or 
description  of  every  franchise  possessed  or  enjoyed  on 
said  day  by  such  owner  or  holder,  as  the  state  board  of 
equalization  may  prescribe,  a  copy  of  the  law,  grant, 
ordinance,  or  contract  under  which  the  same  is  held,  or 
if  possessed  or  enjoyed  under  a  general  law,  a  reference 
to  such  law,  a  statement  of  any  condition,  obligation,  or 
burden  imposed  upon  such  franchise,  or  under  which  the 
same  is  enjoyed,  and  containing  also : 

(1)  The  name  of  the  company,  its  nature,  whether  a 
person  or  persons,  a  partnership  (with  names  of  part- 
ners), an  association,  or  corporation,  and  under  the  laws 
of  what  state,  territory,  or  county  organized,  the  nature 
of  its  business,  the  location  of  its  principal  place  of  busi- 
ness, the  names  and  postoffice  addresses  of  its  president, 
secretary,  auditor,  treasurer,  superintendent,  and  gen- 
eral manager,  the  location  of  its  principal  place  of  busi- 
ness in  this  state,  the  name  and  postoffice  address  of  its 
chief  officer  or  managing  agent  in  this  state,  and  the 
names  and  addresses  of  all  subsidiary  companies  whose 
property  and  business  are  operated  by  it. 

(2)  The  amount  of  its  authorized  capital  stock,  the 
amount  thereof  issued  and  outstanding  on  the  first  Mon- 
day in  March,  and  the  amount  paid  in  thereon  or  the 
value  of  the  property  received  therefor. 

(3)  The  funded  and  floating  debts  and  the  interest 
paid  thereon  showing  separately  the  debts  of  the  oper- 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.         1127 

atiiig  company  and  of  any  subsidiary  companies  in  this 
state  on  the  thirty-first  day  of  December  last  preceding. 

(4)  The  market  value  of  the  stock  and  of  the  out- 
standing bonds,  or,  when  said  stock  or  bonds  have  no 
market  value,  the  actual  value  thereof,  for  such  periods 
and  for  such  dates  as  the  state  board  of  equalization 
shall  prescribe. 

(5)  The  assessed  value  of  its  property  as  assessed 
for   the   current   fiscal  year  in   each   county,   city   and 
county,  and  city  in  the  state  for  the  purposes  of  taxa- 
tion, and  if  any  property  of  such  corporation  be  assessed 
and  taxed  outside  of  the  state  of  California  the  place 
where   assessed,   the    amount   of   such   assessment   and 
taxes  there  paid  during  such  current  fiscal  year. 

In  case  the  company,  person,  firm,  association,  or  cor- 
poration making  such  report  cannot  or  does  not  fairly 
and  fully  state  the  facts  and  matters  contained  in  the 
foregoing  subdivisions  1  to  5,  inclusive,  then  such  com- 
pany, person,  firm,  association,  or  corporation  must  ren- 
der an  additional  report  containing  the  following  mat- 
ters, to-wit: 

(6)  The  dividends  paid  during  the  year  ending  the 
thirty-first  day  of  December  last  preceding,  the  surplus 
fund,  if  any,  on  said  thirty-first  day  of  December,  or 
between  such  periods  as  the  state  board  of  equalization 
may  determine.     Those  of  the  operating  company  and 
of  each  subsidiary  company  in  this  state  to  be  shown 
separately. 

(7)  The  gross  receipts  from  all  sources  for  the  year 
ending  the  thirty-first  day  of  December  last  preceding, 
from  the  entire  property  and  business,  the  gross  receipts 
from  such  classes  of  business  as  the  state  board  may  des- 
ignate, to  be  reported  separately;  also,  where  the  prop- 
erty and  business  are  partly  within  and  partly  without 
this  state,  the  gross  receipts  for  said  period  on  all  busi- 
ness beginning  and  ending  entirely  within  this  state,  and 
that  proportion  of  the  gross  receipts  from  all  business 
passing  through,  into,  or  out  of  this   state,  which  the 


1128  BUSINESS  LAW  FOB  BUSINESS  MEN. 

mileage  within  this  state  bears  to  the  total  mileage  over 
which  such  interstate  business  is  done  as  further  denned 
in  section  seven  of  this  act. 

(8)  The  operating  and  other  expenses. 

(9)  The  balances  of  profit  and  loss,  between  such 
periods  as  the  state  board  of  equalization  may  determine- 

(10)  Such  other  matters  as  the  state  board  of  equal- 
ization may  deem  necessary. 

The  state  board  of  equalization  shall  ascertain  and 
determine  from  the  foregoing  reports  or  from  the  best 
information  it  can  obtain,  the  actual  cash  value  on  the 
first  Monday  in  March  of  each  such  franchise,  and  shall 
assess  and  levy  the  taxes  thereon. 

18.  Arbitrary  Assessment  in  Case  of  Failure  or  Re- 
fuxal  to  Report. — If  any  company  mentioned  shall  fail  or 
refuse  to  furnish  to  the  state  board  of  equalization  within 
the  time  prescribed  in  this  act  the  verified  report  pro- 
vided for  in  this  act,  the  state  board  of  equalization  must 
make  an  estimate  of  the  amount  of  the  gross  receipts, 
gross  premiums,  value  of  the  shares  of  capital  stock,  or 
value  of  the  franchises,  of  such  company,  and  must 
assess  the  same  at  the  amount  thus  estimated,  which 
assessment  shall  be  the  assessment  upon  which  the  taxes 
upon  the  property  or  franchise  of  the  company  for  such 
year  shall  be  levied  and  collected.  And  if  in  the  suc- 
ceeding year  any  such  company  shall  again  fail  or  refuse 
to  furnish  the  verified  report  required  by  this  act,  the 
state  board  shall  make  an  estimate  of  the  amount  of  the 
gross  receipts,  gross  premiums,  value  of  the  shares  of 
capital  stock,  or  value  of  the  franchise  of  such  company, 
which  estimate  shall  not  be  less  than  twice  the  amount 
of  the  estimate  made  by  said  board  in  the  previous  year, 
and  the  said  estimate  so  made  shall  be  the  assessment 
upon  which  the  taxes  upon  the  property  or  franchise  of 
the  company  for  such  year  shall  be  levied  and  collected. 
In  ease  of  each  succeeding  consecutive  failure  or  refusal 
the  said  board  shall  follow  the  same  procedure  until  a 
true  statement  shall  be  furnished. 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.         1129 

19.  Penalty  for  Failure  or  Refusal  to  Report. — Any 
company  failing  or  refusing  to  make  and  furnish  any 
report  prescribed  in  this  act,  or  rendering  a  false  or 
fraudulent  report,  shall  "be  guilty  of  a  misdemeanor  and 
subject  to  a  fine  of  not  less  than  three  hundred  dollars 
and  not  exceeding  five  thousand  dollars  for  each  such 
offense. 

20.  Penalty  for  False  Report. — Any  person  required 
to  make,  render,  sign,  or  verify  any  report,  who  makes 
any  false  or  fraudulent  report,  with  intent  to  defeat  or 
evade  the  assessment  required  by  this  act  to  be  made, 
shall  be  guilty  of  a  misdemeanor,  and  shall  for  each  such 
offense  be  fined  not  less  than  three  hundred  dollars  and 
not  more  than  five  thousand  dollars,  or  be  imprisoned 
not  exceeding  one  year  in  the  county  jail  of  the  county 
where  said  report  was  verified,  or  be  subject  to  both  said 
fine  and  imprisonment,  at  the  discretion  of  the  court. 

21.  Extension  of  Time  for  Filing  Report. — The  state 
board  of  equalization  may,  for  good  cause  shown,  by 
order  entered  upon  its  minutes,  extend  for  not  exceeding 
thirty  days,  the  time  fixed  in  this  act  for  filing  any  report 
herein  provided  for. 

22.  Bank  Waiver  of  Assessment  to  Individual  Stock- 
holder.— If  any  bank  shall  by  resolution  of  its  board  of 
directors,   request   the    state   board    of    equalization    to 
assess  to  and  in  the  name  of  such  bank  so  requesting, 
the  entire  .taxable  value  of  all  the  shares  of  the  capital 
stock  of  such  bank,  as  determined  by  said  state  board, 
instead  of  assessing  such  shares  to  and  in  the  name  of 
the  individual  stockholders  or  shareholders  owning  the 
same,  and  if  such  bank  shall  promise  that  it  will,  upon 
being  notified  by  said  state  board,  of  such  assessment 
thereof  to  said  bank,  and  of  the  amount  of  taxes  to  be 
paid  upon  such  assessment,  pay  such  taxes  at  the  times 
when  taxes  assessed  and  levied  under  this  act  are  due 
nnd   payable.;  which   request   to  assess   said   bank   and 
promise  to  pay  said  tax  shall  be  in  substantially  the  fol- 
lowing form: 


1130  BUSINESS  LAW  FOR  BUSINESS  MEN. 

The  state  board  of  equalization  is  hereby  instructed 
to  assess  in  the  name  of  this  bank  and  not  to  the  indi- 
vidual stockholders  or  shareholders  therein,  the  taxable 
value  of  all  the  shares  of  capital  stock  in  this  bank,  and 
such  bank  hereby  promises  to  pay  to  the  state  treasurer 
the  amount  of  the  tax  levied  upon  such  assessment  when 
such  taxes  are  due  and  payable  under  the  laws  of  this 
state. 

By 

(Here  insert  title  of  official  signing. 

Then  the  state  board  may  assess  the  capital  stock  to 
and  in  the  name  of  such  bank,  and  said  promise  to  pay 
the  taxes  shall  be  binding  upon  such  bank,  and  collection 
of  such  taxes  from  such  bank  may  be  enforced. 

23.  Correction  of  Assessment. — The  state  board  shall 
have  power  at  any  time  on  or  before  the  first  Monday 
in  July  to  correct  the  record  of  assessments  for  state 
taxes,   and  may  increase   or   decrease   any   assessment 
therein  if  in  its  judgment  the  evidence  presented  or  ob- 
tained warrants  such  action: 

24.  Taxes,  When  Due  and  When  Delinquent. — The 
taxes  assessed  and  levied  as  provided  by  the  provisions 
of  this  act,  shall  be  due  and  payable  on  the  first  Monday 
in  July  in  each  year,  and  one-half  thereof  shall  be  delin- 
quent on  the  sixth  Monday  after  said  first  Monday  in 
July  at  six  o'clock  P.  M.,  and  unless  paid  prior  thereto, 
fifteen  per  cent  shall  be  added  to  the  amount  thereof, 
and  unless  paid  prior  to  the  first  Monday  in  February 
next  thereafter  at  six  o'clock  P.  M.,  an  additional  five 
per  cent  shall  be  added  to  the  amount  thereof;  and  the 
unpaid  portion,  or  the  remaining  one-half  of  said  taxes 
shall  become  delinquent  on  the  first  Monday  in  February 
next  succeeding  the  day  upon  which  they  became  due  and 
payable  at  six  o  'clock  P.  M. ;  and  if  not  paid  prior  thereto 
five  per  cent  shall  be  added  to  the  amount  thereof;  pro- 
vided, that  all  taxes  provided  for  or  levied  under  this 
act  which  are  not  fully  secured  by  real  property  are  due 
and  payable  at  the  time  the  assessment  is  made.    When 


H rsr x  KSS  CONTRACTS  AND  LEGAL  OBLIGATIONS.       1131 

in  the  opinion  of  the  state  board  of  equalization  any  of 
the  taxes  provided  for  are  not  a  lien  upon  real  property 
sufficient  to  secure  the  payment  of  the  taxes,  said  board 
may  direct  the  controller,  or  his  duly  authorized  repre- 
sentative, to  collect  the  same  at  any  time  before  the  first 
Monday  in  August  thereafter,  and  the  controller  may 
callect  the  taxes  by  seizure  and  sale  of  any  property 
owned  by  the  company  against  whom  the  tax  is  assessed. 

25.  Sale  of  Property  for  Taxes — The  sale  of  any 
property  seized  shall  be  made  at  public  auction  and  of  a 
sufficient  amount  of  the  property  to  pay  the  taxes,  pen- 
alties and  costs,  and  be  made  after  one  week's  notice  of 
the  time  and  place  of  such  sale  given  by  publication  in  a 
newspaper  of  general  circulation  published  in  the  county 
where  the  property  seized  is  situate,  or  if  there  be  no 
newspaper    of    general    circulation    published    in    such 
county,  then  by  posting  of  such  notice  in  three  public 
places  in  such  county.    On  payment  of  the  price  bid  for 
any  property  sold,  the  delivery  thereof  with  bill  of  sale 
executed  by  the  controller  vests  the  title  in  the  purchaser. 
The  unsold  portion  of  any  property  so  seized,  may  be  left 
at  the  place  of  sale  at  the  risk  of  the  owner.    All  of  the 
proceeds  of  any  such  sale  in  excess  of  the  taxes,  penal- 
ties, and  costs,  must  be  returned  to  the  owner  of  the 
property  sold,  and  until  claimed  must  be  deposited  in  the 
state  treasury  subject  to  the  order  of  the  owner  thereof, 
his  heirs,  or  assigns. 

26.  Taxes  a  Lien. — The  taxes  levied  under  the  pro- 
visions of  this  act  shall  constitute  a  lien  upon  all  the 
property  and  franchises  of  every  kind  and  nature  belong- 
ing to  the  companies  subject  to  taxation  for  state  pur- 
poses, which  lien  shall  attach  on  the  first  Monday  in 
March  of  each  year.    Every  tax  herein  provided  for  has 
the  effect  of  a  judgment  against  the  company,  and  every 
lien  created  by  this  act  has  the  effect  of  an  execution 
duly  levied  against  all  property  of  the  delinquent;  the 
judgment  is  not  satisfied  nor  the  lien  removed  until  such 
taxes,  penalties,  and  costs  are  paid,  or  the  property  sold 


1132  BUSINESS  LAW  FOR  BUSINESS  MEN. 

for  the  payment  thereof. 

27.  Taxes    erroneousy    Collected.  —  Whenever    any 
taxes,  penalties,  or  costs  collected  and  paid  under  the 
pro  visions  of  this  act  shall  have  been  paid  more  than 
once,  or  shall  have  been  erroneously  or  illegally  collected, 
or  when  any  taxes  shall  have  been  collected  and  paid 
pursuant  to   this  act   upon   a  computation   erroneously 
made  by  reason  of  clerical  mistake   of  the  officers  or 
employees  of  the  state  board  of  equalization,  or  shall 
have  been  computed  in  a  manner  contrary  to  law,  the 
state  board   of   equalization   shall   certify  to   the   state 
board  of  examiners  the  amount  of  such  taxes,  penalties, 
or  costs,  collected  in  excess  of  what  was  legally  due,  from 
whom  they  collected  or  by  whom  paid,  and  if  approved 
by  said  board  of  examiners,  the  same  shall  be  credited 
to  the  company  or  person  to  whom  it  rightfully  belongs, 
at  the  time  of  the  next  payment  of  taxes.    No  claim  for 
such  credit  shall  be  so  audited,  approved,  allowed,  or 
paid  unless  presented  within  one  year  after  the  payment 
sought  to  be  refunded. 

28.  Protest    of   Taxes. — Any   company,   person,    or 
association  dissatisfied  with  any  assessment  made  by  the 
state  board  of  equalization  may  bring  an  action  against 
the  state  treasurer  for  the  recovery  of  any  taxes,  penal- 
ties, or  costs  paid  on  such  assessment,  but  no  such  action 
may  be  brought  later  than  the  third  Monday  in  February 
next  following  the  day  on  which  the  taxes  were  due,  nor 
unless  such  company,  person  or  association  shall  have 
filed  with  the  state  controller  at  the  time  of  payment  of 
such  taxes  a  written  protest  stating  whether  the  whole 
assessment  is  claimed  to  be  void,  or  if  part  only,  what 
i)-u1,  and  the  grounds  upon  which  such  claim  is  founded; 
and  when  so  paid  under  protest  the  payment  shall  in  no 
case  be  regarded  as  voluntary.  Whenever  under  the  pro- 
visions of  this  section  an  action  is  commenced  against  the 
state  treasurer,  a  copy  of  the  complaint  and  of  the  sum- 
mons must  be  served  upon  the  treasurer,  or  his  deputy. 
At  the  time  the  treasurer  demurs  or  answers,  he  may 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.          1133 

demand  that  the  action  be  tried  in  the  Superior  Court  of 
the  County  of  Sacramento,  which  demand  must  be 
granted.  The  attorney  general  must  defend  the  action. 

29.  Controller  to  Send  Notice  of  Delinquent  Taxes- 
Within  ten  days  after  the  first  Monday  in  February,  the 
controller  shall  send  by  mail  to  the  last  known  address 
of  any  company  whose  taxes  are  delinquent  a  notice  of 
the  amount  of  said  taxes,  penalties,  and  costs,  and  that  if 
the  said  taxes,  penalties,  and  costs  are  not  paid  on  or 
before  the  first  Monday  in  March  next  thereafter  at  six 
o'clock  P.  M.,  the  delinquent  company,  if  it  be  a  domestic 
corporation,  will  forfeit  its  charter  to  the  state,  and  that 
if  the  delinquent  company  be  a  foreign  corporation  it 
will  forfeit  its  right  to  do  business  in  this  state. 

30.  Charter  Forfeited  for  Delinquent  Taxes. — If  the 
taxes,  penalties,  and  costs  are  not  paid  within  the  time 
specified  in  said  notice,  the  controller  shall,  on  the  Sat- 
urday  preceding   said   first   Monday   in  March   at   six 
o'clock  P.  M.,  mark  on  the  record  of  assessments  for 
state  taxes  opposite  the   assessment  of  the  delinquent 
company  the  words  "charter  forfeited  to  the  state,"  if 
the  delinquent  company  be  a  domestic  corporation,  and 
thereupon  said  charter  shall  be  so  forfeited;  and  if  the 
delinquent  company  be  a  foreign  corporation  the  words 
"right  to  do  business   forfeited,"  and  thereupon   said 
right  to  do  business  shall  be  so  forfeited.     He  shall  at 
once  report  to  the  secretary  of  state  the  name  and  num- 
ber of  charter  of  each  corporation  whose  charter  or  right 
to  do  business  has  been  forfeited  for  non-payment  of 
taxes,  and  the  secretary  of  state  shall  at  once  report  the 
same  to   the  governor.     The  governor  shall   forthwith 
issue  his  proclamation,  declaring  that  the  charters  of 
such  domestic  corporations  have  been  forfeited  and  the 
right  of  such  foreign  corporations  to  do  business  in  this 
state  has  been  forfeited.    Said  proclamation  shall  be  filed 
immediately  in  the  office  of  the  secretary  of  state,  and 
the  secretary  of  state  shall  immediately  cause  a  copy  of 
said  proclamation  to  be  published  in  one  issue  of  one 


1134  BUSINESS  LAW  FOE  BUSINESS  MEN. 

daily  newspaper  of  general  circulation  published  at  the 
state  capital,  of  one  daily  newspaper  of  general  circula- 
tion published  in  the  City  and  County  of  San  Francisco, 
and  of  one  daily  newspaper  ,pf  general  circulation  pub- 
lished in  the  City  of  Los  Angeles.  The  secretary  of 
state  shall  thereupon  transmit  a  certified  copy  of  the 
proclamation  to  each  county  clerk  in  this  state,  who  shall 
file  the  same  in  his  office. 

Act  of  Legislature,  approved  April  30,  1919; 
in  effect  July  22,  1919. 

31.  Relief  from  Forfeiture. — Any  such  corporation 
making  subsequent  payment  of  all  taxes,  penalties,  and 
costs  due  the  state,  and  in  addition  thereto  an  amount 
equal  to  the  taxes  levied  under  this  act  for  the  year  in 
which  such  forfeiture  occurred,  for  each  year  subsequent 
to  such  forfeiture  and  to  the  time  of  such  redemption, 
shall  be  relieved  of  such  forfeiture,  and  the  controller 
shall  notify  the  secretary  of  state  thereof,  and  the  sec- 
retary of  state  shall  annually  on  the  first  Monday  in 
April  transmit  to  the  county  clerk  of  each  county  in  this 
state  a  list  of  the  corporations  so  paying,  and  which 
have  been  relieved  of  such  forfeiture,  which  list  shall  be 
by  said  county  clerk  filed  in  his  office ;  provided,  the  re- 
habilitation of  a  corporation  under  the  provisions  of  this 
act  shall  be  without  prejudice  to  any  action,  defense  or 
right  which  accrued  by  reason  of  the  original  forfeiture ; 
and  provided,  that  in  case  the  name  of  any  corporation 
which  has  suffered  the  forfeiture  prescribed  in  this  act, 
or  a  name  so  closely  resembling  the  name  of  such  corpo- 
ration as  will  tend  to  deceive,  has  been  adopted  by  any 
other  corporation  since  the  date  of  said  forfeiture,  then 
said  corporation  having  suffered  such  forfeiture  shall  be 
relieved  therefrom  pursuant  to  the  terms  of  this  section 
only  upon  the  adoption  by  said  corporation  seeking 
revivor  of  a  new  name,  and  in  such  case  nothing  in  this 
act  contained  shall  be  construed  as  permitting  such  cor- 
poration to  be  revived  or  carry  on  any  business  under 


BUSINESS  CONTRACTS  AND  LEGAL  OBLIGATIONS.         1135 

its  former  name;  and  such  corporation  shall  have  the 
right  to  use  its  former  name  or  take  such  new  name  only 
upon  filing  an  application  therefor  with  the  secretary  of 
state  and  upon  the  issuing  of  a  certificate  to  such  cor- 
poration by  the  secretary  of  state,  setting  forth  the 
right  of  such  corporation  to  take  such  new  name  or  use 
its  former  name,  as  the  case  may  be ;  provided,  however, 
that  the  secretary  of  state  shall  not  issue  any  certificate 
permitting  any  corporation  to  take  or  use  the  name  of 
any  corporation  heretofore  organized  in  this  state,  and 
which  has  not  suffered  a  forfeiture  prescribed  by  this 
act,  or  to  make  or  use  a  name  so  closely  resembling  the 
name  of  such  corporation  heretofore  organized  in  this 
state  as  will  tend  to  deceive. 

32.  State  Board  to  Equalize  Assessments. — When- 
ever the  state  board  of  equalization  is  satisfied  after  in- 
vestigation that  any  county  assessor,  or  board  of  equal- 
ization, has  assessed  any  real  estate  belonging  to  any 
bank  above  its  full  cash  value  and  has  thereby  unjustly 
reduced  the  amount  of  taxes  due  the  state  from  said 
bank,  said  state  board  shall,  under  such  rules  of  notice 
to  the  clerk  of  the  board  of  supervisors  of  the  county 
affected  thereby  as  the  said  state  board  shall  deem  rea- 
sonable, equalize  the  assessed  value  of  such  real  estate, 
and  shall  upon  completion  of  said  equalization  issue  an 
order  to  said  assessor  or  board  of  equalization  and  to 
the  county  auditor  of  the  county  in  which  said  real  estate 
is  located,  fixing  the  assessed  value  of  said  real  estate. 
The  value  so  equalized  and  fixed,  and  no  other,  shall  be 
deemed  the  value,  as  assessed  for  county  taxes,  of  such 
real  estate,  and  the  sole  basis  of  taxation  upon  such  real 
estate  for  county  taxes. 

The  state  board  of  equalization  shall  immediately 
after  the  county  and  city  assessments  have  been  com- 
pleted, ascertain  the  value  of  any  real  estate  belonging 
to  any  insurance  company  as  assessed  and  equalized  for 
purposes  of  county  and  of  city  taxation.  Whenever  the 
state  board  of  equalization  is  satisfied  after  investiga- 


1136  BUSINESS  LAW  FOE  BUSINESS  MEN. 

tion,  that  any  county,  city  and  county,  city,  or  district 
assessor,  or  board  of  equalization,  has  assessed  any  real 
estate  belonging  to  any  insurance  company  above  its  full 
cash  value  and  has  thereby  unjustly  reduced  the  amount 
of  taxes  due  the  state  from  said  insurance  company,  said 
state  board  shall,  under  such  rules  of  notice  to  the  clerk 
of  the  board  of  supervisors  of  the  county  or  the  proper 
officer  of  the  city  affected  as  the  board  shall  deem  rea- 
sonable, equalize  the  assessed  value  of  such  real  estate 
and  shall,  upon  the  completion  of  said  equalization,  issue 
an  order  to  said  assessor  or  board  of  equalization  and 
to  the  county,  city  and  county,  city,  or  district  auditor  or 
clerk  of  the  county,  city  and  county,  city,  or  district  in 
which  said  real  estate  is  located,  fixing  the  assessed 
value  of  said  real  estate.  The  value  so  equalized  and 
fixed,  and  no  other,  shall  be  deemed  the  value,  as 
assessed  for  county,  city  and  county,  city,  or  district 
taxes,  of  such  real  estate,  and  the  sole  basis  of  taxation 
upon  such  real  estate  for  county,  municipal  and  district 
taxes. 

Act  of  the  Legislature,  approved  April  1,  1911 


OCT  1  6  1952 


LAW  LIBRARY 

UNIVERSITY  OF  CALIFORNIA 
LOS  ANGELAS 


ROGER  W.  PRIOR, 


A    001  441  078    1 


